Tag: Individual Taxes

The Trudeau government recently announced the extension of the GST to include digital products and services sold remotely to Canadians by foreign suppliers. This change is sometimes referred to as the “Netflix Tax.” The tax policy change is long overdue, and will ensure foreign suppliers of digital services to Canadians pay their fair share of taxes. The new rules will impart greater integrity to our tax system and prepare Canada to look to the future of digital taxation with clear eyes.

This commentary examines the economic effects of the taxation of dividends and capital gains collected via the personal income tax, applied to the supply side of the capital market. I show that taxable dividends and capital gains are highly concentrated at the top of the income distribution, much more so than is labour income. I also argue that, while the evidence is somewhat inconclusive, aggregate savings is relatively insensitive to changes in after-tax returns. This is the first commentary in a three-part series considering reforms to Canada’s approach to taxing capital income.