REFORM THE TAX REFORMERS FIRST.

Unhealthy enthusiasm seems to be building for Ottawa to launch a full- scale review of Canada’s tax system, perhaps along the lines of the famous 1962 Carter Royal Commission on Taxation. With a new tax regime in Washington, including a corporate tax rate of 21 per cent, experts say Canada’s economy will become less competitive without reform. A Senate finance committee report last week concluded that the Canadian tax system is such a complicated mess that nothing short of a new royal commission, or at least a task force “independent of government and composed of highly regarded tax experts,” is needed to conduct a comprehensive review of the tax system “with a goal of reducing complexity, ensuring economic competitiveness, and enhancing overall fairness.”

Good in principle. It is widely accepted that the Canadian tax system is a monument to rampant ad hoc policy chaos, loaded with variable rates, tax expenditures, loopholes and myriad incoherencies.

But hold on. While reform is certainly needed, it might be dangerous to rush into a great national tax discussion and review at a time when the economic and political environment seems deeply hostile to anything that might be considered clear thinking on taxation. The dominant view of the tax system is that it favours corporations and the rich who are plundering the economy while inequality soars.

In this environment, do we really want the future of the Canadian tax system, a crucial factor in the country’s economic success, turned over to a commission or task force appointed by the equality-obsessed, rich-bashing Trudeau Liberals?

The Liberal platform on taxes, and the government’s main tax moves while in power, appear to be built around one principle, summarized nicely by Finance Minister Bill Morneau: “Cut taxes for the middle class, and raise them on the richest one per cent.”

Morneau’s alleged reform of the small-business tax regime is an illustration of the narrow Liberal perspective on taxation. It is essentially based on class-warfare and income redistribution rather than sound economic policy. The policy objective is to collect a top marginal tax rate of up to 53.5 per cent — or higher if possible — from as many Canadians as possible.

The Trudeau Liberals are already under the influence of left- leaning academic tax experts and assorted redistributionists who see the tax system as a giant corrupt smorgasbord of offshore havens, loopholes and corporate giveaways. Hard to imagine these same Liberals setting up a royal commission headed by independent experts who don’t agree with their agenda.

Indeed, the prospect of a royal commission dedicated to pummeling corporations for more tax revenue has already twinkled the eye of the Toronto Star’s editorial board. “This is exactly what’s needed,” said the Star in a wildly distorted analysis of the Canadian tax system.

The Star’s decision to call for a new royal commission flowed from what is described as a “six-month joint investigation by the Star and Corporate Knights Magazine,” the leftist anti-corporate agit-prop publication run by Toby Heaps. There’s no space here to deconstruct the Star/Knights trashing of the corporate tax system. The conclusion, reached via various tricky data manipulations, is driven by the Star/ Knights starting premise: Canadian corporations, especially the banks, are not paying their fair share of government tax revenue. Billions are up for grabs.

In one graphic, based on complex StatCan data, the Star/ Knights team claimed that, in 2015, Canada’s banks paid only $ 3.9 billion in taxes on $ 37.6 billion in profits, supposedly meaning they paid a tax rate of 10.3 per cent. Since the official bank tax rate is supposedly 26.5 per cent, the impression is that the banks are unfairly dodging taxes.

Problem No. 1: The $37.6-billion profit includes — among other items — income that is not taxable in Canada. Profits on foreign subsidiaries (for example, Bank of Montreal’s U.S. subsidiary, Harris Bank, reported profits of US$ 4.6 billion last year and paid U. S. income tax of US$1.2 billion) are exempted from double-taxation in Canada by tax treaties.

Problem No. 2: That alleged 10.3-per-cent tax rate is an inaccurate and misleading data point selected from one line in a StatCan report that is, to put it mildly, hard to follow as a guide to bank taxation. But here’s what another line in the StatCan data shows: Over the last six years, actual reported income tax paid by the banks totalled $41.6 billion, equal to 22.5 per cent of their total profits of about $185 billion. That 22.5 per cent is a more accurate reflection of the tax rate banks have been paying than the misleading 10.3- per- cent claim.

The objective of the corporate tax academics, leftist thinktank analysts and activists such a Corporate Knights is to produce evidence that will support their view that corporations and their shareholders are accumulating profits and wealth that should be taxed at higher rates to make sure they are paying their “fair share” of the funding for ever-expanding government spending.

Most economists know that from the corporate manager’s point of view, corporate income tax is seen as a cost of doing business, and like all costs, it’s largely passed on to workers through reduced wages and employment or to consumers via higher prices. The conclusion, therefore, is that reductions in corporate income taxes — not increases — will have benefits throughout the economy, but especially for workers and consumers.

These are crucial issues related to the Canadian corporate tax system that would benefit from a comprehensive, objective review that would include accurate data, clear thinking and solid economics. If such a commission is possible, then Canada should do it. But if those conditions can’t be met, as seems likely, then let’s not.