Billions of dollars in tax expenditures escape effective scrutiny
CALGARY, Dec. 11, 2012 /CNW/ - In a report issued today by The School of Public Policy, John Lester, Research Fellow at The School of Public Policy and former manager of the Tax Evaluation and Research Group at Finance Canada, calls for fundamental changes to how tax expenditures are accounted for and reported. About $26 billion in what amounts to federal spending flies under the radar screen simply because it is delivered through the tax system.
The report calls for three changes to increase accountability and transparency of this spending:
First, responsibility for existing tax-based spending programs should be shifted from the Department of Finance to the relevant spending departments. For example, the SR&ED investment tax credit would become part of the Industry Canada portfolio, making it easier to choose the best way to support R&D and to eliminate waste.
Second, reports to Parliament and the government's books have to be improved to give a clear picture of both tax-based and direct program spending. "Canadians deserve better oversight of these massive costs," said Lester today, "that can be achieved, in part, through better reporting to encourage tighter scrutiny of tax expenditures by Parliament and Canadians generally."
Third, tax-based spending programs should be subject to the government's evaluation policy and be included in Strategic Reviews, which now only apply to direct program spending. Systematic evaluation will help ensure that tax measures are effective while broader coverage will make Strategic Reviews fairer and more efficient.
These changes would make government spending more transparent, improve accountability, and result in better policy choices. However, there will be resistance to reform, particularly from the minister of finance who would lose the power, exercised jointly with the prime minister, to implement and manage tax-based spending programs without consulting his Cabinet colleagues.
The report can be found at www.policyschool.ucalgary.ca/publications
SOURCE: The School of Public Policy - University of Calgary
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