Canada’s pensions are a big tax on workers: Report
A report released Tuesday by the Parliamentary Budget Officer says Canada’s tax on pension contributions is the biggest tax on Canadians.
The report says the levy applies to nearly all Canadians who have pension plans.
“The levy on pensions is a significant burden on the labour market,” the Parliamentary budget officer, Pierre Poilievre, said in a release.
“This is particularly true in the short-term.”
The report says Canada imposed the levy in 2017 because of the global economic downturn.
It says that the levy is only the third-largest in the world, behind only the US and Japan.
“Our analysis suggests that the current levy has contributed to a significant slowdown in Canada’s economy, especially among young people, in sectors such as manufacturing and construction,” the report said.
“With the global economy growing and employment steadily rising, the burden of the levy on the Canadian labour market will likely continue to grow.”
The levy applies in a variety of ways, including in the form of higher taxes on employers, more generous benefits for workers, and higher employer contribution rates.
It is currently being phased out over four years, ending in 2021.
Poe said the levy has helped Canada’s lower-income and younger workers, who make up a large proportion of the population.
“That’s where the greatest economic growth has been and that’s where our most significant jobs growth has occurred,” he said.
The report was released in response to a request by the Conservative government to review the levy.
It found that it has contributed significantly to the country’s current economic situation.
“These changes have helped Canada to recover from the global recession and the recession that followed,” the government said in its release.
The PBO said Canada’s levy is also contributing to the Canada Pension Plan’s funding crisis.
It said that as a result of the new levy, it has faced a shortfall of $2.9 billion in 2018-19.