Canada's income and business tax systems are less competitive than those in the United States, according to a new international report that has prompted renewed calls for federal and provincial governments to cut taxes.The Canadian Taxpayers Federation (CTF) says the findings of the Tax Foundation's 2026 International Tax Competitiveness Index highlight the growing tax disadvantage facing Canadian workers and businesses, particularly as companies struggle with American tariffs."The report shows Canada falling behind the United States on business and income taxes and that should be a real wake-up call for our politicians," said CTF federal director Franco Terrazzano."Canadian workers and businesses are fighting to survive tariffs and our governments are making it harder by imposing less competitive business and income taxes than the Americans."The annual report compares tax systems across 38 member countries of the Organisation for Economic Co-operation and Development (OECD), examining how tax policies affect economic competitiveness.Canada ranked 28th out of 38 countries for individual income taxes, compared with 17th for the United States.On corporate taxes, Canada placed 17th, while the U.S. ranked eighth.Canada finished 15th overall, behind 14 other OECD countries.The Tax Foundation identified several weaknesses in Canada's tax system, including capital gains taxes that are significantly higher than the OECD average.The report also found Canada's corporate tax rate exceeds the average among OECD member countries, potentially making the country less attractive for businesses deciding where to expand operations.However, Canada performed better in other categories.The country ranked eighth for consumption taxes, while the report noted Canada does not impose a general wealth, estate or inheritance tax..The CTF argues the findings demonstrate why Canadian governments should reduce the tax burden on individuals and businesses to encourage economic growth and improve affordability."We need income and business tax cuts now," Terrazzano said.The federation maintains Canada's tax policies are particularly concerning as businesses face growing economic pressure from U.S. tariffs and competition for capital south of the border.Terrazzano warned that higher taxes could discourage companies from expanding in Canada and encourage them to move operations to the United States."The fastest, simplest and easiest way to make life more affordable and our economy more competitive is for politicians to stop taking so much money in the first place," he said."Governments need to cut income and business taxes so workers keep more of their paycheques and businesses keep investing here instead of moving south of the border."The Tax Foundation's index evaluates the structure of national tax systems rather than simply comparing how much revenue governments collect.Its rankings consider factors including corporate taxation, personal income taxes, consumption taxes, property taxes and international tax rules.The CTF says Canada's relatively poor performance on personal and corporate taxes should serve as a warning to policymakers as the country attempts to attract businesses, protect jobs and compete with the United States.
