Finance group urges tax cuts, banking overhaul ahead of federal budget
Canada's corporate tax advantage over the US has vanished and a national financial markets group says Ottawa must act now to restore it.
The Canadian Forum for Financial Markets (CFFiM) filed an 18-point pre-budget submission with the House of Commons Finance Committee on May 22, calling for cuts to corporate and personal income taxes, a banking sector shakeup, and long-overdue reforms to retirement savings rules.
CFFiM recommended cutting the statutory corporate income tax rate by one percentage point in both 2027 and 2028, bringing it from 15 percent to 13 percent.
The group noted that Canada's combined federal-provincial corporate rate now averages 25.98 percent, nearly in line with the US at 25.57 percent, erasing a 12.3-point advantage Canada held in 2017.
On personal income taxes, CFFiM called for compressing five federal brackets into three, with combined federal-provincial top marginal rates already exceeding 50 percent in most provinces. The proposed changes include:
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Reducing the second-lowest rate from 20.5 percent to 14 percent over six years starting in 2027
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Cutting the fourth bracket from 29 percent to 26 percent
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Lowering the top rate from 33 percent to 29 percent
To offset the revenue impact, CFFiM recommended raising the GST by one percentage point in both 2027 and 2028, returning it to its original 7 percent.
The shift is part of a broader move toward consumption taxes, which CFFiM said are less damaging to investment and productivity than income taxes.
CFFiM called for expanding the mining flow-through share regime to include preliminary economic, pre-feasibility, and feasibility studies as eligible Canadian Exploration Expenses.
It also recommended extending flow-through eligibility to qualifying R&D expenditures in AI, quantum computing, and biotechnology, integrated with the SR&ED program.
The group recommended a UK-style Enterprise Investment Scheme for early-stage businesses, citing the UK program's record of helping 78,435 companies raise £31.5bn since 1993, and called for examining a modernised income trust structure for mature, cash-generating businesses.
The six largest Canadian banks hold roughly 93 percent of banking assets, a concentration CFFiM said, citing Bank of Canada research, negatively affects productivity.
The Competition Bureau has called for "new players to shake things up," according to the submission.
CFFiM made three banking recommendations:
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A public review of banking regulations to eliminate outdated or duplicative requirements
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Amending the Bank Act and mandates of OSFI, FCAC, and the Competition Bureau to include competition as a core statutory objective
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Designating a technical standards body by Q3 2026 to advance open banking, modelled on the UK's Open Banking Implementation Entity and funded by large banks in proportion to market share
CFFiM argued that both the mandatory RRSP-to-RRIF conversion age of 71 and the 18 percent RRSP contribution limit are relics of 1992 policy that no longer reflect Canadian realities.
Life expectancy at 71 has grown from 13.7 years to approximately 16.1 years since the RRIF rules were set.
The group recommended gradually raising the conversion age to 74, phasing out mandatory RRIF withdrawal rates entirely, and increasing the defined contribution and RRSP contribution limit from 18 percent to 30 percent of earned income.
It also recommended expanding qualified investments in registered plans to include private equity and venture capital funds, giving Canadians access to opportunities currently limited to high-net-worth investors and family offices.
With federal deficits projected to rise from $36.3bn in 2024–25 to $65.3bn in 2026–27, and public debt charges set to climb from $54bn to $80.9bn by 2030–31, CFFiM recommended re-establishing the debt-to-GDP ratio as the primary fiscal anchor, with a clear path back to the pre-pandemic level of 31.2 percent.
President and CEO Laura Paglia said the recommendations are "practical, pro-growth" measures.
"A competitive Canada brings better jobs, lower prices, more choice, faster innovation and fairer outcomes," Paglia said.
