NORTH AMERICA : Canadians Cry: Gimme Shelter From High Taxes : Tired of paying more than neighbors to the south, some citizens seek cap on spending.


Rooted in the western provinces and inspired in part by the U.S. example, an incipient tax revolt is sweeping across Canada.

True to the Canadian stereotype, it is less raucous and more deliberative than its U.S. counterpart. But the long-term goals are strikingly similar: constitutionally enshrined restraints on government spending.

Anti-tax rallies sponsored by the Alberta-based Canadian Taxpayers Federation have drawn thousands of placard-waving, chanting participants from British Columbia to New Brunswick. Tax protests are au courant on radio talk shows. Alberta's anti-tax premier, Ralph Klein, wants to require voter approval of any attempt to impose a provincial sales tax after he leaves office. The conservative-populist Reform Party sponsored a nationally televised call-in show on the issue last weekend.

Preston Manning, the Reform Party leader who would love to become the Howard Jarvis of Canada, described the tax protest as "spontaneous combustion" that has moved across the nation from west to east.


While Proposition 13 and congressional attempts at balancing the budget are well-known here, Manning is reluctant to credit the U.S. example, sensitive to charges that he is trying to "Americanize" Canada. But the higher taxes Canadians pay compared to their southern neighbors is a constant refrain in the debate.

The tax gap between Canadians and Americans has grown from 2% to more than 6% over the last decade, as measured against gross domestic product, according to Satya Poddar, a partner in the accounting firm of Ernst & Young in Toronto and author of a new study on the subject.

In Ontario, Canada's most populous province, the taxpayer hits the top 53.19% income-tax bracket with an annual income of $66,652 Canadian, or about $47,325 U.S. at the current exchange rate.

But U.S. political solutions are not available to Canadian tax protesters, who operate under the parliamentary system. The initiative process that gave birth to Proposition 13 is unknown in Canada, and federal elections typically are on a four- to five-year cycle rather than every two years, as in the United States.

W. John Wright, senior vice president of the Angus Reid Group, a Toronto-based polling firm, said surveys show rising public concern about taxes, but he cautioned that that might not translate into immediate action.

"A typical Canadian tax revolt is to write a letter or phone somebody," he said.

Manning's party would like a legislated spending cap on the federal government that eventually could be entrenched in Canada's constitution. With the governing Liberal Party opposed to such a cap, however, there is no chance of its adoption by Parliament any time soon, Manning admitted in an interview.

In the short term, however, the surging concern about taxes has refocused some public attention as the government of Prime Minister Jean Chretien prepares its new budget, expected to be released at the end of the month.


Until recently, advocates of spending on social and cultural programs have dominated media attention with warnings that the government is preparing major cuts to reduce the federal deficit. They have called for closing the deficit with tax increases rather than spending reductions.

The anti-tax rallies have changed the equation somewhat.

Current speculation is that Finance Minister Paul Martin will attempt a compromise combination of cuts and new taxes.

Martin told Parliament this week that his budget will make the tax system "more fair" and will "close loopholes."

But tax expert Poddar, who spent 18 years as a top civil servant in the Finance Department, said there are not many loopholes left to close.

"This talk about loopholes is to get the public on (their) side for what are really tax increases," he predicted.


Ammunition in the Revolt

The United States takes a smaller chunk in federal taxes, a major issue in Canada's growing debate over government spending.


In Canada, tax revenue as a percentage of the nation's output increased from 29.5% to 36.3% between 1980 and 1993. The U.S. rate went from 29.8% to 30% in that same period.

Tax revenue as a % of GDP in 1993

U.S.: 30% Canada: 36.3%

Source: Canadian Department of Finance


The source of federal revenue in Canada in 1993-94: Personal income tax: 44%

Sales and excise taxes: 23%

Unemployment insurance premiums: 16%

Corporate income tax: 8%

Others: 9%

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