Federal–Provincial “25-25-25” Tax Reform

Overview

A unified “25-25-25” tax framework caps personal income, corporate income, and consumption taxes at 25% combined. It raises enough revenue to balance the federal budget within 10 years and eliminate net federal debt by year 50, while preserving provincial autonomy and simplifying compliance.

1. Personal Income Tax Above $15,000 Index to CPI yearly

Every Canadian pays:

• Federal flat rate: 12.5%
• Provincial flat rate: 12.5%

A basic personal exemption remains tax-free. All income above that exemption is taxed at a single combined 25%, eliminating brackets above 25%.

2. Corporate Income Tax

All corporations pay:

• Federal flat rate: 12.5%
• Provincial flat rate: 12.5%

Active and passive income taxed uniformly. Profit distributions trigger tax, with an optional reinvestment allowance to spur growth.

3. Consumption Tax (Unified VAT)

Replace GST/PST/HST with a single VAT at 25%:

• Federal share: 12.5%
• Provincial share: 12.5%

Essentials—groceries, prescription drugs, healthcare—remain zero-rated.

4. Revenue Targets & Fiscal Impact

• Year 1: +15% revenue increase over current levels
• Years 2–10: Phase in base-broadening measures
• Year 10: Achieve federal budget balance
• Years 11–50: Apply surpluses to debt, reaching zero by year 50

5. Implementation Timeline

• Year 0–1: Negotiate framework and draft legislation
• Year 2–4: Provinces adopt flat-rate codes; roll out VAT
• Year 5–10: Monitor performance; achieve balance
• Year 11–50: Semi-annual reviews; deploy surpluses to debt

6. Benefits

• Simplified filings and transparent rates
• Predictable, stable revenues for governments
• Lower compliance costs and stronger investment incentives
• Capped, fair tax burden for individuals and corporations
• Roadmap to fiscal sustainability and intergenerational equity

7. Next Steps

• Convene a First Ministers’ Fiscal Council to finalize the 25-25-25 split
• Establish a joint secretariat to draft flat-rate and VAT legislation
• Launch a national information campaign on the new structure

8. Accountability & Enforcement

To ensure timely adoption by all federal and provincial governments:

• If any government fails to implement the 25-25-25 framework by Year 4, all MPs, MPPs, and MLAs will incur a 5% annual reduction in salary and benefits until compliance.
• Ministers at any level will face an additional 5% cut per year on top of the standard reduction.
• No elected official may begin receiving a pension before reaching age 67.

Graphical Visualization