In 1998 the Canadian Taxpayers Federation (CTF) presented a submission, 'Simpler, Lower and Flatter' to the Alberta Tax Review Committee. The CTF's sweeping recommendations were grounded in the premise that the 'the tax system should calculate and collect taxes in the fairest, most efficient way possible for the operation of government. The tax system should not be used as a means to other political or social ends.' British Columbia would be wise to heed the same advice.

The three key recommendations of that submission included: Alberta calculate provincial personal income tax as a percentage of income (the existing rates were set as a percentage of federal tax), a generous Basic Personal Exemption (BPE) be set and that a uniform low rate of tax with a minimum of credits be established. Within a year, the CTF's recommendations were in large part adopted. At the time, Alberta was enjoying an economic boon and the government recognized the opportunity to maintain and accelerate growth by overhauling the income tax system.

By all accounts, Alberta's 10% single rate has a roaring success. Alberta's economic growth has continually outpaced every other province and government revenues have shot up to the point that program spending has doubled! But Alberta isn't the first jurisdiction to reap the benefits of being simple. A flat tax revolution is unfolding in Eastern Europe and around the globe.

Crushing tax burden coupled with complexity have buoyed global tax reform. It started in Estonia in 1994 with a flat tax for business and personal income of 26% with no deductions. Estonia's record economic growth and surging government revenues led their Baltic neighbours to follow suit, with Latvia, Lithuania, Russia, Slovakia, Poland, Hungary, Georgia and the Ukraine adopting their own version of a flat tax system. The idea is gaining credence around the world. The German Chancellor has been warming to the idea and Ireland has made significant reforms to flatten and simplify its tax code.

So, where does British Columbia stand We have five marginal rates of income tax and several exemptions, credits, deductions and refunds spun into a confusing and often illogical web. In income tax revenue alone over $881 million is forgone in such provisions each year. Considering that personal and corporate income made up $2.9 billion last year, we are losing over a third of our revenue in targeted and distorting credits and deductions. Specific industries like film, mining, manufacturing and book publishing are the largest benefactors of such credits. Meanwhile, our basic personal exemption is much too low at $8,676, not even providing enough room to meet basic needs before the government is dipping into your pocket.

British Columbia has extraordinary opportunity and economic potential but our growingly complicated tax system is standing in the way. Although we have witnessed great strides in economic growth over the past few years, we still have some distance to go before dismantling the disaster of the 1990s. Our GDP per capita still lags behind Canada's and five other provinces. Simplifying, lowering and flattening the tax system will remove disincentives to work, save, invest as well as decrease tax avoidance and administrative costs.

In fact, as a result of the multitude of credits and deductions for all taxes, the provincial government's overall tax revenue was reduced by a staggering $3.7 billion. That represents more than half of the $7.4 billion the government did take in in 2004/5.

Right now the government is looking at updating and simplifying the sales tax. It's a welcome start. But Finance Minister Carole Taylor should do the same for income tax---it's long overdue. It's time to scrap the special treatment for certain industries and groups and lower our overall tax burden and there is no better place on earth to start than with income tax. Taylor should follow Alberta's example and set up a Tax Review Committee to hear submissions about the negative impacts on economic behaviour from the current system as well as proposals on how to make it fairer and more efficient. Undoubtedly it would be hard pressed to find a better approach than a flat tax system.