Best actors

Canadian income and commodity tax administration, now primarily carried out by the federal government (and with Quebec exercising more jurisdiction than the other provinces), is comprehensive. The federal government alone has tens of thousands of employees in the field. Enforcement in Canada is said by some to be less vigorous than in the United States, but more vigorous than in a number of other countries. There is still an unknown but large “tax gap” filled with untaxed income.
Canada’s income and sales tax system involves substantial (but less than complete) coordination between the federal and the provincial governments, which jointly occupy most tax fields. The provinces are free to set their own tax rates in the jointly occupied fields of income and consumption tax, but they largely follow federal rules in determining their tax base:
• The federal government acts as agent in collecting corporate taxes for all but two provinces, and personal income taxes for all but one province.
• The tax base and the rules for determining taxable income are largely (but not completely) identical under federal and provincial law, because the provinces follow the lead of the federal government on tax changes.
• Federal and provincial sales taxes are coordinated and collected together in six provinces.
The interplay between federal and provincial taxes is, however, rather more complex. Federal action to introduce new deductions into the income tax system can reduce the revenues of the provinces that have adopted the federal tax base. And increases in provincial taxes, such as corporate and personal income taxes, can reduce federal revenues through lowering the tax base in a province. Even more complexity arises from the federal tax equalization measures, because a province that increases its tax rates can receive.