John Ruffolo's Vision for Canadian Tax Reform

June 12, 2025

"Tax policy does not stimulate prosperity—it only gets in the way."

It's not something you'd expect to hear from a former global tax leader at Deloitte, but John Ruffolo, FCPA, FCA, isn't conventional. While some approach tax policy as a debate about minor rate adjustments and new credits, Ruffolo suggests a much bolder approach.

And you can understand why. Canada's economic and productivity performance has lagged for over a decade while other countries have pulled ahead. And with new competitive threats from the U.S. administration, the time for bold tax moves in Canada is now.

Ruffolo founded Maverix Private Equity, OMERS Ventures, and co-founded the CPA Ontario Innovation Leadership Accelerator. Through OMERS Ventures, he oversaw more than $500-million in investments including Shopify and Hootsuite. His background combines tax expertise with hands-on investing and innovation experience, giving him a unique perspective on how Canada’s tax system hampers entrepreneurship and reduces competitiveness.

We recently sat down with John Ruffolo to discuss his vision for tax reform in Canada. In our conversation, Ruffolo laid out his "prosperity agenda;" an approach that recommends scrapping the current tax system and rebuilding it around competitiveness and simplicity. The first step? Agreeing on what you're trying to accomplish.

Starting with Clear Objectives

"The starting point of these discussions is: what are the objectives?" Ruffolo emphasizes. Previous reform efforts have failed, he argues, because they’ve lacked clear agreement on fundamental objectives. Without knowing what you’re trying to achieve, tax changes become political compromises that don't address the underlying problems.

He outlines four objectives that he believes should guide any comprehensive tax reform:

• Reform the tax system to be competitive with Organization for Economic Cooperation and Development (OECD) peers, particularly the U.S.
• Simplify the costs of compliance within the individual system and remove barriers to incentivize intended behaviours.
• Remove barriers in the corporate tax system with a focus on increasing productivity.
• Reduce or eliminate the impacts of indirect taxes that act as a barrier or cause financial burden.

To achieve these objectives, Ruffolo argues we must tackle the biggest barriers first. At the top of his list is Canada’s personal income tax system, which he sees as a major impediment to attracting and retaining the talent and capital needed for economic growth.

Personal Income Tax Reform: Broaden the Base, Lower the Rates

Simply put, Canada's personal income tax system is uncompetitive and overly complex, with rates that make it harder to attract and retain talent, and a maze of deductions that serve no clear policy purpose.

Rather than tinker around the edges, Ruffolo would overhaul the entire approach. He proposes reducing federal tax brackets from five to three while cutting the top marginal rate (currently 53.5 per cent in Ontario) to 45 per cent—the current midpoint rate among OECD countries.

His recommended approach to personal income tax deductions is aggressive: keep five key deductions, scrap everything else. "Eliminate most deductions and broaden the base while lowering the top rate. The logic is that wealthier folks benefit from most of those deductions anyway," he says. "Pick the five most important behaviours you want to incentivize, and those are the only deductions that survive. Everything else is gone." Specifically, Ruffolo suggests keeping only deductions that incentivize key positive behaviors, such as saving for retirement, supporting education, covering medical expenses, encouraging charitable donations, and supporting entrepreneurs and risk-taking investments.

This "broaden the base, lower the rates" philosophy would significantly simplify tax compliance for most Canadians while incentivizing economic growth.  

Corporate Tax Reform: Targeted Precision Over Broad Changes

Ruffolo's approach to corporate tax is different than his approach to personal tax—more targeted than broad. "When you look at our corporate tax rates, we generally fall within the midpoint of the OECD range…. unless you want to do something extremely bold, I think incremental changes are just nickels and dimes," he notes.

When asked what a bold move may look like, Ruffolo points to Estonia’s distributed profits model. Under this system, companies don't pay corporate tax when they earn profits, instead they only pay tax when they distribute profits to shareholders. This creates an incentive to reinvest earnings in the business rather than pay them out. While he acknowledges this would be "politically charged," he sees it as the kind of transformative change that could genuinely move the needle on corporate investment and productivity in Canada.

He also supports implementing a patent box regime, a preferential corporate tax rate for income derived from intellectual property, which would encourage companies to develop and commercialise IP in Canada.

Investment and Capital Policies

Beyond corporate tax rates, Ruffolo sees significant opportunity in reforming the capital gains tax. His key proposal involves allowing capital gains rollovers that let investors defer capital gains taxes by reinvesting proceeds into qualifying Canadian investments, similar to proposals discussed during the recent federal election campaign.

SR&ED Reform: Canada First

When it comes to Canada’s flagship program for supporting innovation, the Scientific Research and Experimental Development (SR&ED) program, Ruffolo worries that a significant share of support goes to foreign firms. He recommends updating the requirements so that only companies owning Canadian intellectual property can claim the credits. "You tweak the definition of R&D performer so that only the owner of the intellectual property can make the claim," he explained. "For example, if a foreign-owned subsidiary operating in Canada wants to claim SR&ED credits, it must own the IP itself—not its parent company abroad. That shift would free up between $1 billion and $1.5 billion per year in SR&ED room." The goal is to end the practice of Canadian taxpayers subsidizing foreign intellectual property and instead redirect that support to Canadian innovation.

Beyond the IP ownership requirement, Ruffolo proposes expanding SR&ED eligibility to include publicly traded companies (a reform put forward in the 2024 federal Fall Economic Statement) and adjusting the thresholds at which the program applies. He recommends increasing the taxable capital threshold to $250 million, but including a complete phase-out once companies reach $1 billion in taxable capital. “Once you hit a billion, you have many choices for capital,” he notes.

How to Pay for It

Ruffolo argues that significant spending reductions are needed to finance his bold tax recommendations. He recommends a cut of 10 per cent in program spending, which is ambitious but not without precedent—it would match the two-year reduction of Jean Chrétien’s government, with Paul Martin as Finance Minister, during the mid-1990s.

With between $40 billion and $50 billion in fiscal room freed up after a careful review focused on high value government spending, he would allocate it as follows: "Half of that would go to defence spending to meet NATO commitments, and the rest would go to tax cuts."

Looking Ahead

Ruffolo says be bold with tax reform because this is the kind of ambition Canada needs at this moment. At the same time, Ruffolo emphasizes that his tax reforms should be thought of as part of a larger economic strategy. "Tax policy on its own isn't a magic wand," he notes, “low productivity, poor infrastructure and excessive red tape all need fixing too.”