Most people change their entire relationship with a room the moment they sense a door is closing behind them, a dynamic that policymakers would do well to understand.
With that in mind, former Google LLC chief financial officer Patrick Pichette offered a bewildering
to Canada’s brain-drain problem.
“You want to go to the U.S.? Give me back my money,” he said at the
in Montreal this past weekend, arguing that graduates educated at Canadian post-secondary institutions should repay his wild estimate of $500,000 in partially taxpayer-subsidized education they received.
He also called for shutting down the TN visa program to keep Canadian graduates at home, apparently unaware or unconcerned that the TN is an American program under the Canada-U.S.-Mexico Agreement that Canada has no authority to cancel, though the agreement will be up for review. He claimed the cost of obtaining a TN is a mere $30, conveniently ignoring the significant legal fees many applicants directly or indirectly incur.
Pichette spent years working in the U.S. and he appears to currently live in the United Kingdom. Draw your own conclusions on those small biographical details.
The growing number of successful Canadians who are
leaving Canada
or exploring the idea is not a theoretical trend and the capital attached to those departures is measured in the tens of billions of dollars. Proposals such as Pichette’s don’t solve the talent and capital exodus; they concede it.
The instinct to make people pay if they won’t stay has appeared before. In 2023, Australia consulted on changes to its
that would have made it easier to enter the system and considerably harder to leave. Critics called it “
” and that’s apropos. Canada would do well to learn from that near-miss rather than adopt the experiment.
Many incorrectly assume those who leave Canada do so without financial cost. However, paragraph 128.1(4)(b) of the Income Tax Act deems individuals who cease to be Canadian residents to have disposed of their worldwide assets at fair market value.
There are important exceptions. For example, personally owned Canadian real estate and registered assets such as registered retirement savings plans are excluded from the deemed disposition because Canada will ultimately tax those assets when they are sold, withdrawn or considered disposed of.
For most other assets, however, any accrued gains are immediately taxed. Such a rule can be troublesome for people who hold illiquid assets — like private company interests — and possible long-term double taxation needs to be properly planned. Given such rules, Canada already aggressively participates in the success of those who leave.
Some also think successful Canadians have a moral duty to Canada for all that the country provided them. But framing departures as a moral failure gets the causality exactly backwards. Entrepreneurs don’t leave because they stopped caring about Canada; they leave because it stopped making it worthwhile to stay.
Fix that and the conversation about obligation becomes unnecessary. Successful people have already greatly contributed through taxes, employment and risk-taking. Canada taxes them again on unrealized gains when they leave. At what point is the debt, including any moral debt, considered paid?
What Pichette is proposing for younger people is something different and more troubling: not taxing accumulated wealth (since many won’t have much yet), but financially penalizing them for choosing where to build their careers before they have built anything at all.
This form of economic indenture — an exit penalty — would have predictable results: earlier departures, offshore education choices and a generation of young professionals who never put down roots in Canada. Trapping people with costly penalties will inevitably cause behaviour changes, just not in the way proponents hope.
The real issue is why successful Canadians and the next generation of talented young people are leaving. The answer is not complicated: economic opportunities are greater elsewhere.
Canada’s top personal tax rates are among the world’s highest. Recent taxation policies, such as the proposed capital gains inclusion rate in 2024, have sent clear messages to investors and entrepreneurs that success will be penalized. The current regulatory environment often discourages risk-taking. There is also a constant and persistent tax-the -rich rhetoric that treats wealth creation as a social problem rather than an engine of prosperity.
Combine this with a political culture that constantly reaches for redistribution before it reaches growth, and you should not be surprised that mobile and talented Canadians are increasingly asking a simple question: Would I be better off somewhere else? For many, the honest
is yes.
Is trapping people the right answer? Of course not. The solution is to ensure economic policies don’t get in the way of success and encourage risk-taking rather than discourage it.
From a tax perspective, Canada needs comprehensive tax reform, not a tinkering around the margins, but a fundamental rethinking of how our system treats individuals, businesses and investors. That should include
reforms — as economist Jack Mintz describes it — that meaningfully reduce tax rates, provide
targeted capital gains deferral
, reduce complexity and provide greater policy stability so that investors and entrepreneurs can plan with confidence.
These reforms would make Canada a destination for foreign capital and talent rather than a cautionary tale about what happens when you tax ambition long enough. The competition for talent and capital is global and intensifying. Canada’s answer to that competition cannot be punitive adhesive residency. It has to make staying the obvious choice.
Traps don’t inspire loyalty; they inspire escape and public policy built on them will, too.
Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, a former chair of the Canadian Tax Foundation, former chair of the Society of Estate Practitioners (Canada) and has held many other leadership positions in the Canadian tax community. He can be reached at kgcm@kimgcmoody.com and his LinkedIn profile is https://www.linkedin.com/in/kimgcmoody.
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