Santa Claus’s arrival is right around the corner and I can barely contain my excitement. Throughout the year, I wrote monthly letters to Santa to present my wish list of excellent tax policy ideas that I’ve gathered over the years.

I also provided a copy of my letters (and weekly Financial Post articles) to Santa Carney, er,

Prime Minister Mark Carney

as well. Why? Well, Santa is magic but to get good tax policy, he needs the buy-in of the prime minister and his colleagues.

Throughout 2025, there were a limited number of tax gifts that were received. For example:

  • On Dec. 16, the Canada Revenue Agency (CRA) announced that “bare trusts” are not expected to file tax returns for 2025, which is consistent with proposed legislation that is before Parliament (but not yet passed). Good news.
  • The Nov. 4 federal budget contained an excellent gift with the repeal of the ridiculous Underused Housing Tax.
  • The consumer carbon tax was eliminated.
  • The luxury tax on airplanes and boats was eliminated. Not sure why Santa Carney decided to keep it for automobiles, though.

But the amount of lumps of tax coal that continues to pile up is growing and the past few years have been exceptional.

For example, the one per cent tax rate reduction on the lowest personal tax bracket was wrapped up as a gift. However, this is

not a meaningful tax reduction

for the average Canadian — about $100 per person. With the cost of living continuing to increase, this $100 gift is a lump of coal — pure retail politics.

The new budgeting exercise of separating the federal budget into

operating and capital

is so brazenly deceptive it’s almost laughable. This lump of coal is designed to fool the financially illiterate voter and needs to disappear.

The amendments to the alternative minimum tax (AMT) that became effective Jan. 1, 2024, were sold by Justin Trudeau as making the rich pay “just a little bit more.” Instead, these proposals are poor policy that includes backdoor capital gains tax increases. In addition, this is causing a chill with philanthropic high-income earners. It is

time for the AMT to be eliminated

.

The “flipping tax” was introduced a couple of years ago to curb those evil people who acquire residential properties and then sell them within 365 days of acquisition. If so, any resulting gains are considered fully taxable income unless certain “life exceptions” apply. This rule adds unnecessary complexity since our system already has provisions to deal with “flippers.” It’s purely politics at the expense of a simpler tax system.

One of the most ridiculous tax policies ever introduced in Canadian tax history was the recent

prohibition of expense deductions

for short-term rental owners who operate in a municipality that prohibits such operations. This puts criminal activity — such as drug dealers — on a better tax footing than those affected short-term rental owners since such drug dealers would be entitled to their expense deductions if they reported their earnings. This policy encourages short-term rental owners to be noncompliant for tax purposes.

Canada’s high personal tax rates stifle investment and act as a repellent to retaining and attracting talent. Eight of the 13 provinces and territories have personal tax rates that exceed 50 per cent at the highest rate, which has been a significant factor for

many successful Canadians leaving Canada

. This lump of coal needs to be burnt and replaced with more moderate and competitive rates.

The recent conclusion on Dec. 11, 2025, of the politically motivated

100-Day Plan

, initiated by Finance Minister François Champagne, to improve CRA call centres and other services was a big lump of coal. Instead of looking at the root causes of poor taxpayer service, it was a political public relations exercise for the CRA to tell Canadians how it was dealing with some of the symptoms, followed up by a concluding self-congratulatory press release. Embarrassing.

What about my tax wishes? From a broad perspective, I wish Canada would get back to the four tenets of a good tax system as espoused by economist Adam Smith in his 1776 book, The Wealth of Nations. Those four tenets — fairness (equity), certainty, convenience and efficiency in collections — should be at the forefront of every new tax policy introduction.

Unfortunately, it has not been the norm for years. If it was, reduced complexity would be the result, which is one of my additional tax wishes. The tax system should be approachable to the average Canadian, but it is not.

What we desperately need — and what I keep asking Santa for every year — is

serious tax reform

. Not tinkering. Not targeted vote-buying gimmicks. Actual reform. A system that rewards hard work and risk-taking. One that doesn’t drive productive people out of the country. One that follows Smith’s foundational principles rather than the politics of envy.

At the end of the day, Santa can only do so much. His sleigh is currently weighed down with political baggage, broken economic compasses, staggering debt loads and a crew more focused on optics than outcomes. Given that, Canadians shouldn’t expect many tax gifts under the tree next year either.

Next year, instead of mailing letters to Santa, I might just fly to the North Pole to hand-deliver my tax wishes. Now that the carbon tax is gone, perhaps I can finally burn my coal pile, assuming Environment Canada doesn’t classify it as a luxury fuel or require a net-zero offset permit to get there.

  • CRA’s 100-day plan results are not the presents Canadians want
  • Tax reform requires more from the Liberals

Maybe Santa Carney will join me, but he’ll need to bring a better tax and economic policy compass and definitely a lighter spending sleigh.

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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