Executive Summary

Earlier this year, the previous federal government announced its refusal to cooperate with the Ontario government’s plan to create a new Ontario Retirement Pension Plan (ORPP). Prime Minister Harper and Finance Minister Oliver announced that they had instructed the Canada Revenue Agency (CRA) to provide no administrative support for the ORPP and also made an implicit threat that the new pension would not be registered or recognized for tax purposes.

The new federal government has announced its intention to cooperate with Ontario, and a commitment from the Trudeau government to strengthen the Canada Pension Plan (CPP) may eventually eliminate the need for Ontario to create the ORPP. Nonetheless, the dispute earlier this year between the federal and Ontario governments raises potential threats to the economic union, and raises questions about the role of the CRA in neutrally administering tax and benefit programs on behalf of Canadian governments.

The merits of the ORPP or CPP expansion have attracted a great deal of public scrutiny and are not the focus of this paper. Instead, this Mowat Note examines the implications for the federation of the federal refusal to cooperate with the Province to administer the ORPP and concludes that such a refusal represented a real threat to decades of effort to strengthen the Canadian economic union and the harmonized tax collection system.

Ontario, like most other provinces, voluntarily uploaded its tax collection capacity to the federal government decades ago, with an understanding that the CRA would administer tax and benefit programs on behalf of the federal and provincial governments on a politically neutral basis. If the federal government had gone through with its threats earlier this year, it would have created a real practical barrier to Ontario pursuing policy choices in areas of provincial jurisdiction. No province would tolerate an implicit federal power of disallowance and Ontario would likely have been forced to reconsider its participation in the federal-provincial tax collection agreements. This eventuality could have led to backtracking on decades of simplification of tax collection that has reduced the administrative burden on individuals and businesses and reduced the cost to governments.