Tax Policy Pauses Show Governments Aren't Getting Things Right In The First Place

A relative of mine started building a garage several years ago. The site was levelled, gravel poured, rebar laid down and then everything stopped. The project, I was told, was paused. The money had run out and, frankly, so had the energy.

A pause like that usually isn’t bad luck; it’s the bill for planning that should have been done before the first shovel went into the ground. Pause has also become one of the favourite words in Canadian tax policy .

For example, British Columbia on Sept. 18 paused its poorly planned expansion of the provincial sales tax to accounting, engineering, architectural and other professional services, less than two weeks before it was to take effect on Oct. 1. The reason? Apparently, United States President Donald Trump . Four days later, Premier David Eby called a snap election two years ahead of schedule, again citing Trump.

Meanwhile, the federal government introduced legislation to continue pausing the federal fuel excise tax to Jan. 31, with half rates in February and March and the full tax returning on April 1. The pause, in place since April, will cost about $5.3 billion this fiscal year. Alberta on Sept. 22 announced it will suspend its 13-cent-per-litre fuel tax from Oct. 1 to the end of the year.

Three governments, five days, the same instinct.

A pause or suspension may sound prudent since it suggests a government carefully stepping back to reassess, but it’s usually a tell that bad politics has trumped good policy. Either a tax was announced before it was properly thought through or a visible tax is being cut because voters notice it — sometimes it’s both.

Start with visibility. Fuel taxes are effectively posted on every pump sign. The Department of Finance has even boasted that gasoline prices fell 11 cents per litre on the first day of the federal suspension earlier this year. That’s a political win you can see from the highway.

Alberta’s case is more nuanced. Its fuel tax relief program uses a formula tied to oil prices, which is a better design than the federal government’s ad hoc extensions. But last quarter, the province opted for a rebate instead of pump relief and resisted calls to cut the tax for months before reversing course because, as Premier Danielle Smith said, Albertans would rather get relief directly at the pumps. Even a formula bends toward visibility.

We’ve seen this before. The Stephen Harper government cut the GST to six per cent in 2006 from seven per cent and then to five per cent in 2008 despite widespread criticism from economists who said income or corporate tax cuts would do far more for growth. The GST was chosen because Canadians see it at every checkout. Nearly two decades later, no government has dared to restore it.

The carbon tax followed the same path, only faster. The federal government in 2023 paused the carbon tax on home-heating oil for three years. Less than 18 months later, the entire consumer carbon tax was gone.

Now, look in the other direction. B.C.’s disastrous 2026 budget also paused indexation of provincial tax brackets and non-refundable credits for 2027 through 2030. That’s not a pause of anything a taxpayer will notice at the till. It’s a four-year tax increase delivered through bracket creep. The same soft word is used to cut visible taxes loudly and to raise invisible ones.

There are also pauses that follow poorly designed measures and are announced before the details, costs and consequences were worked through, then delayed or abandoned once taxpayers and advisers exposed the flaws.

For example, the 2024 increase in the capital gains inclusion rate was announced, deferred in January 2025 and then cancelled outright in March 2025. It never became law. Yet many taxpayers had already triggered gains, restructured their affairs and paid advisers based on a rule that never arrived.

The trust reporting rules are just as bad. Bare trusts were exempted from filing for 2023, then 2024, then 2025 and the rules now return for taxation years ending after Dec. 31, 2026.

Also, the federal government in 2022 introduced both the underused housing tax and the luxury tax on certain autos, aircraft and vessels. Three years later, both were scrapped, apart from the luxury tax on autos, by a government that called them inefficient and costly to administer. No kidding.

B.C.’s PST pause now adds to the pile. Companies registered, updated their invoicing and adjusted their accounting systems, and none of that cost comes back. The province is now telling them to cancel their PST accounts.

Every pause leaves someone holding the cost. Taxpayers and their advisers absorb the compliance work for rules that don’t last, the planning built on dates that shift and the uncertainty that delays real investment decisions.

Don’t get me wrong: bad measures should indeed be cancelled, but they shouldn’t be introduced in the first place.

Meanwhile, temporary measures escape the scrutiny that a permanent $5-billion decision would face in a budget. A suspension doesn’t have to be defended as permanent policy, even when it becomes one.

The fix isn’t complicated, but it requires repairing a broken policy process. Do the policy work before the announcement, not after. If a tax measure is meant to be permanent, say so and cost it honestly in a budget.

My relative’s rebar is still rusting on the gravel, a monument to the money, time and effort spent on something that should have been properly planned before it began. Canada’s tax system is increasingly dotted with its own rusting policies.

Governments sometimes need to change course, but taxpayers shouldn’t routinely be handed the bill because they announce first and think later.

Kim Moody, FCPA, FCA, TEP, is the founder of Moodys Tax/Moodys Private Client, co-host of Canadian Tax Matters, a former chair of the Canadian Tax Foundation 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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