To put it in simple terms, Canada’s corporate income tax is a mess. It discourages capital investment most heavily in many service sectors, is highly distortionary and overwhelmingly complex, impeding economic growth. With current inflation rates, these distortions are even larger. With so many tax preferences, the combined federal-provincial corporate income tax with a headline tax rate of 26 percent raises revenue little more than 19 percent of corporate profits.To build up productive capacity in a post-COVID world, a big-bang approach is needed to put Canada into a better position to attract investment and reduce distortions in the business tax system. There are some major revenue- neutral reforms that could improve neutrality and simplify the overly complex corporate tax. Here, we particularly explore a corporate tax on distributed profits without a reduction in corporate tax revenues.A distributed profits approach means profits from investment activities would only be taxed when they are distributed to investors. This allows profits reinvested in capital to be exempt from taxation. A good example of this design is Estonia’s corporate profit tax on distributions, introduced in 2000. This reform resulted in the elimination of the corporate tax on reinvested profits — these profits are only taxed when the profits are distributed. In 1999, prior to the reform, corporate taxes, as a share of taxes, made up 0.9 per cent of GDP. In 2019, they made up 1.7 per cent of GDP. Estonia has also had remarkable investment performance since with fixed capital formation equal to 27 percent of GDP compared to 23 percent in Canada since 2015.Taxes generally distort economic activity — production of the taxed good or service is reduced when effective tax rates are increased. The value of the lost production is greater than the value of the tax added to government revenue. This results in several distortions: intertemporal, inter-industry, inter-asset, international, risk-taking, financing and business organization. The corporate tax on distributed profits, while still having some disadvantages, does have several advantages in reducing these distortions.The proposal considered here would tax deemed distributions of profits including share buybacks and certain deemed payments to prevent erosion of the tax base. Passive income and capital gains earned by the corporation would remain taxed similar to existing rules. The revenue-neutral corporate tax on distributed profits would be an estimated 16 per cent at the federal level and 11.2 per cent on a provincial average tax rate, when brought forward to the 2022/23 fiscal year results in the same corporatetax revenues collected as in 2022 ($37 billion). While it seems that a distributed tax that exempts reinvested profits would lower the corporate taxable income, it actually doesn’t lower it much. Due to tax incentives, taxable corporate income ($370 billion for 2022/23) is significantly below corporate operating profits ($515 billion). The distributed tax removes the need for tax incentives, no longer providing those tax savings.This proposed model is not perfect, but it is better than the current system, which is distortionary, with high economic, compliance and administrative costs. A distributed profits design would make the corporate income tax fairer and simpler, reducing administrative and compliance costs, while not significantly eroding corporate tax revenues