Time to do something with the corporate tax rate
Value-added taxes (VAT) and GST aside, I think it's time the feds seriously looked at reducing our corporate tax rate by at least 6 per cent. At the moment, our rates are just too damn high:
In a review of corporate tax rates at the beginning of 2007 in 92 countries, the average rate in the EU was 24.2 percent, compared with 27.8 percent in the OECD countries, 28 percent in Latin America and 30.1 percent in Asia-Pacific. Among developed economies, Canada's corporate tax rate of 36.1 percent is one of the highest.
Moreover, with rates like this, is it any wonder that corporations on Canadian soil are having a tough time competing and, in turn, are being taken over. They just can't mobilize the type of capital needed to make a go of it in a global economy. As the saying goes, "capital flows to the area of least resistance" Which explains why many Canadian firms and manufacturing companies are leaving for greener [low tax] pastures.
(Source: marketwire)
6 Comments:
I'd rebut more if I thought anybody out there actually took that post seriously. Corporations in NB contribute 3% of the budget, and corporations only contribute 13% of the federal budget. ED Smith just got sold because of the income trust scandal, meanwhile canadian corporations are setting profit records unheard of.
With income taxes and property taxes you at least have a shot at getting agreement, but unless you're looking for a corporate sponsor I think you're wasting time on that one. I can just see canadians jumping on that bandwagon. Those poor poor rich corporations:)
Keep in mind also that the fed rate is only 21%, and corporate tax levels are very different depending on what industry is being discussed.
Maybe. But if you consider the public reaction [outrage] regarding Flaherty's last budget, you will realize that these things matter. Which is probably why he is reviewing the increase of foreign takeovers of Canadian owned firms. (and how to proceed)
In other words, he was wrong to tax income trust, not to mention, his lack of insight with canadian corporations was disappointing. IMO, he should have lowered corporate and personal taxes as protectionist policy never works in these cases.
Just l;ook at Walter Gordon's first budget back in 1963 that introduced two risky nationalist measures: a 15 per cent tax on dividends paid by corporations to non-Canadians; a steep 30 per cent tax on the sale of Canadian companies to non-Canadians. Want to know what happened next? The stock market collapsed and thus his budget. In just five days, Gordon announced that the takeover tax would be rescinded and the tax on dividends was soon to follow.
Well said! You've hit the nail on the head. Lower corporate taxes, open up the market and increase competition!
Lower personal tax rates and income splitting for all... yep!
Failing that, how do I incorporate myself?
First, opening markets and increasing competition is a separate issue, you can do those things without lowering the tax rate.
Second, actually the reverse is true and protectionist policies usually work very well, that's why the US uses them so often. However, protectionist policies means tariffs, NOT tax rates. Just because NB has a lower tax rate than Nova Scotia doesn't mean that NS is being 'protectionist'. Protectionist policies would only be a higher tax on IMPORTED goods as opposed to local goods. And again, it depends which industry you are protecting.
Protectionist policies help local industries, while getting rid of them SOMETIMES helps consumers. However, as we know from China, at the risk of losing well paying blue collar jobs.
Flaherty isn't announcing anything new, since it was predicted that foreign takeovers would be the result of the trust scheme, people overlook the very likely event that the government simply doesn't care whether US companies take over canadian ones.
IF you assume, as many do, that the integration of our three countries is the aim, which even government departments claim,then all these things make sense.
1963 is before my time but again you are talking about NEW taxes, not the reduction of taxes. I think those are great ideas for taxes, however, I'm a realist and the risk of capital flight is very real. However, as has been pointed out very often, Canada is the largest foreign owned economy in the world, and that's not a good thing. In a 'fragile' democracy, it gives them much more power over public policy.
But I still tend to be skeptical of Cause A led to Effect B in economics, because there are so many effects at play.
However, like I said, few of the public would buy into that with corporations making so much money.
I would say that that would be an interesting approach in NB, and its been discussed at David Campbell's blog before. IF NB were to grant a tax holiday to new corporations, then that very well could spur economic development. In NB corporations provide almost no benefit to the government's budget anyway, and the main requirement is good jobs. As a tactical advantage it would perhaps spur investment.
However, it probably would be short lived as other provinces would start screaming bloody murder. As a recent study in Maine pointed out, tax levels aren't even in the top 5 considerations of investors, there are so many loopholes that I know revenue canada accountants who have told me that corporations typically 'pay what they want to pay'. There is next to no oversight, Revenue Canada does far far more audits of home businesses than they do of corporations.
"Which explains why many Canadian firms and manufacturing companies are leaving for greener [low tax] pastures. "
But just as many are arriving or expanding. Any facts to back up your beliefs? Darn little evidence to support the idea that tax rates by themselves have much impact on economic growth or job creation.
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