Canada’s business tax system is complex and costly, challenging the country’s
ability to compete internationally, a new study by PricewaterhouseCoopers (PwC)
suggests.
The 2007 Total Tax Contribution survey is based on a framework developed by
PwC in the United Kingdom, and encompasses all taxes paid by a company, as well
as all taxes collected by the company from its employees and customers on behalf
of the government.
A company's total tax contribution is therefore a measure of its total impact
on government revenues.
The survey found that companies in Canada are subject to 49 different taxes
and 18 other payments to governments at the federal, provincial and municipal
level.
Adding to the complexity of Canada’s tax system, companies are
subject to more than 200 possible “taxing points” - the number
of tax obligations a business would be required to fulfill if it were subject
to all taxes in all jurisdictions.
On average, the companies that took part in the survey spent CAD2.1mn a year
to comply with these taxes.
The average time spent on compliance was 19,863 hours, which translates to
2,483 eight-hour days or the equivalent of 11 full-time employees dealing solely
with tax compliance.
According to the survey, the tax burden on companies in Canada is significantly
higher than the burden on businesses in the United Kingdom.
UK companies pay or collect 21 different taxes, fewer than half the number
of taxes encountered by companies in Canada.
“While recent tax reforms have produced real savings for many corporations,
the tax landscape in Canada still presents numerous challenges,” observed
Tom O’Brien, a tax partner with PwC in Canada, adding that:
“Money and time spent on complying is money and time not invested in
research and development, product development and other business improvements,
which obviously hurts Canada’s overall competitiveness.”
In addition to taxes borne directly by companies, businesses make a significant
contribution to government revenues through their obligation to collect and
remit a wide range of other taxes.
The 39 companies that took part in the survey collected a combined CAD19.8bn
in taxes in 2006 on behalf of all Canadian governments.
For every dollar they paid in corporate income tax, survey participants paid
a further CAD0.82 in other business taxes and remitted CAD3.41 in taxes collected
from their employees and customers. The major taxes collected by companies in
Canada, as identified by survey participants, were personal income taxes withheld
from employees, fuel duties, GST and excise duties.
According to the survey, a relatively small number of companies contributed
the largest proportion of the total taxes borne and collected.
The companies responsible for the 10 largest tax contributions in the survey
(a quarter of the respondents) contributed 64% of the taxes borne, and 68% of
the taxes collected in 2006.
Of the 49 taxes identified in the study, 34 were paid by the companies themselves
and 21 were collected by companies and remitted to governments (some taxes are
both borne and collected by the company).
One measure of the inefficiency of
the tax system is that half of the 34 taxes paid by survey participants accounted
for only 8% of the total taxes paid by those companies.
PwC’s Total Tax Contribution survey was sponsored by the Canadian Council
of Chief Executives (CCCE), a non-partisan organization that represents 150
CEOs of major Canadian companies and leading entrepreneurs.
The survey illustrates the critical role played by Canada’s largest businesses
in paying for the many services provided by governments, was the comment from
Thomas d’Aquino, the CCCE’s Chief Executive and President, who observed that:
“Canada’s largest enterprises are well recognized as drivers of
innovation and productivity, but many Canadians do not appreciate how important
they are as taxpayers. The activities of even a handful of major enterprises
can generate tens of billions of dollars in tax revenue."
"If Canadians care about
maintaining high-quality public services, we need to ensure that public policies
encourage the growth in Canadian communities of enterprises with the scale to
compete and win globally."
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