Canada Needs To Keep Cutting Corporate Tax, Business Leaders Urge Government

by Mike Godfrey, Tax-News.com, Washington

08 November 2004

The Canadian Council of Chief Executives last week urged the government to usher in a fresh round of corporate tax cuts to help insulate business against unfavorable underlying economic factors, and ensure that Canada maintains a competitive edge.

“The time has come for a second major round of tax reduction, this one with an initial focus on corporate taxation,” the CCCE argued in its pre-budget submission to the House of Commons Finance Committee.

“The choices that Canada makes on corporate tax policy will have a huge impact on how quickly Canadian enterprises adapt to a higher dollar, and on the extent to which their responses maintain and add to employment in Canadian communities,” the group warned.

The Council noted that while Canada’s headline corporate tax rate was slightly lower than that of the United States, the effective tax rate faced by Canadian firms was in actual fact much higher.

The executives also expressed concern that the tax gap between Canada and its neighbour will continue to grow as a re-elected George W. Bush seeks to push through further tax cuts and regulatory reform.

Citing data released by the IMD World Competitiveness Yearbook, the Council observed that Canada has the fourth highest corporate tax rate of the 60 countries featured, yet ranks 33rd in terms of tax collected as a share of the economy. By comparison, Ireland, with a corporate tax rate of 12.5% is said to collect 25% more revenue than Canada.

“In today’s world, high corporate taxes simply do not pay,” argued the CCCE.

“Smart corporate tax policy therefore should be front and centre in the next federal budget,” the Council concluded.

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