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Industry body Canadian Manufacturers and Exporters (CME) has urged the Canadian Government to create a globally competitive business tax structure that supports growth.
CME has released "Manufacturing a Competitive Business Environment in Canada," the first of five reports resulting from its Industrie 2030 initiative. The project aims at doubling manufacturing output by 2030. CME and its strategic partners held 55 community consultations and received more than 550 responses to its biannual Management Issues Survey.
According to CME, participants identified a range of tax increases and policy changes that are making it more difficult and costly to do business in Canada. It said: "Payroll taxes are rising, carbon taxes and other levies are being expanded, and the corporate tax rate is going up in several provinces." It added that, by contrast, the new US Administration intends to cut corporate taxes, streamline the regulatory burden on domestic businesses, and has committed to not introduce carbon taxes.
"As a result, if we are to succeed, Canada must act aggressively not only to overcome its current investment image challenges, but to respond to this widening gap. Failure to do so will only accelerate the rate at which manufacturing investment passes Canada by," CME argued.
Among CME's recommendations is that Canada's federal and provincial governments should reform the corporate tax structure so that only distributed profits are subject to tax. It said that business income that is retained and re-invested should be tax-exempt.
CME also suggested that the business structure "should be reformed to reward companies for growing and adding value rather than for being small." It said the gap between small business and headline corporate tax rates should be re-examined, along with a range of other tax exemptions for SMEs.
At present, the federal small business rate is 10.5 percent compared to the general rate of 15 percent. Provincial corporate tax rates range from 11 percent to 16 percent, with small business rates varying from zero percent in Manitoba to eight percent in Quebec.
Lastly, CME called on the federal Government to establish a national manufacturing and processing tax credit. The intention is that this would reduce the federal corporate tax rate from 15 percent to 12 percent.
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