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Canadian CEOs 'Pay Their Fair Share' In Tax

by Mike Godfrey, Tax-News.com, Washington

20 December 2013


Canada's high income earners pay around twice as much tax for every dollar of their income as a typical wage earner, McDowall Associates has claimed.

The independent consulting firm examined the details on the compensation of chief executive officers (CEOs) held in its own database and compared the findings with the most recently available information on the income taxes paid by Canadian high income earners from Statistics Canada, which dates from 2010. It found that the average total direct compensation paid to the CEOs of S&P/TSX 60 companies stood at CAD6.21m (USD5.84m) in 2010. The average industrial wage that year was just CAD46,600, generating a CEO pay ratio of 133 to one.

The average amount of income tax paid by these CEOs hit CAD2.52m (40.6 percent). Industrial workers paid the taxman an average of CAD7,993 (17.1 percent), leading to McDowell Associates calculating a CEO tax ratio of 316 to one.

The closest match McDowell Associates was able to find to the 2010 average industrial wage in the Statistics Canada income tax database was a group of 10.2m tax filers. Their "market income," including capital gains and excluding government transfers, ranged from CAD22,600 to CAD80,600. With an average income of CAD45,200 this group represented the 50th-90th percentile pre-tax income earners out of a total of 25.5m tax filers in 2010.

Statistics Canada's "top 0.01 percent income group," of only 2,550 filers with a median market income of CAD4.63m, offered the nearest match to an S&P/TSX 60 CEO. This group's average income was CAD6,06m, and its tax bill CAD1.78m. The 50th-90th percentile group paid the tax man an average of CAD6,875.

For McDowell Associates, the research therefore demonstrates the relative significance of CEOs to the Canadian economy, both as individual taxpayers and collectively. A tax hit on high income earners would not, therefore, "solve Canada's federal and provincial debt problems, as compared to a small increase in the taxes paid by the average worker."

TAGS: individuals | tax | employees | tax planning | tax rates | Canada | revenue statistics | individual income tax

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