Canada’s corporate tax advantage is eroding – and it’s a threat to our economic future
Managing editor Theo Argitis published an op-ed in the Globe and Mail, co-authored by Jack Mintz, the President’s Fellow of the School of Public Policy at the University of Calgary. They write about how Canada’s global competitive edge is being threatened by recent corporate tax policies.
In recent years, Canada’s status as a competitive destination for business investment has been increasingly questioned. Business spending has stagnated, and capital flight has reached record levels, resulting in falling per capita incomes.
In this environment, the role of Canada’s corporate tax policies in potentially exacerbating the problem and stalling investment has never been more crucial.
Canada once had a sharply lower effective tax on investment compared to other Organisation for Economic Co-operation and Development (OECD) countries and – most importantly – the United States, which is the world’s largest economy and our biggest trading partner.
New taxes on financial institutions, intended to increase revenue from highly profitable sectors, are likely putting pressure on the margins on loan volumes and raising borrowing costs, potentially stifling economic growth.
Similarly, the early adoption of the 15-per-cent global minimum tax (GMT), while aligning Canada with international tax reform efforts, threatens to erode our ability to offer competitive tax rates to our multinational corporations.
For Canadian multinationals, the aggressive implementation of the GMT in Canada means facing a higher tax burden than their international competitors, placing them at a distinct disadvantage that could potentially prompt some to relocate their headquarters to more favourable jurisdictions. Manulife, Canada’s largest insurance company, has already taken an $88-million charge for the first six months of this year and said it expects to see its effective tax rate increase by two to three percentage points as a result.
The implications of these developments are profound. Canada’s economic resilience and growth prospects hinge on our ability to attract and retain businesses that create jobs, foster innovation and contribute to our tax base.
To regain our competitive edge, Canada must prioritize tax policies that encourage investment.
Read the full op-ed here.
