THUNDER BAY – Prof. Jack Mintz, Director of the School of Public Policy, released a paper that analyzes the tax regimes of the federal and provincial governments, and determines their relative ability to attract business and investment.
Mintz calls Alberta, B.C. and New Brunswick the most competitive provinces in Canada, and singles out Quebec, Saskatchewan and Manitoba as the least competitive. In Ontario, Mintz calls the HST and income reforms in the 2009 budget the boldest tax reform of 2010. “This caused a huge drop in Ontario’s and Canada’s marginal effective tax rate on business,” Mintz said. “But it’s not enough. Ontario simply will not be able to compete with Alberta and B.C. if further reductions in corporate taxation are not made.”
“The boldest business tax reform in 2010 came from Ontario, which, on July 1, harmonized its provincial sales tax with the goods and services tax (GST), phased in a corporate income tax reduction, and accelerated the elimination of the provincial capital tax,” states Mintz. “This tax reform reduced the METR on capital for Ontario by more than 12 percentage points from its 2009 level of 33.6% to 21% (Figure 1a and Table 2a) and contributed 5 percentage points to the drop in the overall METR on capital in Canada from 2009 to 2010”.
Mintz has frank advice for the federal government. Corporate tax cuts must continue as planned to keep Canada competitive. In his words, “Governments around the world are waking up to the reality of global competitiveness. To create jobs and attract investment, corporate taxes must be kept in check. Further, Canada needs to work to make sure its tax burden is neutral, otherwise we’re sapping productivity.”
Mintz worries about the call from federal opposition parties to revoke corporate tax cuts. “Canada is in the middle of the pack globally,” he said. “We’re just beginning to stake our claim as a country that is good for business. To revoke Canada’s planned corporate tax cuts would reverse that trend, and cost jobs, business growth and competitiveness. Calling for an increase in corporate taxation is irresponsible policy as far as the overall economy is concerned.”
A copy of the paper is available at www.policyschool.ca under the “new papers” section.