Reducing corporate taxes would create jobs, boost investment, make Canada more competitive and put more money in the pockets of the Canadians, according to a report by Canadian Manufacturers & Exporters (CME).
“The numbers show that corporate tax cuts are critical drivers of the Canadian economy,” said CME president and CEO Jayson Myers. “The question is not if we can afford corporate tax cuts; it’s can we afford not to make tax rates in Canada competitive with the rest of the world. The answer is simple – corporate tax cuts are good for Canada and Canadians.”
The federal government reduced its corporate tax rate from 18 per cent to 16.5 per cent on Jan. 1 and plans to reduce it to 15 per cent of business profits as of Jan. 1, 2012. Meanwhile, provincial governments will also reduce the tax rates on general corporate income over the next two years, said CME. By 2012, Canada’s average combined statutory corporate tax rate is slated to fall to 25 per cent.
“These planned tax rate reductions will enhance Canada’s international tax competitiveness, placing the combined statutory corporate tax rate at the current global average and lowering Canada’s effective tax rate on business income to a level just below that of the United States,” said Myers.
“I don’t think the average Canadian is going to take issue with a business measure that creates 49,000 new jobs and an additional $440 in their wallet,” says Myers. “It’s good politics and even better policy. Business measures like corporate tax cuts and the accelerated capital cost allowance benefit all Canadians.”
Profits for all business sectors can be expected to grow by 10 per cent this year and next, according to CME, so federal and provincial corporate tax rate reductions in 2011 and 2012 can be expected to:
• increase after-tax business profits by $12.4 billion or 10.6 per cent
• lower Canada’s unemployment rate by 0.52 percentage points and boost employment by 98,800 net jobs
• increase total business investment by $6.2 billion or 4.4 per cent (Investment in new facilities can be expected to rise by $3.0 billion and investment in machinery and equipment by $3.2 billion.)
• increase business spending on research and development by $546 million or 4.4 per cent
• boost nominal gross domestic product (GDP) by $51.6 billion or 3.2 per cent
• increase personal incomes of Canadians by $30.4 billion or 2.4 per cent
• increase per capita personal income by $880
• contribute $2.6 billion to $3.7 billion in additional net revenues for all levels of government.
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