OTTAWA—Despite outraged business and media reaction to the NDP’s demand for rescinding a new round of corporate tax cuts in return for supporting the Liberal government’s 2005 Budget, a strong case can be made that further reductions in corporate taxes are unjustified.
In a study released today by the Canadian Centre for Policy Alternatives, economist Andrew Jackson points to the fact that corporate profits have already soared to a record high, in large part because of the substantial business tax cuts enacted in previous government Budgets.
“The full corporate tax rate cut of nine percentage points implemented between 2000 and 2010, plus the elimination of the surtax and capital tax,” says Jackson, “will reduce annual federal government revenues by $12.6 billion in 2010. That is about $400 for every Canadian.”
He argues that reports by KPMG, The Economist, and other reputable sources rank Canada very highly in terms of both tax competitiveness and overall cost competitiveness.
“Corporate Canada is awash with cash,” he notes, “but soaring profits are being invested outside the country in record amounts, stashed in offshore tax shelters, or paid out to corporate insiders and shareholders.”
Jackson argues that Canada’s key economic weaknesses are in the building-blocks of a knowledge-based economy, in areas such as innovation and skills. Thus the diversion of proposed additional corporate tax cuts into social investments such as early childhood education and expanded access to post-secondary education would do more to boost the economy and create jobs than swelling already overflowing corporate profits that are not being ploughed back into the economy.
The Case Against More Corporate Tax Cuts is available on the CCPA web site: www.policyalternatives.ca
For more information contact Kerri-Anne Finn, CCPA Communications Officer, 613-563-1341 x306.