After years of cutting, corporate load eases in major cities: KPMG
Jul 29, 2008 04:30 AM
Dana Flavelle
Business Reporter
Corporate tax cutting over several years has given Canada the third-lowest tax burden among its international peers, a study by KPMG of 10 Western countries has concluded.
Only Mexico and the Netherlands have lower tax costs for business, the accounting firm said.
The study, which also looked at individual cities, found Toronto ranked seventh among 35 international centres. That was better than New York City, but worse than Montreal and Vancouver.
``Canada has done well in reducing its federal corporate tax rates,'' said Greg Wiebe, KPMG's Canadian managing partner, tax, and author of the report called Competitive Alternatives: Special Focus on Tax.
However, he said, it could do even more with the help of the provinces.
``Tax policy choices by all levels of government can significantly affect our competitiveness. For example, if the provinces follow the federal lead and reduce their rates as well, Canada's advantage will be enhanced," Wiebe said.
The study comes amid a feud between Ottawa and Ontario over how best to help Canada's manufacturing heartland, which has been hit by the double whammy of cheaper Asian imports and a slowing U.S. economy for Canada's exports.
Ottawa blames Ontario, saying it's corporate tax rates are too high, while Ontario blames Ottawa for failing to provide specific targeted aid to troubled industries, such as the auto sector.
Business groups welcomed the study, which could help attract more foreign investment.
"It's a good news story," said Carol Wilding, president and chief executive officer of the Toronto Board of Trade. "Toronto, on a relative scale, fares fairly well."
``It's a very positive study," said Tina Kremmidas, senior economist with the Canadian Chamber of Commerce, saying it adds fresh data to existing research.
Favourable tax rates are just one component of a company's decision where to locate, the study noted. Labour costs, facilities and transportation are bigger factors in most corporate investments, the study said. However, lower tax rates help maintain global competitiveness, the study also noted.
``There's no question there's a lot of things going on in the global economy. It's very difficult to isolate the impact of tax policy on business decisions,'' said the Chamber's Kremmidas. On the other hand, ``global competitive pressures are intensifying. Countries around the world are constantly reducing their corporate tax rates. Canada can't just stand still.''
While tax breaks are welcome, governments must also invest in labour skills, public transit and infrastructure, said the Board of Trade's Wilding. The good news is governments and business are both pulling in the same direction, she said.
Canada's combined federal-provincial corporate tax rate, at just above 30 per cent, is now better than most U.S. states' corporate tax rates, KPMG's Wiebe noted.
If federal Finance Minister Jim Flaherty succeeds in his goal of getting the provinces to help reduce that even further to 25 per cent by 2012 "we will be very competitive."
Wiebe said the report is the first of its kind to look at all forms of tax, including payroll taxes, sales taxes and local business taxes.
Mexico and the Netherlands had the lowest tax burden, followed by Canada, Australia, the U.S., the U.K., Japan, Germany, Italy and France.
Jul 29, 2008 04:30 AM
Dana Flavelle
Business Reporter
Corporate tax cutting over several years has given Canada the third-lowest tax burden among its international peers, a study by KPMG of 10 Western countries has concluded.
Only Mexico and the Netherlands have lower tax costs for business, the accounting firm said.
The study, which also looked at individual cities, found Toronto ranked seventh among 35 international centres. That was better than New York City, but worse than Montreal and Vancouver.
``Canada has done well in reducing its federal corporate tax rates,'' said Greg Wiebe, KPMG's Canadian managing partner, tax, and author of the report called Competitive Alternatives: Special Focus on Tax.
However, he said, it could do even more with the help of the provinces.
``Tax policy choices by all levels of government can significantly affect our competitiveness. For example, if the provinces follow the federal lead and reduce their rates as well, Canada's advantage will be enhanced," Wiebe said.
The study comes amid a feud between Ottawa and Ontario over how best to help Canada's manufacturing heartland, which has been hit by the double whammy of cheaper Asian imports and a slowing U.S. economy for Canada's exports.
Ottawa blames Ontario, saying it's corporate tax rates are too high, while Ontario blames Ottawa for failing to provide specific targeted aid to troubled industries, such as the auto sector.
Business groups welcomed the study, which could help attract more foreign investment.
"It's a good news story," said Carol Wilding, president and chief executive officer of the Toronto Board of Trade. "Toronto, on a relative scale, fares fairly well."
``It's a very positive study," said Tina Kremmidas, senior economist with the Canadian Chamber of Commerce, saying it adds fresh data to existing research.
Favourable tax rates are just one component of a company's decision where to locate, the study noted. Labour costs, facilities and transportation are bigger factors in most corporate investments, the study said. However, lower tax rates help maintain global competitiveness, the study also noted.
``There's no question there's a lot of things going on in the global economy. It's very difficult to isolate the impact of tax policy on business decisions,'' said the Chamber's Kremmidas. On the other hand, ``global competitive pressures are intensifying. Countries around the world are constantly reducing their corporate tax rates. Canada can't just stand still.''
While tax breaks are welcome, governments must also invest in labour skills, public transit and infrastructure, said the Board of Trade's Wilding. The good news is governments and business are both pulling in the same direction, she said.
Canada's combined federal-provincial corporate tax rate, at just above 30 per cent, is now better than most U.S. states' corporate tax rates, KPMG's Wiebe noted.
If federal Finance Minister Jim Flaherty succeeds in his goal of getting the provinces to help reduce that even further to 25 per cent by 2012 "we will be very competitive."
Wiebe said the report is the first of its kind to look at all forms of tax, including payroll taxes, sales taxes and local business taxes.
Mexico and the Netherlands had the lowest tax burden, followed by Canada, Australia, the U.S., the U.K., Japan, Germany, Italy and France.