Corporate Tax

The federal net corporate tax rate is currently 15%. For small businesses, this figure is 11%. However, businesses are also subject to provincial taxation, so their total tax rate will be higher. Canada’s average combined federal-provincial tax rate is currently 26.3%. By comparison, the average corporate tax rate for G7 countries is 29.9% and in the United States it is 39% (but the U.S. has a complex system of tax deductions which effectively reduces overall corporate tax rate). Those in favour of lowering corporate tax rates argue that high taxation harms economic growth. They point out that a reduction in corporate tax rates does not always lead to a significant reduction in government revenues from corporate taxes. As taxes decrease, companies are more likely to invest and expand, potentially leading to more taxable profits and higher tax revenues by government. Reducing corporate tax rates also provides incentives for multinational firms to shift taxable activities into countries with lower tax rates. By contrast, increasing corporate tax levels would initially increase government income, but this may be short-lived as corporations alter their spending habits and investment in the long-run to avoid taxation. Those in favour of raising corporate tax rates argue that there is no definitive proof that higher taxes harms economic growth, and could in fact help spur growth through increased government spending and investment. They also argue that corporations gain benefits from government spending such as better infrastructure, healthier workers, and better human capital from education and social programs, so corporations should be expected to contribute to these. There is debate as to the extent and ability of some high-income professionals to reduce the amount of income tax they pay by abusing the lower corporate tax rate for small businesses . They can do this by shifting their income into a Canadian Controlled Private Corporation (CCPC) that qualifies as a small business, and then giving their revenue as dividends to lower-income family members—all while taking advantage of other benefits to reduce their tax burden. Economist Jack Mintz has estimated that 60% of the small business deduction goes to households with incomes of more than $150,000, while economist Michael Wolfson has estimated that 5-10% of small businesses act as tax shelters (a means of avoiding taxes), and that the government loses around a half billion dollars per year due to this. However, these estimates are difficult to prove and small business associations have argued that this is the exception to the rule. Moreover, they argue that small businesses should be given greater tax benefits as they face higher wages, tax, and other costs relative to larger corporations.


Reduced the corporate tax rate to 15% from 22% in 2006 (1, 2) Has legislated a reduction in the small business tax rate from 11% to 9% by 2019 (2) Has steadily reduced subsidies to oil and gas industries and will eventually phase them out (4) Has legislated a reduction in payroll taxes (money businesses and employees contribute to the Employment Insurance program) from a tax of $1.88 per $100 earned to $1.49 per $100 earned by 2017 (7, 8) Pledges to extend the Northern Mining Exploration Tax Credit, which gives a 15% tax credit for those who invest in mineral exploration in Northern communities, by another three years (3, 4, 5, 6) Pledges to provide an enhanced credit of 25% of a company’s corporate tax to subsidize proposed mining projects that face steep overhead costs due to remote locations or distance from transportation routes (such as the Ring of Fire in Ontario and Plan Nord in Quebec) (4, 5, 6)	Pledges to impose a "slight and graduated increase in corporate taxes" that would remain below the average that the Conservatives have had in place for 10 years (17.5%) (9, 13) Promises to reduce the small business tax rate from 11% to 9% (2, 11, 13) Believes the small business tax credit should be “tweaked” to ensure that it cannot be used as a tax dodge by wealthy individuals (12) Will immediately end all subsidies to the oil and gas industries and shift the tax breaks to clean and renewable energy projects (14, 16, 17) Pledges to create a new Innovation Tax Credit and offer targeted tax breaks to manufacturers and businesses that invest in machinery, equipment, and property to promote innovation and increase productivity (10, 11, 13) Promises to extend the accelerated capital cost allowance for machinery and equipment by two years (13) Opposes extending the Northern Mining Exploration Tax Credit (4)	Pledges to keep corporate tax rate the same (15) Promises to reduce the small business tax rate from 11% to 9% (2, 13) Believes the small business tax credit must be significantly changed to ensure that it cannot be used as a tax shelter by wealthy individuals (12, 15) Pledges to reduce payroll taxes (where money businesses and employees contribute to the Employment Insurance program) from a tax of $1.88 per $100 to $1.65 per $100 earned (7) Will end all subsidies to oil and gas industries and invest $200 million per year into clean and renewable energy projects (14) Opposes extending the Northern Mining Exploration Tax Credit (4)	Pledges to return corporate taxation to 2009 levels, 19% (2, 18, 20, 21) Promises to reduce the small business tax rate from 11% to 9% (2, 20, 21) Believes the small business tax credit should be changed to ensure that it cannot be used as a tax dodge by wealthy individuals (19) Will end all subsidies to oil and gas industries and create $1 billion per year in technology commercialization grants for entrepreneurs to accelerate emerging technologies (19) Promises to create a carbon-fee-and-dividend that taxes polluting industries and returns all funds to Canadian citizens above the age of 18 (13, 18, 19) Will work with provinces to increase taxes on alcohol and tobacco (2, 21)

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Corporate Tax

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Further Reading