Cut our bruising business taxes
National Post
Thu 22 Sep 2005
Page: A20
Section:
Editorials
Byline:
Source: National Post

In recent weeks, both Paul Martin, the Prime Minister,
and Stephen Harper, the federal Conservative leader, have waxed eloquent on the
importance of building trade relationships with emerging markets in Asia and
elsewhere. While partly an ill-advised attempt to pressure the United States on
cross-border trade disputes, this approach is also a reflection of the growing
power of economies we have typically neglected. But as a study released this
week by the C.D.
Howe Institute
shows, Canada is at a significant disadvantage to virtually every other
competitive nation in the world, courtesy of our cripplingly high business
taxes.

According to the institute, among 36 industrial and leading developed
countries, only China -- at 45.8% -- has a higher marginal effective tax rate
(METR) on business capital (combining capital and corporate tax rates with an
array of other factors, including depreciation deductions) than Canada's 39%.
While the difference between Canadian and American rates is relatively small,
with the U.S. at 37.7% (although it is worth noting that American income tax
rates are also significantly lower), the gap between our country and many
rapidly emerging economic powerhouses is enormous. When competing with India at
24.3% or Ireland at an astonishing 13.7%, it is inevitable that we are going to
lose investment and jobs.

By 2010, Canada's METR will have dropped to 37.3%. But while nobody is
suggesting we go as low as Ireland, it is simply unrealistic to suggest that
this modest drop will put us in position to compete with countries where it is
little more than half of ours, or even lower.

It would be one thing for business taxes to remain so high if federal
resources were stretched thin. But with Ottawa running annual multi-billion
dollar surpluses, these rates are inexcusable. Indeed, there is almost unlimited
potential for tax cuts, since some of the federal government's existing spending
could obviously also be trimmed. But at the very least, Paul Martin's government
should put an end to the annual ritual of throwing "surprise" surplus dollars in
every direction, and instead set about making our tax rates more competitive.

It is to their credit that our federal leaders are talking about preparing
Canada to meet the challenges posed by emerging economies overseas. But doing so
means more than mouthing platitudes and embarking on trade junkets. If Ottawa
wants our country to be an attractive place to do business, it needs to stop
taking so much money from businesses.

Edition: National
Story Type: Business; Editorial

Length: 407 words