Just cutting taxes would level the field too
much
The Vancouver Sun
Sat 07 Jan 2006

Page: I3
Section: BusinessBC
Byline: Michael Campbell
Column:
Michael Campbell
Source: Vancouver Sun

Hey, it's an election campaign, so we should expect a
heaping helping of nonsense. But sometimes, inadvertently, something worth
discussing comes up.

Case in point: The "I love Canada more than you do" debate between Paul
Martin and Stephen Harper.

I have no interest in declaring whose Canadian flag is wrapped tighter, but I
did find myself smiling when, once again, it was brought up that Mr. Martin's
former company, Canadian Steamship Lines (now owned by his sons), is registered
in other countries in an effort to lower its tax burden.

Leaving the obvious politics aside, the fact that CSL flies different flags
makes perfect business sense.

The company is in a very competitive industry, and it would be financial
suicide not to play, as they say, "on a level playing field." That's also the
reason why, according to calculations by the Canadian Taxpayers Federation, the
federal government has handed over $772 million in subsidies to Bombardier over
the past 22 years. They also must play "on a level playing field" in order to
succeed. And, after all, other countries are offering better tax or subsidy
deals.

General Motors and Ford must also play on a level playing field when it comes
to their manufacturing facilities, which is why the federal and Ontario
governments committed $435 million for manufacturing plants in three Ontario
communities last March. According to the companies and government, that is what
was needed to level the playing field with competitors in the southern U.S. and
Mexico. According to the Financial Post's Tasha Kheiriddin and John Williamson,
this subsidy alone worked out to about $870,000 per job.

Of course, taking money from more successful corporate taxpayers like Toyota
and Honda to prop up competitors will raise the ire of some, but the message is
still the same. In a competitive world the tax burden matters, and whether you
alleviate that burden through subsidies for shipbuilders and automakers, special
tax breaks for the film industry, or by registering in a different jurisdiction
for shipping companies, the intention is still the same.

Given that we provide special breaks in one form or another to such a wide
variety of businesses and industries, it's becoming increasingly difficult to
pick one that isn't in line for special favours from governments of every
stripe. Which begs the question: Why don't we stop playing favourites and lower
corporate tax rates across the board in order to attract business?

A C.D. Howe study released in 2005 found that Canada's
effective tax rate on investment "is second highest among the 36 developed and
leading developing nations." Taxes for ongoing operations vary for different
municipalities and provinces, but clearly in many instances governments are
forced to acknowledge the uncompetitive nature of the tax environment they
created by giving special breaks to so many industries.

Of course, across-the-board cuts that benefit the entire economy are not
nearly as much fun as creating a permanent group of voters beholden to the
government because of special treatment. Business and industries are much like
people when it comes to protecting their seat on the gravy train, and that's why
you won't find a single political party in this election suggesting any change
to the status quo.

Michael Campbell's Money Talks radio show can be heard on CKNW 980 on
Saturdays from 8:30 to 10 a.m.

Edition: Final
Story Type: Business; Column

Length: 555 words