Canadian Manufacturing

Canada is the most tax-competitive in the G-7: report

University of Calgary economists Jack Mintz and Duanjie Chen compare the business tax regimes of 90 countries in terms of their impact on growth.



CALGARY— Canada has become the most tax-competitive jurisdiction in the G-7 according to a report released today by The School of Public Policy at the University of Calgary.

In the third Global Tax Competitiveness Ranking, authors Jack Mintz and Duanjie Chen compare the business tax regimes of 90 countries in terms of their impact on growth.

“Thanks to recent reductions to the corporate tax rate, Canada now has the most competitive tax system for business among the G-7, the 20th most competitive in the OECD and it ranks 57th among the countries we surveyed,” Mintz said. “The result has been greater investment and improved economic growth despite recessionary pressures.”

The report cross-references corporate tax rates versus government revenues from these taxes.

Despite reductions to the corporate tax rate since 2000, revenues have grown with the economy. The report attributes this to profit-shifting, meaning more companies looking to capitalize on favourable tax rates are investing in the Canadian economy.

While Canada is reaping the rewards of its 19.9 per cent Marginal Effective Tax Rate (METR), the U.S. is perilously lagging behind with a METR of 35.6 per cent—last among the 34 OECD countries.

But Mintz says this large gap is not something Canadians should be happy about.

“The U.S. is our largest trading partner and our economies are so closely linked that we really do need the U.S. to get their act together and reform their tax system,” he said. “After all, when they lose out on investment, we lose out too.”

However Canada has slipped back in the last year.

Mintz and Chen identify B.C.’s decision to renege on the Harmonized Sales Tax as hurting Canada’s competitiveness.

They also issue a warning to Ontario, where a planned general corporate tax rate reduction is stalled until it can be accommodated fiscally, a decision which the authors say will cost $7.5 billion in capital investment.

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