Canada’s largest firms claim to pay more than corporate tax rate
Survey showed companies paid on average 33.4 per cent of profits in taxes in 2012
OTTAWA—Canada’s largest firms want it known that they are indeed paying their fair share of taxes, even if governments have slashed corporate rates to new lows.
The Canadian Council of Chief Executives (CCCE), which represents 150 of the country’s largest firms, issued survey results that suggest when all taxes are included, the companies paid on average 33.4 per cent of profits in taxes in 2012.
That’s larger than the 25 per cent statutory corporate rate that exists in most Canadian provinces.
The explanation, said Lincoln Schreiner of PricewaterhouseCoopers LLP, who did the survey for the CCCE, is that the big firms surveyed pay almost as much in other forms of taxation—such as employment insurance contributions, non-refundable sales taxes on inputs and property taxes—as they do on corporate income taxes.
CCCE chief executive John Manley concedes the survey is far from conclusive because it was not random—only 63 of the 150 or so companies in his group participated on a voluntary basis—but he said he hoped this would be the first of annual surveys that would allow the group to build a database on taxation and other indicators.
The survey is also not representative of corporate taxation levels in Canada generally because smaller firms have lower statutory rates.
As well, how much taxes a company pays will also depend on where it is in the business cycle because some may be carrying forward losses from previous years, or depreciating equipment, which would lower their payments in any one year.
“I’d like to do the survey on a regular basis because I think it becomes meaningful when you can see a trend instead of a snapshot,” said Manley.
“(Still) I do think there’s this perception that corporate taxes have been cut and what we’re hoping to underscore here is that the contributions of businesses are way more than the statutory corporate rate.”
The NDP and many progressive analysts have been critical of the Harper government for slashing corporate rates from about 22 per cent to 15 per cent, even as the economy was struggling and Ottawa fell deeper and deeper into debt.
That criticism intensified after it became apparent that many were socking away profits instead of investing it—what former Bank of Canada governor Mark Carney derided as “dead money.”
While corporate taxes are a generally lower portion of total government revenues today than they were in the 1960s and 1970s, an examination of the record shows the annual contribution tends to vary wildly, reflecting the state of the economy at the time, with corporate tax receipts lowest during economic slowdowns.
In recent years, business taxes have dipped from 16.5 per cent of total government revenues in 2006-07 to 13.6 per cent in 2012-13.
The report also comes a few days after an analysis by the Canadian Centre for Policy Alternatives (CCPA) determined that the country’s 86 wealthiest individuals and families had amassed enough assets to equal the net worth of the country’s 11.4 million poorest.
Labour economist Erin Weir of the United Steelworkers (USW) union, who has researched the issue extensively, says what is striking is what’s occurred during the most recent tax cuts brought in by Conservatives, especially considering some of those cuts occurred during a deep recession and slow recovery.
“Corporate taxes declined as a share of government revenue from the early 1970s to the early 1990s because corporate profits declined as a share of the economy,” he said. “What’s striking over the past decade is that because of corporate tax cuts, corporate taxes have edged down as a share of revenues even as corporate profits have soared as a share of the economy.”
Bank of Canada governor Stephen Poloz has been more sympathetic to businesses, saying their reluctance and caution is understandable given the high level of uncertainty in the global economic outlook, and weak global demand.
In total, the survey shows the 63 participating companies paid $19-billion in taxes in 2012, as well as another $5.7-billion in other payments to governments for such things as stumpage and spectrum licence fees, and rents and leases.
The survey shows firms paid more than 50 different kinds of taxes, for which the average spent $4.5-million and employed 22 full-time employees to comply.