As a result of business tax reform since 2005, Canada has become the most tax-competitive jurisdiction in the G7, according to a report released today by the University of Calgary’s School of Public Policy.
In the Annual Global Tax Competitiveness Ranking, authors Jack Mintz and Duanjie Chen contrast the business tax regimes of 90 countries worldwide 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 G7 and 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.”
While Canada is reaping the rewards of its 19.9% marginal effective tax rate, the U.S. lags behind at 35.6%—last among the 34 OECD countries.
“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 its act together and reform its tax system,” Mintz says. “After all, when it loses out on investment, we lose out, too.”
The authors warn, however, that in the past year, Canada slipped back somewhat. Mintz and Chen identify B.C. and its decision to renege on the HST as hurting Canada’s competitiveness. They also issue a warning to Ontario, whose planned general corporate tax rate reduction is stalled until it can be accommodated fiscally. “Ontario will lose $7.5 billion in capital investment in the long run by forgoing plans to reduce the general corporate rate to 10% by mid-2013,” the authors write.
Read the full report at policyschool.ucalgary.ca/publications.