Monday, July 16, 2007

Canada and International Tax Rates

The full article is here.
It seems that business tax rates are always "too high" and that there will be articles in the media proving that our rates are too high and that they make us uncompetitive!

Canada and International Tax Rates

Posted by Erin Weir under big business, taxation, rankings.
July 16th, 2007
Comments: 1

Canada’s corporate-income-tax rates are fairly low compared to other G-7 countries. Advocates of further Canadian corporate-tax cuts have responded to this reality in two ways. First, they promote alternative measures indicating that corporate taxes are higher in Canada than elsewhere. Second, they compare Canada to a much broader range of countries.
In the latter vein, The Globe and Mail’s Report on Business has made much of KPMG’s “Corporate and Indirect Tax Survey 2007.” A June 27 news story and Neil Reynolds’ July 11 column presented this document as evidence that Canada’s 36% corporate-tax rate is quite high by global standards.
KPMG added up the corporate-income-tax rates of 98 countries and divided by 98, which generated a World average of 27%. However, this approach gives the same weight to Albanian corporate taxes as to American corporate taxes. My hunch was that a relatively large number of tiny “tax havens” were dragging down the World average.
One solution is to weight countries by economic size in calculating average corporate-tax rates. Jacinta Athaide, a summer student here at the Canadian Labour Congress, diligently copied tax and Gross Domestic Product (GDP) data into a spreadsheet to compute weighted averages.
Weighted by GDP, the average corporate-income-tax rate for the 98 countries is 34%, significantly higher than KPMG’s unweighted average and quite close to the Canadian rate of 36%. Canada - a country with abundant resources, modern infrastructure, an educated workforce, and the rule of law - can surely afford to charge corporations 2% more than the World average without any meaningful loss of “competitiveness”.
Another common claim is that Canada’s corporate taxes are high by OECD standards. Indeed, the unweighted average corporate-income-tax rate among the OCED’s 30 members is 28%, but this figure largely reflects eastern Europe’s low corporate taxes. Weighted by GDP, it rises to 35%. In other words, Canada’s corporate-income-tax rate is very similar to the average rate prevailing in the World economy and/or in the OECD economy.

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