Tax free­dom day ear­lier for firms: report

Cana­dian busi­nesses now clear fis­cal hur­dle by Jan. 30, labour group says

Ottawa Citizen - - BUSINESS & TECHNOLOGY - JU­LIAN BELTRAME

Cor­po­rate tax free­dom day con­tin­ues to get ear­lier with each pass­ing year thanks to gen­er­ous government tax cuts, the Cana­dian Labour Congress says in a report is­sued Tues­day.

While most in­di­vid­ual Cana­di­ans don’t earn enough to pay off their taxes un­til some­time in late June, the labour group says the coun­try’s busi­nesses will have reaped suf­fi­cient rev­enue to pay their year’s share by Jan. 30.

The cal­cu­la­tion is for 2011, but the CLC says that was two days ear­lier than in 2010 when it came on Feb. 1, and notes that it was not long ago when so-called “cor­po­rate tax free­dom day” came much later in Fe­bru­ary.

It was likely even ear­lier in 2012 and will be again this year, since in 2011 Ot­tawa had not as yet re­duced the fed­eral cor­po­rate tax rate to 15 per cent. That was ac­com­plished in Jan­uary 2012.

The new report, re­leased Tues­day, at­tempts to make the case that Cana­dian firms have ben­e­fited greatly from years of Con­ser­va­tive and Lib­eral government tax poli­cies, which have cut busi­ness levies more ag­gres­sively than per­sonal taxes.

The labour group says busi­ness taxes rep­re­sent only 8.3 per cent of the fed­eral and pro­vin­cial rev­enue in 2011, down from 8.8 per cent in 2010 and around 11 per cent in the 1960s and 1970s.

It at­tributes most of the change to a steady re­duc­tion in the fed­eral cor­po­rate tax rate, from 28 per cent in 2000 to 15 per cent to­day. Pro­vin­cial rates have also de­clined, but not as dra­mat­i­cally.

But while the ra­tio­nale for re­duc­ing cor­po­rate taxes is to en­cour­age in­vest­ment and job cre­ation, the CLC says most of the money has gone to fat­ten cor­po­rate bank ac­counts and to pay the high salaries of ex­ec­u­tives.

Quot­ing Statis­tics Canada data, the labour group notes that cash re­serves held by pri­vate non-fi­nan­cial cor­po­ra­tions in Canada bal­looned to $575 bil­lion in the last quar­ter of 2011 from $187 bil­lion in the first quar­ter of 2001 — de­spite three of those years be­ing deep in re­ces­sions.

Be­tween 2010 and 2011, cor­po­rate cash re­serves grew an ex­tra $72 bil­lion, while the fed­eral government was re­port­ing a $33 bil­lion deficit.

As well, com­pen­sa­tion to chief ex­ec­u­tives in Canada’s top 10 non-fi­nan­cial firms av­er­aged $11.9 mil­lion in 2011, the CLC says.

“Cor­po­ra­tions in Canada are tak­ing ad­van­tage of cor­po­rate tax cuts, but they are not nec­es­sar­ily us­ing them to in­vest in pro­duc­tiv­ity and jobs,” the report ar­gues.

“In­stead, they have ac­cu­mu­lated bil­lions of dol­lars in cash re­serves.”

The CLC report gives the top prize for cor­po­rate hoard­ing to Teck Re­sources Ltd. with $4.3 bil­lion, fol­lowed by Sun­cor En­ergy Inc. with $3.8 bil­lion, and by Bom­bardier Inc. with $3.3 bil­lion.

The Top 10 also in­cluded Ge­orge We­ston Ltd., Bar­rick Gold Corp., Re­search In Mo­tion Ltd., Husky En­ergy Inc., Gold­corp Inc., Kin­ross Gold Corp., and Magna In­ter­na­tional Inc.

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