The list was short, but it started relatively familiarly: Mulcair’s similar extolling of a west-east pipeline was nothing but bandwagon hopping, Oliver said, and Mulcair wants to impose a carbon tax on everyone. Some might wonder at this juncture when the last time it was that the Opposition and the government agreed on so much, but never mind. Oliver had one more – newer – charge to add to the list: Mulcair’s apparent wish to impose higher corporate taxes on Canadian businesses.
“Mr. Mulcair told reporters he would impose a crippling $34-billion tax hike on Canadian job creators,” Oliver told reporters gathered in the foyer of the House of Commons.
According to his staff, he was talking about an interview Mulcair gave the Bloomberg editorial board in March, during his swing through the United States. Mulcair told Bloomberg the NDP would increase corporate tax rates if it were to come to power and use the money to invest in social programs “while keeping sales and personal income taxes unchanged.”
The Conservatives duly went back to the NDP’s 2011 campaign costing document to check out the Opposition’s figures on what a higher corporate tax rate would net the feds. Turns out, if you add up the revenue the NDP predicted this would produce from restoring the corporate tax rate to 19.5 per cent (between 2011-12 and 2014-15), you get just under $34 billion ($33.7, to be exact). So that’s where that figure came from.
Obviously, as a minister for the Conservative government, Oliver doesn’t want that to happen. Government MPs have been happy to promote lowering corporate tax rates as a way to spur job growth and investment in the economy. Sault Ste. Marie Conservative MP Bryan Hayes told the House in October, 2011 not long after the Conservatives had won their first majority government that “there are things I am certain of.” One of those was simply this: “that cutting corporate taxes stimulates economic growth.”
Speaking to the 2013 Budget last month, Conservative Dean Del Mastro told the House about Tim Horton’s returning its head offices to Canada “because of tax advantages here.” Corporations, Del Mastro explained, look at tax rates and the cost of doing business in “any number of countries.” But with an economy like Canada’s, which has “competitive tax rates” he could “guarantee we will create jobs, attract investments and build a stronger Canada.”
Lowering the corporate tax rate has worked roughly as expected – that is, fostered some economic growth – but the reality is slightly more complicated than Del Mastro or Oliver present when it comes to tying corporate tax rates to job creation.
Simply put, job creation is not necessarily tied to lower federal corporate tax rates, which now sit at 15 per cent in Canada, having been dropped gradually by successive Liberal and Conservative governments.
To Del Mastro’s point directly, a recent Harvard Business School report confirmed that taxes, along with regulations, do play an important role in whether a company will move. But there are often a number of other factors that companies examine before moving operations to one nation or another, including labour costs, worker competence and skill level, or better access to customers.
“There are 101 other reasons why a firm would locate in a particular place. I don’t think any serious person would argue that … corporate taxes are the prime factor. But they certainly help,” Mike Moffatt, assistant professor of business and economics at the Ivey School of Business at the University of Western Ontario. “I think where they help a little bit more is in where multinational companies decide to repatriate their profits – meaning that they record their profits from being in Canada rather than being in the U.S. or someplace else. I don’t think it changes production decisions all that much.”
The Globe and Mail found similarly when it interviewed “executives in the machinery, aviation, food, beer and retailing sectors” in 2011. From the Globe:
“All said low taxes foster confidence in the economy. But they said many other factors go into making investment decisions, including the cost of raw materials and the value of the Canadian dollar. Many executives singled out specific programs, such as research and development incentives for small companies and funding for retraining programs, as more effective in creating jobs.”
The Globe went on to quote figures from the finance department itself. In a study the department compiled in 2010, it “compared tax cuts with other stimulus measures, including infrastructure investments and Employment Insurance premiums.” It put corporate tax cuts “at the bottom of the list,” the Globe reported. Corporate tax cuts produced “just 20 cents of domestic economic growth for every $1 in cuts for 2010. Infrastructure investments, by comparison, generated $1.50 in economic activity for every $1 invested.”
Does this mean Mulcair is right, and that corporate taxes ought to be raised again? No.
“The main issue is that you’re not going to raise nearly as much money as the NDP indicates. The problem is that multinationals can repatriate their profits based on tax rates. So that’s why when both the Liberals and Conservatives lowered corporate tax rates significantly, the revenue from that corporate tax didn’t really change a whole lot,” Moffatt said. “Generally speaking, corporate tax rates are not a great way to raise money.”
However, the perception garnered by a raise in corporate taxes is it’s a way to hit the wealthy owners of major companies. That’s not really what happens, Moffatt said, and “governments have found the fastest way to do that is just through the regular income tax, rather than trying to do it indirectly through corporate income taxes.”
Still, a line like Oliver’s about higher corporate taxes being an attack on “job creators” remains somewhat of a misnomer.
“An attack on a job creator would be something literally where you are taxing jobs,” Moffatt said. “So, a raise in EI premiums or something like that would be more so than sort of a corporate income tax rate, which really doesn’t have a whole lot to do with jobs, one way or another.”
Original Article
Source: ipolitics.ca
Author: Colin Horgan
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