Canada poised to become northern tiger

The U.S. could lose business to Canada, according to a new comparison of tax regimes

February 23, 2011 @ 08:00PM

Today, Prof. Jack Mintz, director of The School of Public Policy at the University of Calgary, released a paper co-authored by Duanjie Chen analyzing tax regimes of 83 developed and developing countries. In a global economy, this kind of comparison is a strong indicator of future investment, job and economic growth for those countries.

“Over time, wage rates will slowly equalize around the world, so we are getting to the place where tax rates on business will be a key factor in determining where capital flows and business sets up shop,” Mintz said.

Mintz has frank advice for the United States: “Either reduce your exorbitant taxes on corporations and get in line with international rates, or face a bleeding of capital, business, and jobs to more competitive countries, including Canada because of its geographic proximity, as well as developing nations.”

While Canada finished mid-pack amongst the countries studied, this is a vast improvement over competitiveness just six years ago.

“In 2005, Canada was the fourth highest taxed jurisdiction in the world. Since then, corporate tax cuts in Canada have made Canada an attractive place to do business – but there’s still work to do.” Mintz said. “Corporate taxes should still be reduced further, and to scrap planned corporate taxes reductions would be a job killer – plain and simple.”

Is Canada on its way to becoming a northern tiger? “Yes,” said Mintz. “The future looks bright for Canada. The combination of resource wealth, a favourable tax regime and our proximity to the U.S. is very positive.”

There are, however, two clouds on the horizon.

“The threat posed by the unfavourable U.S. tax regime is so great, that the damage done to the U.S. economy could seriously affect Canada. And the political threat to continued corporate tax cuts could send uncompetitive signals to global businesses. We need those cuts to take Canada to the OECD competitive average, and businesses have already factored in those cuts.”

A copy of the paper is available at www.policyschool.ca under the “latest papers” section.

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