Corporate Tax Burdens in Canada Continue to Drop

January 26, 2012 Taxation in Canada

Corporate Tax in CanadaOTTAWA – Canadian businesses have enjoyed a number of tax cuts over the last 12 years, and could soon see their Tax Freedom Day shift back into January.

On January 25th the Canadian Labour Congress released a new study on the tax liabilities faced by Canadian companies, claiming that corporate income tax collections are making up a decreasing amount of the government’s cumulative revenues.

According to the report, in 2010 Canadian businesses saw Corporate Tax Freedom day (CTF) fall on February 1st, and in 2012 the date is expected to move into late January. The CTF date is a hypothetical measure which indicates how many days of the year a company will need to work before they can cover their annual tax obligations in full. The CTF date has fallen earlier every year since 2000.

The move in the CTF date is being attributed to the series of cuts to the corporate income tax rate in Canada. At the start of the year 2000 the tax rate stood at 28 percent, and at the start of 2012 the rate was already down to 15 percent, with many businesses taking advantage of a constantly updated system of tax breaks and allowances.

After taking into account the provincial tax rates faced by businesses in Canada, as of January 1st 2012 the effective tax rate faced by companies is estimated to be below 24 percent.

The authors of the report suggested that each 1 percent decrease in the corporate tax rate results in a CAD 2 billion reduction in collections of corporate taxes in Canada.

Photo by v i p e z