Posted by & filed under Canadian Economy, Corporate Restructuring, Taxation & Planning.

To Lower or not to Lower Corporate Tax Rates? Let us look at a few conflicting arguments. We are presently in the mist of a Federal Election, and all the major parties have different arguments to increase or decrease taxes.

All three parties basically seem to get the notion of corporate competitiveness and the link to job creation. The Conservatives, Liberals and the New Democratic Party differ as to where Canadian companies fit in the international landscape and whether chopping what these firms pay to Ottawa is the best way to create jobs. Of course, some of these variations are the result of political calculations by the federal parties, designed to position themselves to get the most votes.

 The battle is joined

 Some like the notion of chopping what firms pay.

 “The recent and planned general corporate rate reductions are good for the economy with a minimal impact on government revenues,” Jack Mintz, Palmer Chair of Public Policy, School of Public Policy at the University of Calgary, wrote in a recent opinion piece in the National Post. 

 Waving the low-tax flag

 At first blush, the case for knocking down company taxes would appear to be fairly straightforward.

 “To increase after-tax cash flow — leave more money in the hands of business to invest,” noted Jeff Brownlee, vice-president of public affairs and partnerships for the Canadian Manufacturers and Exporters, an Ottawa-based business group.

Simply put, if a company has more cash on hand, it can buy more performance-enhancing machinery or hire new workers.

Conversely, if the government takes away that money, public officials are more likely to waste at least some of those tax dollars on inefficient projects, losing the maximum benefit the money could have on the overall economy.

 Hiking profitability

 Increasing corporate taxes may cause corporations to move to other countries that offer lower taxes and thus lose jobs in the process. The higher cost of paying taxes, may cause corporations to pass on the increase cost to consumers.

 To read more: See CBC News

  Discussion Questions:

  1. If corporations were to pay lower corporate taxes: Who would be the beneficiaries?
  2. Do you agree with the following statement: “Large multinational corporations may move their head offices and place of business to lower tax jurisdictions”.
  3. Thinking question: With the increasing prevalence of the internet, worldwide consumers may purchasing online, in which country or jurisdiction should  corporate profits be taxed? 

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