Monday, April 05, 2010

On pointless giveaways

Erin looks at the numbers comparing corporate costs in countries around the world. And if anybody was operating under the illusion that tens of billions of dollars of corporate tax cuts over the last decade had served any useful purpose, let Erin put those to rest (italics in original, bolding added):
First, “taxes typically represent up to 14 percent of location-sensitive costs.” Since corporate income tax (CIT) is only one of the taxes paid by business, it alone accounts for an even smaller percentage of costs. Therefore, changes in the CIT rate have very little effect on total business costs.

Second, Canada’s effective CIT rate is about 4 percentage points below the next lowest country (Holland) and about 10 percentage points below the other countries examined (see exhibit 5.10 on page 60 of volume I). So, Canada could raise its CIT appreciably and still have a lower CIT than our main competitors.

Third, Canada had the second-lowest costs overall. The current round of federal CIT cuts was introduced in the 2007 Economic Statement. Looking back before that, Canada had also ranked second in the 2006 Competitive Alternatives report (PDF). Apparently, the latest CIT cuts have not affected our overall ranking.

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