Ontario could derail Ottawa’s corporate tax vision

Provincial government may forgo corporate tax cuts to fight deficit

Ontario may derail federal Finance Minister Jim Flaherty’s five-year plan to establish Canada as a uniform 25 per cent corporate income tax zone, The Globe and Mail reports. Liberal Premier Dalton McGuinty’s minority government faces a troubling deficit situation and may not reduce its corporate tax rate from its current 11.5 per cent to 10 per cent. Since 2007, the Conservative government in Ottawa has been incrementally cutting the federal corporate tax rate from 22.7 per cent. On Sunday, Ottawa moved to lower it to 15 per cent. The argument in favour of a lower corporate tax cut is that it would attract more foreign corporations to Canada while giving businesses more money to invest in Canadian enterprises. Opponents contend such cuts do not result in more economic investment and merely swell the coffers of successful corporations. A study released last year by the Canadian Centre for Policy Alternatives concluded business fixed capital spending has declined as a share of GDP since the early 1980s, when federal-provincial tax rates were much higher than they are today.

Globe and MailPolicy Alternatives

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