Canadian business leaders think Canada needs a reduction in corporate tax levels in order to improve the county’s global competitiveness, a KPMG Canada study has found.
It also found wide support for reducing personal income tax rates.
In 2018, the U.S. government reduced the corporate federal tax rate from 35% to 21%. The representative U.S. corporate tax rate is approximately 27%.
Currently, Canada's representative corporate tax rate is 26.5%, based on federal and Ontario rates. Some provincial and state corporate tax rates are higher or lower than the representative rates. The highest personal tax rate in Canada now exceeds 50% in most provinces, significantly higher than in the U.S.
According to KPMG, 70% believe the economy is weakening in the near-term, 87% say U.S. tax reform has had a negative impact on Canada's tax competitiveness, and 98% have some level of concern about the impact of current trade disputes on the economy—particularly for Canadian exporters.
Greg Wiebe, Canadian managing partner, tax, at KPMG, said: “We have been hearing concerns from our clients and business leaders about Canada's slowing growth relative to GDP and how current tax rates are hurting our global competitiveness.
“The negative effects of major U.S. tax reform are top of mind for many in the business community, who would like to see Canada's competitive tax advantage restored. On average, Canada's combined federal and provincial corporate tax rate is now roughly on par with the average U.S. corporate tax rate."
The top measures identified to foster business growth in this federal budget are reductions to personal income tax rates (37%) and reductions to corporate tax rates (26%). Furthermore, 29% of respondents identified taxation and regulatory requirements as a key challenge for the economy, while household debt levels (40%) were considered the most significant issue for Canadian consumers.
"Although this is an election year, we hope this budget contains substantial measures to address the competitive challenges facing Canadian companies and our ability to attract foreign investment," continued Wiebe. "We will be watching to see how the government manages to deliver an economic plan that balances the interests of both business and individual Canadians."
by Asena Degirmenci