Canada’s corporate tax cuts need more time to work
31 January 2012
Matthew Gilleard - ITR
A new report from the Canadian Labour Congress (CLC) has called into question the effectiveness of Canada’s corporate tax cuts. The three-step reduction in the country’s corporate tax rate, implemented with the objective of incentivising job creation, is not having the desired effects, says the report.
Finance Minister Jim Flaherty implemented a three-stage corporate tax reduction which lowered the rate from 21% to 15% from 2006. The new 15% rate has been effective since January 1 2012, but the CLC claims Canadian companies are simply hoarding funds and paying bigger dividends to shareholders rather than increasing job creation and hiring.
“In return for tax breaks, companies are supposed to invest to create jobs, but they are not. Instead, they are hoarding cash and paying out fat dividends to their shareholders,” said CLC President Ken Georgetti.
The CLC findings throw doubt over the government’s tax policy, especially when one considers that each percentage point reduction in the corporate tax rate means the government losing out on about C$2 billion ($2 billion) revenue a year, but advisers believe the cuts were not a...
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