CLC president Ken Georgetti says Ottawa should target its tax credits at companies that actually invest in machinery and increased productivity.
When the CLC observed Corporate Tax Freedom Day last year, spokespersons for big business rushed to defend both tax breaks and the high level of corporate cash reserves. They said that Canada has to be competitive with other countries. That is just talk. Canadian corporate income taxes are already competitive and did not have to be lowered. Business representatives also claimed last year that corporate income tax as a share of government revenue would soon increase. That has not happened. Corporate income taxes fell from 8.8 per cent of government revenues in 2010 to 8.3 per cent in 2011. Back in the 1960s and ‘70s, corporate income tax represented an average 11 per cent of government revenues. (via CEOs take tax breaks, but don’t create jobs - thestar.com)
- In return for tax breaks, companies are supposed to be investing their windfall, but studies have shown that rising corporate after-tax profits are not all invested in increased productivity and the creation of good jobs in Canada. There were 1.35 million unemployed Canadians in December 2012 compared to 1.1 million unemployed in October 2008, just before the recession. Today’s unemployment rate of 7.1 per cent remains well above the pre-recession rate of 6 per cent.
- Our CLC study shows that between 2001 and 2011 the total cash reserves of private, non-financial private corporations in Canada grew from $187 billion to $575 billion. Between 2010 and 2011 alone, there was an astounding one-year increase of $72 billion. This is a figure more than double the entire $33.4 billion federal deficit for 2010-11.
- Bank of Canada Governor Mark Carney has described the high level of corporate cash reserves as “dead money,” and he says private companies should invest and put it to work. Even federal Finance Minister Jim Flaherty is frustrated with the situation and has called on private corporations to invest in Canada.
- The CLC study shows just that the top 10 corporate hoarders accumulated $27.7 billion in extra short- and long-term cash assets between 2001 and 2011. Those companies include Teck Resources Ltd., Bombardier Inc., Suncor Energy Inc., George Weston Ltd., Barrick Gold Corp. and Research In Motion. CEOs from the top 10 cash-hoarding companies are among the highest paid in the country. This is illustrated by cross indexing our list of corporate hoarders with CEO pay as outlined in a Canadian Centre for Policy Alternatives study titled Over-Compensating: Executive Pay in Canada.
- CEO compensation among Canada’s top 10 non-financial corporations averaged $11.9 million in 2011, ranging from $3.7 to $40.9 million at Magna International. The top CEOs take home a yearly average of 235 times more than the average Canadian.
This argument is a bit simplistic and I do not endorse it; it nonetheless must be made.
The main reasons for decreasing corporate taxes is double taxation (both the corporation and people deriving income from it) and attracting corporations creates employment and collateral tax revenues. Then again, corporate personhood weakens that idea.