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article imageOp-Ed: Canadian Corporate Tax Freedom Day is January 30 this year

By Ken Hanly     Jan 29, 2013 in Business
Ottawa - A research study by the Canadian Labour Congress (CLC) shows that Corporate Tax Freedom Day, the day that corporations will have paid their taxes to all levels of government, will come on January 30 in 2013.
Last year when the CLC also made note of Corporate Tax Freedom day, defenders of the corporations said that Canada had to be competitive with other countries. However, Canadian corporate tax rates are already competitive but they are reduced anyway. Defenders also predicted that corporate taxes as a share of government revenue would increase but they decreased from 8.8% in 2010 to only 8.3% in 2011. However, back in the 1960s and1970s, average corporate income taxes were 11% of government revenue.
The Corporate Tax Freedom day has been getting earlier each year. On the other hand the Personal Tax Freedom Day for the average Canadian was June 11 last year. The Personal Tax Freedom Day is calculated every year by the conservative Fraser Institute think tank.
While the extra revenue gained by corporations is supposed to be used to create jobs, the unemployment rate in Canada remains high at 7.1%, which is still well above the rate of about 6% before the last recession. The CLC research shows that non-financial corporations reserves in the decade ending in 2011 went from $187 billion in 2001 to $575 billion in 2012. Just in one year, between 2010 and 2011, reserves went up by $72 billion more than twice the federal deficit for the same year.
Not only Ken Georgetti of the CLC complains about these uninvested reserves. The Bank of Canada Governor Mark Carney has described these reserves as "dead money" which corporations should put to work. Even the Conservative government's Finance Minister, Jim Flaherty, is frustrated by this hoarding of cash and has called upon companies to use their money to invest in Canada and create jobs.
When it comes to rewarding CEOs Canadian corporations are generous. Canada's top 10 non-financial corporations paid their CEOs from $3.7 million to $40.9 million a year. Their yearly average income is 235 times that of the average wage earner in Canada.
Lower taxes on corporations means less revenue for the government. The Conservative government has borrowed money to finance programs, driving up the deficit and national debt. The government is now making cuts to programs to help reduce the deficit.
Ken Georgetti, head of the CLC, says that the government should target tax credits to companies that invest in machinery and increase productivity. As well, the government, Georgetti claims, should be spending money on infrastructure that increases productivity, including transit, workplace training and child care.
Finance Minister Jim Flaherty accuses the CLC of supporting higher taxes for firms. He is right that the CLC does support that on the grounds that corporate taxes are already lower than elsewhere in the G7 nations. Flaherty said that the CLC does not point out that business investment had increased by 6.2% since the slump. Of course, this was starting from a low base. Even Flaherty has complained about corporations sitting on their cash reserves. Flaherty said:"Our Conservative government is focused on leaving more money in the hands of investors, entrepreneurs and ultimately, growing the work force."
Gregory Thomas from the Canadian Taxpayers Federation claims that many companies have been using their cash reserves to survive in the economic downturn:These CEOs, if they think they can make a buck on an investment, they'll make it. They are not going to spend their nest egg if things are looking scary. There is no doubt some truth in this. Until the business outlook is more positive, companies will be tempted to hoard cash with the unfortunate results noted by the CLC and even Jim Flaherty. The appended video is a speech by Georgetti on Corporate Tax Freedom Day last year.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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