Jack Mintz is out today with yet another paper applauding the federal corporate tax cut from 18% in 2010 to 15% in 2012.
He claims that the revenue loss will be “relatively small” or “relatively insignificant” without actually suggesting a dollar amount (pages 3 and 20). By comparison, the Department of Finance (see Table 3.5), the opposition parties, and even the Canadian Manufacturers and Exporters estimate that this cut will reduce annual corporate tax revenues by $6 billion.
The “relatively small” claim has a footnote citing the 2007 Tax Competitiveness Report, also authored by Mintz. That report referenced “the tax-revenue-maximizing rate of 28 percent” (pages 0, 14 and 22).
The proposal Mintz now finds so odious is to roll back the federal rate to 18%. With a 10% provincial rate, that would mean a combined rate of 28%!
So, today’s report alleges that there is “little, if any, revenue cost” (page 20) to cutting well below what Mintz himself identified as the “tax-revenue-maximizing rate.” (Finance Canada and I think the revenue-maximizing rate is far above 28%.)
Mintz’s premise is that Canada’s corporate taxes are “relatively high . . . the 2010 federal-provincial rate of 29.3% was almost four points higher than the OECD average” (page 20).
He means an unweighted average dragged down by small countries with ultra-low tax rates like Estonia, Ireland, Iceland, Chile, the Czech and Slovak Republics, Hungary, and Slovenia – hardly Canada’s foremost economic competitors. With countries appropriately weighted by economic size (GDP), Canada was already below the OECD average in 2010.
UPDATE (January 25): Quoted by Canadian Press
- Don’t Privatize ISC (May 16th, 2013)
- Provincial Corporate Taxes: A 12% Floor? (April 23rd, 2013)
- Fairness by design: a framework for tax reform in Canada (February 14th, 2013)
- Effective Corporate Tax Rate Falling (October 18th, 2012)
- Do Corporate Tax Cuts Really Pay For Themselves? (September 13th, 2012)