Corporate Tax Giveaway to the U.S.
U.S.-based companies . . . are taxed by the Internal Revenue Service on their global income. So any profits they donâ€™t reinvest and try to repatriate are hit with the higher U.S. rate, not the Canadian rate.
â€œThe lower tax rate makes their profits look better in Canada, but that just means they are taxed more in the United States,â€ [Jayson] Myers explained.
â€œThereâ€™s no direct impact on U.S. subsidiaries operating here.â€
When questioned, Myers admits that â€œIt is a big issue.â€ So big, apparently, that he forgot to mention it at all in his 33-page report on corporate taxes earlier this month. Myers even compared Canadian and American corporate tax rates withoutÂ acknowledging how they interact for US-based companies.
McKenna deserves credit for raising an issue that corporate-tax cutters would rather ignore.Â However, his conclusion seems slightly off the mark: â€œMaking a country thatâ€™s good for business is a lot more complicated than shifting the business tax rate a few percentage points, and both parties would be wise to duke it out over something else.â€
McKennaâ€™s headline is correct: â€œCorporate tax cut dispute bit of a yawn for U.S. businesses.â€ But that does not mean Canadians should yawn about losing billions of dollars of corporate tax revenue. The fact that much of this revenue is simply being transferred to the US treasury should embolden the opposition parties to duke it out over corporate taxes.