Stop the Corporate Tax Giveaways
The Conservative government promised that companies would create jobs if only their corporate taxes were reduced. From 2006, when the Conservatives took power, to 2011 the corporate tax rate fell from 21% to 16.5%. As of January 1, 2012 it fell another 1.5% to 15%. What's been the value to Canadians?
A major CLC study "What did Corporate Tax Cuts Deliver?" shows that big businesses aren't creating jobs, investing in equipment, machinery or developing the skills of their workers. What corporations are doing is hoarding cash, paying out increased dividends to shareholders, and beefing up CEO paycheques.
Big businesses are now sitting on $500 billion in cash assets. But Canadians are paying the price. To fund the corporate tax giveaways, the federal government is borrowing money and cutting back on the public services Canadians need - like food inspection, or staff to deal with Employment Insurance claims from workers who have lost their jobs.
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What did Corporate Tax Cuts Deliver?
- Big businesses in Canada will be popping the champagne corks to celebrate Corporate Tax Freedom Day on February 1st. A CLC research report shows that by that date, because of corporate tax breaks, companies will have paid their share of taxes to all levels of government.
- Corporate income taxes in 2010 amounted to only 8.8% of all government revenues.
- Successive federal governments have slashed the federal corporate tax rate from 28% in 2000 to 15% in 2012. Each percentage point reduction costs the government about $2 billion a year in foregone revenues, which amounts to a $13 billion tax giveaway this year.
- The Conservative government's latest round of tax giveaways on January 1st means Corporate Tax Freedom Day will arrive on an even earlier date in years to come.
- In return for tax breaks, companies are supposed to be investing and creating jobs but that is not happening. The job market ground to a halt in the last three months of 2011. Statistics Canada reports that in those months we lost 63,000 full-time jobs and the national unemployment rate rose from 7.1% to 7.5%.
- There were 1.4 million unemployed Canadians in December 2011, compared to 1.1 million unemployed in October 2008, just prior to the recession.
- Rather than using their tax breaks to invest in creating jobs, Canada’s largest non-financial corporations are hoarding cash and paying out fat dividends to their shareholders.
- The top ten corporate hoarders have collectively accumulated $30.7 billion in extra short and long-term cash assets between the years 2000 and 2010.
- The leading cash hoarder has been Potash Corporation of Saskatchewan, which accumulated over $5.13 billion in assets over this period. Other cash hoarders of note include: George Weston Limited ($4.09 B); Barrick Gold Corporation ($3.91 B); Research In Motion ($2.65 B); Kinross Gold Corporation ($2.08 B). Air Canada is in 10th pace among hoarders ($1.65 B).
- CEOs from the top 10 cash hoarding companies are among the most highly paid in the country.
- Companies have used increased after-tax profits to boost dividends paid out to their shareholders. Dividends as a percentage of after tax profits have risen sharply from 30% in the year 2000 to over 50% in recent years.
- The government has been borrowing money to pay for its corporate tax giveaways. Now, to pay for tax breaks, the government is planning to make massive cuts to public services, such as meat inspection, that are essential to Canadians.
- Ottawa should be investing these billions of dollars in Canadian families rather than giving taxpayers’ money to corporations who don’t need it and who aren’t investing and creating jobs.
- We want the government to use its 2012-13 budget to invest in job-creating infrastructure projects and badly-needed public services.
- According to the Department of Finance, $1 billion invested in infrastructure investment creates more than five times as many jobs as the same amount spent on corporate tax cuts.
- These government investments can be financed by restoring the federal corporate income tax rate to 19.5%, which would still be less than it was when the Conservative government took office in 2006, and would generate $10 billion this year in added tax revenue.
Find this interesting? Then you should read the full report by our Economist Andrew Jackson.