Stop the Corporate Tax Giveaways
Corporate executives in Canada will be dancing in their suites and celebrating Corporate Tax Freedom Day on January 30. A CLC research report shows that by that date corporations will have paid their entire share of taxes for the year to all levels of government.
Corporate income taxes in 2011 amounted to only 8.3% of all government revenues, down from 8.8% in 2010 and an average of 11% in the 1960s and 70s. 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 prior to the recession. Today’s unemployment rate of 7.1% remains well above the pre-recession rate of 6%.
- Between 2001 and 2011, the total cash reserves of private, non-financial private corporations in Canada grew from $187 to $575 billion.
- Between 2010 and 2011 alone, there was a one-year increase of $72 billion in cash reserves. This is a figure more than double the entire $33.4 billion federal deficit for 2010-11.
- Bank of Canada Governor Mark Carney has called these corporate cash reserves “dead money” and says that private companies should invest and put it to work. Even federal Finance Minister Jim Flaherty is frustrated with the situation and has called upon private corporations to invest in Canada.
- The leading cash hoarder has been Teck Resources Limited, which accumulated over $4.30 billion in assets over the 2001-2011 period. Other cash hoarders of note include: Bombardier Inc. ($3.28 B); Suncor Energy Inc. ($3.80 B); George Weston Limited ($2.47 B); Barrick Gold Corporation ($1.95 B); Research In Motion ($1.39 B); and Husky Energy Inc. ($1.84 B). Magna International is in 10th pace among cash hoarders ($435 million).
- The top 10 corporate hoarders have collectively accumulated $27.7 billion in added cash assets between the years 2001 and 2011.
- CEOs from the top 10 cash hoarding companies are among the most highly paid in the country. This is illustrated by cross indexing our list of corporate cash hoarders with CEO pay as outlined in a Canadian Centre for Policy Alternatives study titled Over-Compensating: Executive Pay in Canada.
- CEO compensation in Canada’s top 10 non-financial corporations averaged $11.9 million in 2011, ranging from $3.7 to $40.9 million at Magna International.
- Corporate tax giveaways mean that the federal government has foregone billions of dollars in revenues. To pay for the tax breaks, Ottawa has borrowed billions of dollars and driven up the national debt. Now, the government has chosen to make massive cuts to public services essential to Canadians in order to pay the bill for its tax giveaways. These service cuts include closing the Coast Guard station in Canada’s busiest port in Vancouver to save $900,000 a year, and closing the Search and Rescue call centre in St. John's to save $1 million.
- It is time for corporate Canada to invest and create jobs. The hoarded cash should be put to work. If it isn’t, provincial and federal governments should take it back.
- Ottawa should target its corporate tax credits to companies that actually do invest in machinery and increased productivity.
- The government should also be investing in productivity-enhancing public infrastructure including transit, literacy, workplace training and child care.