Canadians for Tax Fairness welcomes the news that the government is going ahead with private corporation tax reforms. And the tweaks announced today sound reasonable. But a cut in the tax rate to 9% for small businesses in unlikely to do anything to boost jobs or the economy and could cost more than the savings from closing the private corporation tax loophole.
The lower small business tax rate, already the lowest in the G7 was costing taxpayers $3.6 Billion. The new rate cut is estimated to cost $1.6 Billion. This is less than the estimated revenues from closing the loopholes, leaving us further behind.
“The large gap between the business tax rates and those for individuals is already the main driver of the tax avoidance the government is trying to address,” says Dennis Howlett, Executive Director of Canadians for Tax Fairness. “There is little evidence that lower business tax rates are linked to job creation at all.”
Canadians for Tax Fairness, and other groups in the Canadian Coalition for Tax Fairness, are pleased the government is moving forward with tax reforms to close the private corporation tax loopholes despite backlash from the opposition and vocal business lobby. The tweaks announced today seem reasonable and will help to target the highest income earners and avoid unintended consequences for farmers or other small businesses who want to pass on their business to the next generation.
If the government is intent on going ahead with the small business tax rate reduction, it should target it to those who employ three or more staff.
“Less than half of the private corporations under $500,000 have any employees at all,” adds Howlett. “If this rate cut proceeds, it needs to be targeted to the small businesses that are actually creating jobs (3+ employees) like it was in Quebec, not providing boutique tax savings for business owners.”
Canadians for Tax Fairness is a national organization that advocates for a modern, effective and fair tax system.
For more information: Dennis Howlett Canadians for Tax Fairness 613-863-3670
Read more about this issue on the Tax Fairness website.