No doubt much thought went into the issue of taxation at the federal Liberals’ thinkers conference on the weekend, but they need to rethink this one.
The business community is warning that the party, if elected, would be making a huge mistake if it cancelled scheduled corporate tax cuts. Certainly, corporations and business lobbies will make such a claim out of self-interest, but the reasons they provide should be heeded.
For starters, taxing business might seem a popular move to the average citizen who isn’t a major shareholder or on a corporate board. But it would be a serious damper, particularly at a time when many industries are slowly recovering from a recession.
Liberal Leader Michael Ignatieff is reported to be considering freezing the corporate tax rate at 18 per cent. He would put off indefinitely a plan by the Conservatives to cut it to 15 per cent – or at least until it is more affordable. It’s estimated the difference between the two rates would mean up to $6 billion additional revenue.
Business leaders are alarmed by the prospect. Canadian Chamber of Commerce president Perrin Beatty said the party sprang the proposal without consulting with the business community beforehand.
It would be a tough hit, but there’s more. Toronto-area economic consultant Dale Orr said he doubts the federal government would realize the $5 billion to $6 billion they hope the higher rate would yield. He said in reduced investment and in the loss of a competitive advantage that would have resulted in more multinationals paying their taxes in Canada.
Whatever party is in power has to take care not to stifle economic growth in anyway. Budget savings will have to come from elsewhere.
We also know that businesses pushed to the limit will reach a tipping point and pull up stakes to relocate where labour costs are lower and a tax regime is more favourable. This is no idle threat. Canadians all over have seen it happen time and time again.