[andyt]

http://www.theglobeandmail.com/news/opinions/opinion/a-canada-us-tax-gap-means-a-canada-us-tax-transfer/article1991567/

Quote:

The Canada-U.S. tax differential becomes increasingly important in this context, as our rates fall substantially below U.S. rates. According to the 2010 budget, the Canadian corporate tax rate at 16.2 per cent in 2012 would be half that of the U.S. at 34.2 per cent, with a still-to-come 1.5-point drop.

Under Article XXIV of the Canada-U.S. tax treaty, any U.S. citizen, resident or company earning income in Canada is subject to U.S. tax, with a credit for Canadian tax paid or accrued. This is critical...

The $50-billion low-end estimated income (not all income is taxed at the corporate rate, the dividing line is not always clear, and rates of return on capital are closer to 9 per cent) could result in a potential $500-million annual tax transfer from Canada to the U.S. for every point reduction in the Canadian tax rate.

[Bruce_the_vii]

Lowering the corporate tax rate moves the tax load to the consumer. There'd be a transfer. That's the entire idea. However the G7 countries have lower corporate taxes than the USA. In addition to a $1.5 trillion deficit they have high corporate taxes.

[andyt]

Bruce_the_vii wrote:

Lowering the corporate tax rate moves the tax load to the consumer. There'd be a transfer. That's the entire idea. However the G7 countries have lower corporate taxes than the USA. In addition to a $1.5 trillion deficit they have high corporate taxes.

The transfer is from the Canadian govt to the US govt, because what the US companies based in Canada don't pay in taxes here they pay in the US at a higher rate. He says each point difference means 500 mil are paid in taxes in US instead of Canada. I'm not sure if he's applying that to the whole 16 point diff, but if so that would mean we lose 8 billion dollars a year in taxes that the companies pay in the US in taxes instead.

[Bruce_the_vii]

Yeah. it's a subsidy to foreigners.

[saturn_656]

andyt wrote:

Bruce_the_vii wrote:

Lowering the corporate tax rate moves the tax load to the consumer. There'd be a transfer. That's the entire idea. However the G7 countries have lower corporate taxes than the USA. In addition to a $1.5 trillion deficit they have high corporate taxes.

The transfer is from the Canadian govt to the US govt, because what the US companies based in Canada don't pay in taxes here they pay in the US at a higher rate. He says each point difference means 500 mil are paid in taxes in US instead of Canada. I'm not sure if he's applying that to the whole 16 point diff, but if so that would mean we lose 8 billion dollars a year in taxes that the companies pay in the US in taxes instead.

Sounds like an incentive for those companies to relocate their head offices.

Come to Canada. Take advantage of lower taxes rates. Come here. Bring jobs.

It's all good.

[commanderkai]

saturn_656 wrote:

Sounds like an incentive for those companies to relocate their head offices.

Come to Canada. Take advantage of lower taxes rates. Come here. Bring jobs.

It's all good.

Exactly. That's the tradeoff. Corporations are taxed less, but the large number of jobs can be created will give the government revenues to make up for the difference (theoretically). If corporations move their facilities, be it offices, research centers, factories, or whatever else, not only will jobs be created, there will be a good chance of skilled workers immigrating to Canada to keep their jobs that were in the United States.

[Bruce_the_vii]

If your taxes are substantially lower and likely to stay lower they might affect decisions to locate factories. I believe part of the Celtic Tiger (Ireland) was low taxes. However most countries have got their taxes down, just above Canada. It's not like reducing them would not be similar to a trade war.

[commanderkai]

Bruce_the_vii wrote:

If your taxes are substantially lower and likely to stay lower they might affect decisions to locate factories. I believe part of the Celtic Tiger (Ireland) was low taxes. However most countries have got their taxes down, just above Canada. It's not like reducing them would not be similar to a trade war.

But we're in a unique situation being right next to the United States. European countries still have the expensive transport issues to supply the United States, while we have extremely cheap rail access to any major city in the United States. This will encourage industries to move due to the convenient location to the world's largest market.

[Bruce_the_vii]

I believe American tax rates are something like 35% compared to our 18%. They've been squeezing corporations and it's now a Republican demand that they be cut - to be more in line with the competition.

[saturn_656]

Don't forget there are federal AND provincial corporate taxes.

The combine them both, and some jurisdictions aren't looking quite as competitive.

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/ ... s-eng.html

[DerbyX]

saturn_656 wrote:

Don't forget there are federal AND provincial corporate taxes.

The combine them both, and some jurisdictions aren't looking quite as competitive.

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/ ... s-eng.html

What isn't being discussed though is the degree and prevalence of deductions available. I work with more then a few people who have lived and worked in the US and they always say that we have so few deductions (at least in income tax) compared to them.

That is a pretty important factor as an area that allows a lot of exemptions might allow a company to lower their effective tax rate to well below the level.

Any data sheet you can think of that deals with such things on a comparison basis?

[saturn_656]

Off the top of my head? Nope.

Lemmy might be the guy to answer that question. He seems knowledgeable in such matters.

[andyt]

saturn_656 wrote:

Sounds like an incentive for those companies to relocate their head offices.

Come to Canada. Take advantage of lower taxes rates. Come here. Bring jobs.

It's all good.

And have they? Can you think of lots of American companies that have moved their head offices to Canada?

[Thanos]

Our insistence that they contibute to health care and that they won't pay their people in pesos probably keeps scaring them off.

[martin14]

andyt wrote:

saturn_656 wrote:

Sounds like an incentive for those companies to relocate their head offices.

Come to Canada. Take advantage of lower taxes rates. Come here. Bring jobs.

It's all good.

And have they? Can you think of lots of American companies that have moved their head offices to Canada?

No, there are far better places than Canada to go.

Still, if we did nothing we would have even less.