June 21, 2015

Analysis: Canada’s Low Corporate Tax Rate Works

In a profile at Economics21, Savannah Saunders looks at the positive effects of Canada’s corporate structure. Canadian lawmakers lowered the rate in the 1980s from 36 percent to 28 percent and then lowered it again several more times. Today, the nation’s corporate rate stands at 15 percent. Saunders says, “The results of Canada’s policies have pushed the nation to the forefront of competitiveness for corporate investment, and have demonstrated positive effects on the unemployment rate, personal income, nominal GDP, along with net federal tax revenue.” For example, between 2000 and 2012:

  • Additional private sector investment led to the creation of 230,000 more jobs;
  • Personal income per capita increased by $2,269; and
  • Nominal GDP rose by 8.4 percent.

More U.S. businesses have moved their headquarters to Canada as well. Saunders reports, “In August 2014, Burger King bought out Tim Hortons, a popular Canadian coffee-and-donuts chain. The deal went on to save Burger King hundreds of millions of dollars in tax payments.” 

Despite the tax rate cut, Saunders notes the government still netted an additional $20.6 billion in tax revenues between 2000 and 2012 and has one of the lowest debt-to-GDP ratios in the world. Additionally, the country now ranks second on Bloomberg’s annual “20 Best Countries for Business.”