Foreign investment into Canada up and flows to US down despite US corporate tax cuts.

Canadians for Tax Fairness calls for a dose of reality on the tax debate; net investment actually flowed North in the first quarter of 2018.

Ottawa, July 04, 2018 (GLOBE NEWSWIRE) -- The Trump corporate tax cut bill was signed in December 2017 with some of the changes coming into effect as soon as January 2018.

“There was speculation that this would result in a flow of money from Canada to the US and anecdotes of businesses relocating have been popping up in the news,” says Diana Gibson, a researcher with Canadians for Tax Fairness, “however, recent Statistics Canada data shows that the outflow has not happened.”

According to Statistics Canada data, Canadian direct investment in the US in the first quarter of 2018 was less than half of the long-term average at $4.1 billion, while direct investment from the US to Canada was higher than the long-term average, at $7.9 billion. Not only were flows into Canada higher than average, and flows to the US lower than average, but net investment actually flowed north.

Canadians for Tax Fairness has submitted a brief to the federal government with this and other evidence that Canada should not be engaging in a race to the bottom on corporate taxes as it would only cause fiscal and other problems for Canada.

The brief explains Canadians should not expect to see a US tax impact:

  • The difference between the US and Canadian rate is very small, and states are already raising taxes to take advantage of that tax room, something the provinces would likely to do if the federal rate dropped.
  • Non-tax cost advantages for businesses in Canada (public health care system, public education etc.).
  • Loopholes (data shows that corporations on the TSE Exchange paid between 2% to 16% in 2014, far from the actual rate of 26.5%).
  • Tax havens (companies that are mobile have options in tax havens with tax rates as low as 0%).

Everyone loses in a race to the bottom on taxes in the longer term. Canadians for Tax Fairness recommends instead that the government take the opportunity to reverse the downward spiral of corporate taxes internationally and within Canada, and take concrete action to fully address tax avoidance and tax evasion.”

Read more about this issue on the Tax Fairness website.



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