– The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies through research that is nonpartisan, evidence-based and subject to definitive expert review.
CANADA – The best and worst major cities for business investment are identified in a new report from the C.D. Howe Institute. In Business Tax Burdens in Canada’s Major Cities: The 2017 Report Card, authors Adam Found and Peter Tomlinson compare business tax burdens in 10 Canadian cities. The report examined the largest cities in each province.
Found notes that before a business decides to locate or expand in a given jurisdiction, it must consider the tax implications. Heavy tax burdens drive investment away to other jurisdictions and, with it, the associated economic benefits.
The report finds the overall highest tax burdens to be in Saint John, Charlottetown, and Montreal, with Montreal having the most burdensome local taxes. As for the most competitive overall business tax environments, Saskatoon and Calgary still lead the way, but Calgary increasingly lags behind Saskatoon as Alberta’s business tax environment deteriorates.
The report quantifies the 2017 tax burden on business investment for the largest city in each province, focusing on – from the federal all the way down to municipal level – corporate income, retail sales, land transfer and business property taxes.
Taken together, these taxes determine the tax burden on every dollar of new business investment, called the marginal effective tax rate (METR).
The authors note considerable gaps in the way Canadian governments measure the overall tax burden on business investment, primarily because business property and land transfer taxes are omitted from the METR.
As in previous editions in this series on inter-municipal business tax burden comparisons, the authors find this oversight of major significance: business property and land transfer taxes represent about two-thirds of the total investment tax burden nation-wide.
Found recommends the federal Department of Finance include business property taxes when determining the provinces’ METR estimates. Once governments better understand the effect of business property taxes on the cost of investment, Found believes they are more likely to reduce the burden these taxes impose.
