ERGETE FEREDE
BRITISH COLUMBIA – Every additional ($1) dollar of business income tax revenue collected by the provincial government costs the British Columbia economy $2.37 by discouraging private investment, entrepreneurship and business activity, and impeding productivity growth, which shrinks the tax base, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.
“With the British Columbia provincial government running large deficits and piling on debt, there may be a temptation to raise business taxes to generate more government revenue, but this is ill-conceived policy that would further damage provincial economies,” said Ergete Ferede, senior fellow at the Fraser Institute and author of How Costly Are Corporate Income Taxes in the Short Run?
The study finds that since tax increases adversely affect the private sector’s decisions related to investment, entrepreneurship, saving and labour supply, society loses more than what the government collects in actual tax revenue. In fact, for an additional dollar in business income tax that the provincial government collects, the actual economic cost to British Columbians—because of those behavioural changes—is $2.37.
In Ontario, the economic costs of one additional dollar of business income tax revenue is $1.66, and in Alberta it’s $1.47.
“Raising business taxes is an inefficient way for government to raise revenue, and it comes with significant trade-offs in the form of less investment and economic activity, and, reduced productivity growth, which negatively impacts all British Columbians,” Ferede said.
