A U of T professor is urging Ottawa to change Canadian tax law to encourage greater business productivity.
A working paper released in late March by Ontario’s Institute for Competitiveness and Prosperity proposes, among other measures, eliminating corporate income tax altogether as a way of spurring Canadian businesses to invest more in machinery, equipment and software. “Corporations don’t pay taxes, people do,” explains Roger Martin, dean of the Joseph L. Rotman School of Management and chairman of the institute.
“Corporate income taxes are paid by workers through lower wages, by customers through higher prices and by shareholders through lower returns. If governments want to tax the wealthy, they should tax them directly, rather than taxing corporations.” To replace revenue lost through lower corporate taxes, the institute recommends that governments convert the provincial sales tax to a GST and apply it to the same goods and services as the federal tax.
The institute also encourages governments to investigate the benefits of shifting the basis of taxation away from annual incomes to lifetime earnings. Instead of giving taxpayers an annual exemption of around $10,000, as is currently the case, this approach would exempt from taxation the first $250,000 of lifetime earnings. Income taxes would be imposed only after an individual has passed this mark, and the tax rate would rise as accumulated lifetime earnings passed other income levels. According to the institute, people with lower incomes might not pay taxes for years, and those with higher incomes would face lower marginal tax rates than currently.
“Taxation is a complex issue,” says Martin. “We’re proposing ideas that could lead to higher prosperity for all.”