Home February 2019 Corporate Income Tax Rates Don’t Show the Full Picture

Corporate Income Tax Rates Don’t Show the Full Picture

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Terry O'Flynn.

Taxes in Alberta are famously competitive, and they are part of what makes up the Alberta Advantage. However, even as rates for small business have dropped, it’s clear that the tax rate is not showing the full picture of what’s going on in Alberta’s business community.

Since the beginning of 2017, small businesses in Alberta have enjoyed a drop in the tax rate from 3 per cent to 2 per cent. Larger corporations have seen their taxes increase from 10 per cent to 12 per cent, but on a federal level, small business taxes went down, dropping a full per cent from 11 to 10 between 2015 and 2018. Corporate income tax on the federal level remained steady at 15 per cent since 2012.

Make no mistake; taxes on business are a good thing. They help pay for the things Canadians have earned and deserve, from our world-renowned healthcare system to everyday things like roads and grants and incentive programs. However, it’s a big mistake to just look at the competitive tax rate and assume that businesses are thriving. In many cases, they are not.

Corporate income tax is paid on what is left after expenses are deducted from profits. Those expenses include everything it takes to keep the lights on, like gas and electricity, and employees’ salaries.

Over the past few years, small businesses have been hit again and again with impacts that erode their profits. In Edmonton businesses must deal with sharply rising property taxes on top of increased minimum wage (and its impact on the entire wage scale), carbon tax, increased fuel costs and more. Therefore, many businesses are working harder, but earning less.

And let’s face it, Edmonton is still very largely tied to oil and gas. With pipeline disputes, protests and everything else preventing the energy industry from bouncing back, too many businesses are faced with increasing costs, uncertain futures, and shrinking profit margins.

But thank goodness we have a competitive tax rate, right?

Again, taxes are paid from what’s left when expenses are deducted from earnings. Lower profits mean paying less taxes – and that affects the public sector, infrastructure, and everything else those taxes pay for.

The recession is supposed to be over, but for the many companies that borrowed to the limit to stay afloat, the struggle continues. Rather than just pointing to a nice tax rate and assuming Edmonton business are doing well because they pay less tax than other provinces, let’s start taking a long, hard, and honest look at what can really help our economy – supporting business in more effective ways.

While Alberta continues to argue about Kinder Morgan, the Americans have placed thousands of kilometres of pipeline. While other provinces and countries fight to be competitive, Alberta is locked in pointless squabbles and a punitive framework that keeps us from being a big player – or a player at all on the world’s economic stage.

We may have a great tax rate, but what we need is real support to keep the lights on and our workforce gainfully employed.

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