Last week, legislation was proposed in the Canadian province of Alberta that could soon change its corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. rate and personal income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. starting on July 1 and October 1, respectively. Joe Ceci, the Minister of Finance, introduced the Act to Restore Fairness to Public Revenue in an effort to implement a progressive taxA progressive tax is one where the average tax burden increases with income. High-income families pay a disproportionate share of the tax burden, while low- and middle-income taxpayers shoulder a relatively small tax burden. structure. The revenue generated by the tax would be used to invest in quality services and infrastructure.
The corporate tax rate would rise 2 percent, from 10 percent to 12 percent, while small business tax rates would remain stable at 3 percent. Additionally, the 10 percent flat income tax would be replaced by a graduated tax structure with five different brackets:
|
Income |
Personal Income Tax Rate |
|
Up to $125,000 |
10% |
|
$125,000-$150,000 |
12% |
|
$150,000-$200,000 |
13% |
|
$200,000-$300,000 |
14% |
|
$300,000 and higher |
15% |
Source: Alberta Ministry of Finance
During a press conference, Ceci explained that 7% of the Alberta province is directly impacted by this progressivity.
Ceci estimates the personal income tax alone would raise an additional $800 million to $1 billion in FY 2016-2017. The corporate tax rate would also generate $350 million to $550 million more. Health care, education, and social services are expected to see further support with additional revenue being channeled into each fund. $500 million would strictly funnel into health care, $40 million to post-secondary schools, $45 million to schools with new students in the fall, and $39 million for programs regarding human services.
Canada is well known for its low corporate taxes. Just last year, our experts commended Canada’s decrease in corporate tax rates in 2000. For many years, their corporate tax revenue, as a share of GDP, has surpassed that of the U.S. because businesses are more comfortable incorporating under Canada’s tax code.
The Act to Restore Fairness to Public Revenue will raise revenue, but not without substantial costs to competitiveness and growth.
Share this article