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The third annual PwC Canada Total Tax Contribution report shows that large Canadian companies pay at least 68 different kinds of taxes, fees and royalties – a finding that underscores the complexity of the tax system.
“Corporate income tax (CIT) gets most of the attention, but it’s actually just one of the many ways large companies contribute to public finances,” said Lincoln Schreiner, a tax services partner at PwC Canada.
The study shows that for every dollar large firms pay in CIT, they contribute $1.09 in other business taxes, pay $0.70 in government fees, royalties and similar charges, and collect $3.15 in employee payroll taxes, customer sales taxes, excise duties, fuel duties and property tax on behalf of Canadian governments.
This complexity is costly for business and inefficient for governments. On average, each of the 89 companies that participated in the survey reported spending $4 million annually on tax compliance and requiring 19 full-time accountants and other employees to meet their Canadian tax obligations.
Conducted with the help of the Business Council of Canada, the Total Tax Contribution study illustrates the critical role of large companies in generating tax revenue for Canadian governments.
The 89 companies that participated in the survey contributed a total of $77.5 billion to municipal, provincial and federal governments in 2014. Of that, $7.8 billion was paid in federal corporate income tax, representing nearly 20 per cent of all federal CIT revenues that year.
The latest edition of the study, published today, is based on data from 2014. Survey participants comprised a cross-section of Canada’s leading companies, including banks, insurance firms, manufacturers, retailers, telecommunications providers, energy producers and natural resource companies.
“This report is further evidence of the need to embrace comprehensive tax reform and simplification,” said The Honourable John Manley, President and Chief Executive Officer of the Business Council of Canada. A primary goal of reform should be to reduce the number of business taxes imposed across the country, in particular smaller taxes that generate little revenue but are time-consuming and expensive for governments to collect.
Consistent with last year’s findings, the study confirmed that large companies collectively contribute more money to governments in taxes and other payments than they earn in after-tax profit. On average, 42 per cent of the annual value created by companies in the survey went to governments, while 28 per cent went to employees in the form of after-tax wages and salaries. The remaining 30 per cent was earned as after-tax profit and either retained for reinvestment in the business or distributed to shareholders.
In addition to being major taxpayers, the large companies surveyed employed nearly 1.1 million Canadians and paid $75 billion in gross wages and salaries. They paid their workers an average of $64,769 in 2014 and contributed an average of $23,693 in payroll taxes per employee.
Copies of the PwC Canada Total Tax Contribution report are available here.