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Total tax burden on large companies increases amid economic weakness, survey finds

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Date: April 27, 2017

Related Issues Trade and Investment

At a time when Canada’s economy was under pressure from low energy and commodity prices, large corporations faced an average total tax burden of 37.5 per cent, the highest such rate in the four years the data has been collected, a new report by PricewaterhouseCoopers (PwC) shows.

Conducted in partnership with the Business Council of Canada, the fourth annual edition of the PwC Total Tax Contribution study is based on data from 87 leading Canadian companies, including banks, insurance firms, retailers, telecommunications providers, manufacturers, energy and mining companies.

The tax total tax rate is a measure of all taxes borne by a company – corporate income tax plus all other taxes paid to the three levels of government – as a percentage of profits before taxes. In 2012, the first year of the PwC Total Tax Contribution study, the average total tax rate was 33.4 per cent. The average rate rose to 33.9 per cent in 2013 and 35.4 per cent in 2014.

“The Total Tax Contribution report provides a snapshot of how large companies contribute to public finances in Canada,” said Peter van Dijk, National Tax Policy Leader at PwC Canada. “What differentiates this year’s result is that it reflects a time of economic uncertainty – the downturn in oil prices in 2015.”

Collectively, the 87 surveyed companies contributed $63.8 billion in 2015 to public finances at the federal, provincial/territorial and municipal level. To put it in context, that amount is roughly equal to the annual total of all government expenditures on primary and secondary education.

The report found that large Canadian companies pay 68 different kinds of taxes, fees and royalties to the three levels of government. On average, for every dollar they paid in corporate income tax in 2015, companies contributed another $1.59 in other business taxes and $0.63 in government fees, royalties and similar charges, as well as $3.48 in taxes remitted on behalf of their customers and employees.

“The results of the latest Total Tax Contribution survey demonstrate that when the energy and resource sector suffers, the economic impact reverberates across the country,” said The Honourable John Manley, President and Chief Executive Officer of the Business Council of Canada. “In good times and in bad, large companies are significant contributors to public finances. As Canada faces an increasingly competitive global environment, an understanding of the overall tax burden on Canadian companies is critical.”

Consistent with last year’s findings, the study showed that large companies collectively contribute more money to governments in taxes and other payments than they earn in after-tax profit. On average, the companies that took part in the survey remitted more than 40 per cent of the annual value they created to federal, provincial/territorial and local governments.

In the most recent edition of the Total Tax Contribution study, respondents were also asked about their capital expenditures.  Despite generally weak business conditions in 2015, the 87 companies reported a combined $37 billion in capital expenditures.

About the Council

The Business Council of Canada brings business leaders together to shape public policy in the interests of a stronger Canada and a better world. Founded in 1976, the Business Council is a non-profit, non-partisan organization composed of the chief executives of Canada’s leading enterprises, representing every region and sector of the economy. Through supply chain partnerships, service contracts and mentoring programs, Business Council members support many hundreds of thousands of small businesses and entrepreneurs in communities of all sizes across Canada.

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