Canadian corporate income tax payments rose sharply in 2016, study shows

Print Share

Share this page

Date: May 28, 2018

Related Issues Macroeconomic and Fiscal

Canadian corporate income tax payments rose sharply in 2016, study shows

Large Canadian companies paid significantly more in corporate income tax in the 2016 fiscal year compared to 2015, a new study shows.

 

The study, based on financial data from 87 of the country’s largest companies, found that they collectively contributed $68.3 billion to the federal, provincial and municipal governments in 2016, the most recent year for which tax information is available.

 

Included in that total was $12.7 billion in federal and provincial corporate income tax payments. The comparable figure in 2015 – a year in which corporate profits overall were lower – was $9.5 billion.

 

The findings are based on the fifth annual Total Tax Contribution survey of Business Council of Canada members, conducted by PwC Canada.

 

Since the survey began, there has been a gradual upward trend in the total tax rate paid by large Canadian companies, from 33.4 per cent in 2012 to 36.3 per cent in 2016. The 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.

 

The 87 companies that took part in the survey employed more than one million people in 2016 and paid them an average of $66,788, generating $24,442 per person in employment taxes. The wages they paid were 32 per cent higher than the national average for full-time workers in Canada.

 

“The Total Tax Contribution study underscores two simple but important messages,” said The Honourable John Manley, President and Chief Executive Officer of the Business Council of Canada. “First, large Canadian companies are significant contributors to public finances, through a wide range of different taxes. Second, when the economy is growing and businesses are profitable, governments, workers and communities all benefit.”

 

Among the report’s other findings:

  • The burden of tax compliance continues to rise. On average, the companies that took part in the study spent $3.72 million and required 19 full-time employees to keep up with their Canadian tax obligations.
  • For every dollar large firms paid in corporate income tax, they contributed another $1.08 in other business taxes, 25 cents in government fees, royalties and similar charges, and $3.01 in taxes remitted on behalf of their employees and customers.
  • For every $100 of value generated by the companies in the survey, $36 went to Canadian governments in taxes, while $26.70 was retained as after-tax profit and either reinvested in the business or paid out to shareholders. The rest – $37.30 – was paid to employees.

 

In a summary of the report’s findings, PwC notes that the recent reduction in the U.S. federal corporate income tax rate from 35 per cent to 21 per cent “will have a considerable impact on business decisions, in North America and around the world.”

 

“The average effective U.S. federal-state corporate income tax rate has now fallen below the effective Canadian federal-provincial corporate income tax rate,” the report says. “Combined with other U.S. tax reform measures encouraging business investment in the U.S., as well as measures which may increase the cost of cross-border business with the U.S., there is considerable concern that Canada’s corporate tax system has lost its competitive edge.”

 

About PwC Canada

At PwC, our purpose is to build trust in society and solve important problems. More than 6,700 partners and staff in offices across the country are committed to delivering quality in assurance, tax, consulting and deals services. PwC Canada is a member of the PwC network of firms with more than 236,235 people in 158 countries. Find out more by visiting us at www.pwc.com/ca.

© 2018 PricewaterhouseCoopers LLP, an Ontario limited liability partnership. All rights reserved. PwC refers to the Canadian member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details.

 

About the Business Council of Canada

The Business Council of Canada is a not-for-profit, non-partisan organization composed of the CEOs of Canada’s leading enterprises. Member CEOs and entrepreneurs represent all sectors of the Canadian economy and are responsible for the vast majority of Canada’s exports, business investment, private-sector research and development, and employer-sponsored education and training. Find out more by visiting thebusinesscouncil.ca.

News Archives

Subscribe to email updates from the Business Council of Canada
  • This field is for validation purposes and should be left unchanged.