Monday, 2 January 2012

Taxes Quebeckers Pay Go up, Taxes Companies Pay Go Down

Canada now has one of the lowest corporate tax rates in the world: 15 per cent as of midnight on Sunday. But are businesses going to use that tax windfall to reinvest in Canada?

Not likely, say a chorus of economists.

The bottom line (and don't all those financial types like talking about the bottom line?) is that Stats Can figures show investment actually falling as corporate tax rates decline. Back in April, before the federal election The Globe and Mail reported that the "rate of investment in machinery and equipment has declined in lockstep with falling corporate tax rates over the past decade. At the same time...businesses have added $83-billion to their cash reserves since the onset of the recession in 2008."

But New Year's Day also marked an increase in taxes for ordinary folk in Quebec. The sales tax went up a percent to 9.5 per cent, slightly lower than the 10 per cent charged in Nova Scotia, and the 10.5 per cent in PEI.

Payroll taxes across the country will also rise this year, as employment insurance premiums increase 5 cents per $100 of insurable earnings and federal pension plan contributions fo up. The Toronto Star reports that it means "employees will have to give up a total of $3,147 in payroll taxes next year — an increase of about $142 over this year.

"Employers will have to shell out about $164 more in payroll taxes next year, for a total of $3,483.

"The combined net increase of 4.84 per cent is the highest since 2002."

There's something wrong with this picture, don't you think?

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