Tax Rate Surprises

We keep hearing that raising corporate tax will stall the economy and cost jobs.  The rhetoric includes efforts to plant seeds of fear that if we raise the corporate tax even the slightest bit, the corporations will flee our fine province.  Something about what I was hearing just didn't sit right with me so I went on a little digging expedition and I was surprised by what I found.  If you follow the various links in the blog today, you will be surprised by something along the way.

Did You Know...

Alberta's General Corporate Tax Rate has declined since 2000, from 15.5% to 10% in 2006.  It has remained at 10% since April 1, 2006 according to the tables published by Alberta's Finance department.  Alberta has the lowest corporate tax rate in Canada.  Did you realize that our corporate tax was being reduced over that time period?  Most Albertans probably missed it like I did because we were too busy going to school, raising kids, starting businesses, and living.

Alberta Corporate Tax Rate 2000-2015
Finance Alberta
If you want to see how Alberta's corporate taxes compare to taxes in other Canadian provinces

One of the rationale for not increasing corporate tax at all is that it will hurt small businesses.  But it doesn't have to hurt small businesses.  We already have a mechanism in place to provide corporate tax rate relief to small businesses which means that with some creativity it is than possible to move the General Corporate Tax rate without impacting small businesses.  However, this concept has been completely ignored in the PC budget and in their platform for this election.  

Between various news media we have been informed or partially informed that small business makes up 80-95% of our total businesses, depending on the day and the source.  Either way, that sounds like a lot of businesses and makes it seem like increasing the tax rate for the 5-20% that don't fit the small business criteria is probably not really worthwhile.  I set about to try to understand what constitutes a small business in Alberta and it won't surprise you to hear that the definition differs depending on the situation.  

When the government is dealing with tax rates, they talk dollars but when they write a report on small business impact in Alberta they use the number of employees in a business as the criteria.  In a 2014 Small Business Profile the government attributes 25% of Alberta's Gross Domestic Product (GDP) to small businesses with 1-49 employees.  That means that the remaining 75% of GDP was contributed by medium to large businesses; the ones that have had their corporate tax rate decreased by 5.5% over the last fifteen years.  

Did You Know...

Did you know that Alberta has the most publicly owned, Canadian companies per million people of any province in Canada?  Alberta had 52 firms fitting that criteria, that generated $1B or more in annual revenue in 2012.  If you like pictures with facts, go to Canada's Billion $ Firms and check it out.  Go all the way to the bottom and you will see that Alberta has more of those firms per million people than the USA.  Ask yourself, if that's just the publicly owned, Canadian companies in Alberta - how many more are there that are privately held and/or not Canadian?  Is your head spinning yet?

Take Away

We have two more head spinning weeks to ask questions and challenge each other to think clearly before voting.  This is not an election to take lightly, we need to come to it prepared and we need to make our voices heard.   And if you want to do a little more digging around, you can compare Canada's corporate tax rate to other countries around the world.  You will find more surprises there.  Check out Canada's position compared to the USA KPMG Global Corporate Tax Rate Comparison.