Canadian Manufacturers & Exporters

Canadian Manufacturers & Exporters

January 12, 2011 15:00 ET

Corporate Tax Cuts Boost Economy: CME Report

OTTAWA, ONTARIO--(Marketwire - Jan. 12, 2011) - Reducing corporate taxes creates jobs, boosts investment, makes Canada more competitive and puts more money in the pockets of the Canadians, according to analysis released today by Canadian Manufacturers & Exporters.

The 36-page report, The Economic Impact of Corporate Tax Reductions, measures the effects that tax cuts at both federal and provincial levels will have on the Canadian economy over the next two years.

"The numbers show that corporate tax cuts are critical drivers of the Canadian economy," explains CME President & CEO, Jayson Myers. "The question is not if we can afford corporate tax cuts; it's can we afford not to make tax rates in Canada competitive with the rest of the world. The answer is simple – corporate tax cuts are good for Canada and Canadians."

The federal government reduced its corporate tax rate from 18% to 16.5% on January 1 this year and plans to reduce it to 15% of business profits as of January 1, 2012. Meanwhile, provincial governments will also be reducing their tax rates on general corporate income over the next two years. By 2012, Canada's average combined statutory corporate tax rate is slated to fall to 25%.

"These planned tax rate reductions will enhance Canada's international tax competitiveness, placing the combined statutory corporate tax rate at the current global average and lowering Canada's effective tax rate on business income to a level just below that of the United States," Myers adds. 

Canadian manufacturers are also looking to the federal government to extend the accelerated capital cost allowance currently available for investments in manufacturing and processing equipment for another five years.

"The two-year write off boosts investment in productivity enhancing technologies. That is more important than ever for a sector whose profits remain under pressure as a result of a strong Canadian dollar," Myers says.

According to CME, profits for all business sectors can be expected to grow by 10% this year and next. Based on that assumption, federal and provincial corporate tax rate reductions in 2011 and 2012 can be expected to:

  • Increase after-tax business profits by $12.4 billion or 10.6%;
  • Lower Canada's unemployment rate by 0.52 percentage points and boost employment by 98,800 net jobs;
  • Increase total business investment by $6.2 billion or 4.4%. (Investment in new facilities can be expected to rise by $3.0 billion and investment in machinery and equipment by $3.2 billion.);
  • Increase business spending on research and development by $546 million or 4.4%;
  • Boost nominal GDP by $51.6 billion or 3.2%;
  • Increase personal incomes of Canadians by $30.4 billion or 2.4%;
  • Increase per capita personal income by $880; and,
  • Contribute $2.6 billion to $3.7 billion in additional net revenues for all levels of government.

"I don't think the average Canadian is going to take issue with a business measure that creates 49,000 new jobs and an additional $440 in their wallet," says Myers. "It's good politics and even better policy. Business measures like corporate tax cuts and the accelerated capital cost allowance benefit all Canadians."

Canadian Manufacturers & Exporters (CME) is Canada¹s leading trade and industry association and the voice of manufacturing and global business in Canada.

The association represents more than 10,000 leading companies nationwide. More than 85% of CME's members are small and medium-sized enterprises. As Canada¹s leading business network, CME, through various initiatives including the establishment of the Canadian Manufacturing Coalition, touches more than 100,000 companies from coast to coast, engaged in manufacturing, global business and service-related industries.

CME's membership network accounts for an estimated 82% of total manufacturing production and 90% of Canada¹s exports.

Contact Information

  • Canadian Manufacturers & Exporters
    Jeff Brownlee
    VP of Public Affairs and Partnerships