The Fraser Institute

The Fraser Institute

November 21, 2007 06:00 ET

The Fraser Institute: Government Subsidies and Handouts to Business Cost Each Canadian Taxpayer $1,295

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 21, 2007) - Canadians provided business with $19 billion in subsidies in 2004, the equivalent of $1,295 from each Canadian taxpayer, according to a new report released today by independent research organization The Fraser Institute.

The 2004 figure was almost double the $10.3 billion governments doled out in business subsidies in 1995. Taxpayer-funded subsidies to business totalled almost $144 billion between 1995 and 2004 (the most recent year for which data is available), the equivalent of $11,030 per tax payer (all figures adjusted for inflation to 2007 dollars).

"There is no concrete evidence showing that government subsidies to business provide any net benefit to Canada's economy. Instead, these subsidies merely encourage the transfer of wealth from one set of taxpayers to another, often from small businesses to large businesses, and from taxpayers in general to special interests," said Mark Milke, author of the report, Corporate Welfare: A $144 Billion Addiction.

"Canada's business community needs to dump corporate welfare in favour of corporate tax cuts."

Milke's report looks at the amount of money Canadian governments of all levels spent on corporate welfare over a 10-year period. It provides repayment records by year with respect to specific programs or agencies involved in corporate welfare. It notes the cash-in-hand position of companies or parent companies that have received corporate welfare as well as offering an opportunity cost calculation for such disbursements.

The complete study is available at

"Governments justify the subsidies by claiming they help start-up companies. But many of the companies receiving the largest subsidies are anything but start ups," Milke said.

The report lists the top 50 business subsidy recipients, which include the Ford Motor Company, Rolls-Royce, Noranda, IBM, General Dynamics, Pratt & Whitney, Lockheed Martin, and Raytheon.

Milke points out that one of the main problems with corporate welfare is the lost opportunity to use the money for other purposes such as tax relief.

"If the federal government ended corporate welfare in 2004, the government could have reduced the federal corporate income tax rate to 14.6 per cent from 21 per cent. In other words, eliminating federal corporate subsidies could have resulted in a 30.5 per cent reduction in the federal corporate income tax rate."

Milke finds that although there is virtually no economic evidence supporting the use of business subsidies, governments historically pursue corporate welfare policies because they want to be seen to be "doing something" for their constituents.

"By subsidizing or bailing out failing businesses, politicians can tell voters they are saving jobs, or they can appeal to voters with interests in specific industries," Milke said. "At the same time, civil servants rarely oppose corporate welfare policies, often because these policies provide them with additional status or budgets."

In the end, he makes four recommendations for dealing with corporate welfare:

1. Wind down and end business assistance programs.

2. Require companies to repay already allocated subsidies as per the terms of their contracts and agreements.

3. Continue to support international efforts to end subsidies, including bilateral and multilateral agreements, as well as efforts to strengthen existing country-to-country treaties and to initiate new ones.

4. Use the money that would have been spent on business subsidies for business tax reductions.

"With $144 billion spent between 1995 and 2004 and $19 billion allocated in 2004 alone, corporate welfare to business is hurting Canadian taxpayers. Governments need to end these hand outs," Milke said.

"This money could be put to much better use by providing Canadian taxpayers with broad-based tax relief. Not only will this put more money in Canadians' pockets, research shows it will be much more successful in stimulating investment and economic growth."

The Fraser Institute is an independent research and educational organization with offices in Calgary, Montreal, Tampa, Toronto, and Vancouver. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute's independence, it does not accept grants from governments or contracts for research. Visit

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