Most arguments revolve around competitiveness, but it could also have an impact on pensions
The proposal to reduce headline corporate tax rates in the US has wide-ranging implications, not just for American businesses and workers, but also for other countries — including Canada. Classic arguments focus on separating business interests from those of workers. But according to one expert, those lines are not so sharp anymore.
“When commentators in Canada discuss the implications of corporate tax rates in the US, the focus is usually on competitiveness,” Toronto-based public policy consultant Neil Mohindra said in a think piece on the Financial Post. “Lower US corporate taxes will make the US more attractive relative to Canada in competing for investment unless Canadian federal and provincial governments follow suit.”
But Mohindra added that in his view, lower US corporate taxes also benefit Canadian savers, whose retirement assets are significantly tied up in equities. As examples, he cited the recently expanded Canada Pension Plan (CPP), with over half its assets invested in public and private equities; the Quebec Pension Plan; and Canadian private pension plans, as well as other retirement savings vehicles, which he said were also highly invested in equities.
“Because of the small size of Canadian capital markets … Canadians mostly have a significant portion of their retirement savings in foreign capital markets including the US,” Mohindra said. “Hence, Canadians benefit from lower corporate tax rates in other jurisdictions.”
He took aim at arguments that corporations should be taxed more because they “should pay their fair share.” Such positions, which he said underlie decisions by provincial governments in Alberta and BC as well as a major promise by the federal NDP to raise corporate taxes, disregard the fact that the tax burden will ultimately fall on people. The other extreme is not mentioning tax rates at all, as the recently released Ontario Conservative election platform did, which he said ignores Ontario’s need to remain competitive.
According to Mohindra, politicians against lower corporate tax rates who want to be honest with voters should note that higher corporate taxes would ultimately result in smaller nest eggs for workers.
“Canadians should welcome lower corporate taxes in Canada, the US and everywhere around the globe,” he said.
Related stories:
Canada urged to keep up with US tax cut plans
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“When commentators in Canada discuss the implications of corporate tax rates in the US, the focus is usually on competitiveness,” Toronto-based public policy consultant Neil Mohindra said in a think piece on the Financial Post. “Lower US corporate taxes will make the US more attractive relative to Canada in competing for investment unless Canadian federal and provincial governments follow suit.”
But Mohindra added that in his view, lower US corporate taxes also benefit Canadian savers, whose retirement assets are significantly tied up in equities. As examples, he cited the recently expanded Canada Pension Plan (CPP), with over half its assets invested in public and private equities; the Quebec Pension Plan; and Canadian private pension plans, as well as other retirement savings vehicles, which he said were also highly invested in equities.
“Because of the small size of Canadian capital markets … Canadians mostly have a significant portion of their retirement savings in foreign capital markets including the US,” Mohindra said. “Hence, Canadians benefit from lower corporate tax rates in other jurisdictions.”
He took aim at arguments that corporations should be taxed more because they “should pay their fair share.” Such positions, which he said underlie decisions by provincial governments in Alberta and BC as well as a major promise by the federal NDP to raise corporate taxes, disregard the fact that the tax burden will ultimately fall on people. The other extreme is not mentioning tax rates at all, as the recently released Ontario Conservative election platform did, which he said ignores Ontario’s need to remain competitive.
According to Mohindra, politicians against lower corporate tax rates who want to be honest with voters should note that higher corporate taxes would ultimately result in smaller nest eggs for workers.
“Canadians should welcome lower corporate taxes in Canada, the US and everywhere around the globe,” he said.
Related stories:
Canada urged to keep up with US tax cut plans
Bond market facing $1 trillion problem in 2018
