BC to Raise Corporate Taxes

Amazingly, BC’s government has joined its official opposition in proposing to restore the provincial corporate income tax rate from 10% to 12%.

The same government that cut from 12% to 10% would now reverse itself as part of a last-ditch effort to save the HST. Revenue from a higher corporate tax rate would help finance a lower HST rate.

According to BC’s finance minister, “It is clear that business is a major beneficiary of the HST and an honest rebalancing is viewed by the public as appropriate and reasonable.”

A key argument for the HST, which removes sales tax from business inputs, has always been that business should be taxed not on its inputs but on its profits. I have long noted that an honest effort to put this principle into practice would combine the removal of sales tax from business inputs with higher corporate taxes on business profits.

However, the federal Conservative government called for all provinces to both adopt the HST and cut their corporate tax rates to 10%. The provincial governments of Ontario and BC followed these marching orders. The apparent goal was to make the largest possible fiscal transfer to the corporate sector.

Now that BC’s opposition has successfully pushed back on the HST, the government is starting to follow the logic of its own argument, promising to combine the HST with a corporate tax increase. However, the reversal of BC’s corporate tax cuts would not collect enough revenue to fully offset the removal of sales tax from business inputs.

Nevertheless, this development seems to improve the chances of BC restoring its corporate tax rate to a more appropriate level. More broadly, it weakens the narrative that corporate taxes must always and everywhere decline. The business lobby’s acceptance of the government’s plan undermines its usual claims that raising corporate taxes would be unimaginably horrible.

– Erin Weir is Senior Economist with the International Trade Union Confederation and a CCPA Research Associate.

UPDATE (May 28): Seth and Greg have more.

One comment

  1. Big Corporations should know by now that it’s ‘Not’ wise or good to be on the bad side of the public and taxpayers and that it’s ‘Not ‘ good for image , relations and business to be accepting gifts/tax cuts from Harper and his gang of contemptuous misleading and spinners of bs crap and lies.

    Improve relations with the public and taxpayers and things with improve and come back in a positive way for business down the road.

    things need to be made Fair for all.

    Harper knows he is Wrong to be giving gifts /tax cuts , but he obviously Doesn’t care one way or another, he is owned by his big fatcat corporate buddies who have No moral or ethical responsibility to the people they are taking money from.

Join the Discussion

Your email address will not be published. Required fields are marked *

Before commenting, please read our Comment Policy