January 29 is Corporate Tax Freedom Day – CLC report: Many businesses hoarding cash from tax giveaways rather than invest in creating jobs
OTTAWA ― A research study by the Canadian Labour Congress shows that Corporate Tax Freedom Day occurs on January 29.
“Governments have slashed corporate taxes so deeply that in 2012 companies paid their share of taxes to all levels of government for the entire year by January 29,” says CLC Secretary-Treasurer Hassan Yussuff. “We hold Corporate Tax Freedom Day to draw attention to the urgent need for the government to stop wasting dollars on tax cuts and start making sense.”
Since 2000, the general federal corporate income tax rate has been cut almost in half, from 28% to 15%, and provinces have also been dropping their tax rates on corporate profits. “The years of tax giveaways have been good for business,” Yussuff says. “Their after tax profit margins rose from 6.9% in 2000 to 8.1% in 2012.”
Yussuff says, “In return for tax breaks, business has promised to invest in training, research and development and job creation but they have failed to do that. Companies have instead been hoarding cash and paying out fat compensation to their CEOs.”
Cutting corporate taxes has not provided the investments needed to stimulate Canada’s economy, Yussuff says. The average annual rate of economic growth between 2000 and 2012 was 1.14%, one of the longest periods of low economic growth in decades. Business investment in research and development fell from 1.13% of GDP in 2000 to 0.88% of GDP in 2012. Investment in employee training and skills development is down by 40% since the 1990s.
Yussuff says that unemployment has also increased during the years that coincide with corporate tax giveaways. “The official rate of unemployment in December 2000 was 6.8% and today it is 7.2%, but the real rate is about 14%. The potential of our work force, especially our younger workers, is seriously under-utilized.”
So, what did lower corporate taxes really deliver? Yussuff says, “The answer is resounding, overwhelming and backed with clear evidence: corporate tax cuts delivered nothing – except windfall profits that haven’t benefited the ordinary Canadians who paid for them.”
The CLC study shows that between 2000 and 2012 the total cash reserves of non-financial private corporations in Canada grew from $182 to $541billion, an increase of over 300%. During the same period, CEO pay went sky-high. The average CEO compensation at Canada’s largest non-financial corporations averaged $7.96 million in 2012.
Corporate tax giveaways costs the federal government billions of dollars in foregone revenues, Yussuff says. “To pay for its tax breaks, Ottawa has borrowed billions and driven up the national debt. Now, the government has chosen to make big cuts to public services in order to pay the bill for its tax giveaways.”
Yussuff adds, “It’s time to stop unproductive corporate tax cuts and demand that big business pay its fair share of taxes – and invest windfall profits in creating jobs and strengthening Canada’s economy.”
The Canadian Labour Congress, the national voice of the labour movement, represents 3.3 million Canadian workers. The CLC brings together Canada’s national and international unions along with the provincial and territorial federations of labour and 130 district labour councils.
Web site: www.canadianlabour.ca
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