Strategy

The CEO Poll: Tax revolt

Canadian business leaders want equality and fairness.

Business leaders give the federal mini-budget high marks.

The inequalities in corporate tax policies need to be fixed, according to the 114 Canadian CEOs who participated in a web poll conducted by COMPAS Inc. The CEOs were responding to a recently released report from the C.D. Howe Institute that spelled out a number of changes to be made to corporate taxes.

“Corporate tax fairness within Confederation is one of the most important issues facing this country,” wrote one CEO.

The respondents reached a near consensus on many issues, including that the marginal effective tax rate (METR) on corporations should be as equal as possible across assets and industries. Currently, the METR on capital investment is double or higher in some industries and asset classes than in others.

Ontario’s tax policy was singled out as particularly egregious. It has the highest METR of all the provinces, and the CEOs identified unequal tax rates between the provinces to be more problematic than inequalities in taxation on industries and asset classes.

One respondent was mindful of the challenges provinces face, however. “Conditions in every province are different; therefore, there must be some flexibility in their tax policy to meet their needs bearing in mind they have to remain competitive,” wrote the CEO.

An overwhelming majority of the panel agreed with the C.D. Howe report when it recommended the provinces cut the corporate income tax rate to 10%, bringing the total rate to 25%, in line with international averages.

The only recommendation that did not gain a near consensus (but still a majority) was that British Columbia, Manitoba, Ontario, Prince Edward Island and Saskatchewan fall in line with the rest of Canada and harmonize sales tax with the GST.

One respondent was perhaps more perturbed by an issue not directly raised in the survey. “The single biggest unequal tax we are about to face is carbon taxes, where energy-intensive industries will be paying taxes in order to lower the taxes for service industries,” argued the CEO. “Essentially back to the bad old days of the manufacturers’ sales tax.”