Abolish the Small-Business Tax Rate in Canada? Very Bad Idea…

A recent Globe&Mail article suggested that it may be time to abolish the small-business tax rate.

Sorry to “report”, that in the end, businesses do not actually pay taxes, that is economically speaking (of course they do, statutorily; a lot actually).

Abolishing the small-business tax rate is fiscal policy at its worst.

It is all about understanding the core of the issue: the tax burden is ultimately resting on the shoulders of the employees, clients and shareholders of the corporation (in that specific order, most of the time, in variable mix).

Businesses are intermediaries in the tax world.

As for tax planning, the higher the corporate tax rate, the more incentives there is for tax planning. This is obvious.

Most of the complexity of any domestic tax system aims to prevent unwarranted income splitting, whether domestically or internationally.

The ultimate goal of any modern tax system is to ensure less income inequality. Each of us can attest of the extraordinary failures of that complexity: income inequality has never been more pronounced…

There is no doubt whatsoever that without corporate income tax, our tax world would become significantly simpler to administer. Without corporate tax, the income inequality issue could be directly tackled and given a fighting chance to succeed.

Robert Robillard, Ph.D., CPA, CGA, MBA, M.Sc. Econ.
Senior Partner, DRTP Consulting Inc.
514-742-8086; robertrobillard “at” drtp.ca
www.drtp.ca

DRTP Consulting Inc. solutions go beyond transfer pricing and international tax solutions. The information in this blog post is general information only. Data and information come from sources believed to be reliable but complete accuracy cannot be guaranteed. DRTP Consulting Inc. or the author are not responsible or liable for any error, omission or inaccuracy in such information. The opinions expressed in this blogpost are those of the author. Readers should seek advice and counsel from DRTP Consulting Inc. as required.