Financial Blog Says Foreign Investment Into Canada Is Up – Down In The US – Despite US Corporate Tax Cuts

Ottawa – The financial blogger, Canadians for Tax Fairness, calls for a dose of reality on the tax debate; net investment actually flowed North in the first quarter of 2018.

The Trump corporate tax cut bill was signed in December 2017 with some of the changes coming into effect as soon as January 2018.

“There was speculation that this would result in a flow of money from Canada to the US and anecdotes of businesses relocating have been popping up in the news,” says Diana Gibson, a researcher with Canadians for Tax Fairness, “however, recent Statistics Canada data shows that the outflow has not happened.”

According to Statistics Canada data, Canadian direct investment in the US in the first quarter of 2018 was less than half of the long-term average at $4.1 billion, while direct investment from the US to Canada was higher than the long-term average, at $7.9 billion. Not only were flows into Canada higher than average, and flows to the US lower than average, but net investment actually flowed north.

Canadians for Tax Fairness has submitted a brief to the federal government with this and other evidence that Canada should not be engaging in a race to the bottom on corporate taxes as it would only cause fiscal and other problems for Canada.

The brief explains why Canadians should not expect to see a US tax impact:

  • The difference between the US and Canadian rate is very small, and individual states are already raising taxes to take advantage of that tax room, something the provinces would likely to do if the federal rate dropped here in Canada.
  • Non-tax cost advantages for businesses in Canada (public health care system, public education etc.) offset the small tax difference.
  • Loopholes mean that the real tax rate is much lower (data shows that corporations on the TSE Exchange paid between 2% to 16% in 2014, far from the actual rate of 26.5%).
  • Companies that are mobile and looking for tax advantages are already using tax havens with tax rates as low as 0%.

Read more about this issue on the Tax Fairness website.

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