05 May 2017•Update: 05 May 2017
By Barry Ellsworth
TRENTON, Ont.
A senior Cabinet minister in the Ontario government said the province is prepared to lower its corporate tax rate to stay competitive with the United States, the Globe and Mail newspaper reported Friday.
“We’ll do whatever we need to do to maintain our competitiveness,” said economic development minister Brad Duguid.
While there was no mention in the Ontario budget, presented earlier this week, to lower corporate tax, U.S. Treasury Secretary Steve Mnuchin said recently there is a proposal to cut corporate taxes to less than 15 percent, down from 35 percent.
The federal tax rate in Canada is 15 percent, but rises to an overall 26.5 percent when the Ontario tax is added.
Duguid said it was important for businesses in Ontario to know the province would keep its competitive edge to maintain a strong provincial economy.
“I think it is important for us to signal our business community that we’re very conscious of what’s going on in the U.S, and we’ll be monitoring the actions down there very closely,” Duguid said.
Several big American companies have moved their head offices to Canada to take advantage of the lower tax rate in a financial move known as tax “inversions”.
Examples include Burger King, which bought Canada’s Tim Hortons coffee chain in 2014, and the combined headquarters of parent Restaurant Brands International are now in Oakville, Ont.
In another inversion, Valeant Pharmaceuticals merged with Biovail in 2010 and moved from California to the province of Quebec.
With the future of trade up in the air – U.S. President Donald Trump wants to renegotiate the North American Free Trade Agreement with Canada and Mexico – all of Canada, not just Ontario, would likely need to respond to any American corporate tax cut.
“Combined with the uncertainty over trade, it would present a clear pressure point on Canada,” Bank of Montreal (BMO) chief economist Doug Porter said late last month.
