Frequent readers of this blog will know that I have written many times on how positive the tax environment is for business in New Brunswick. One of the main reasons is that business doesn’t pay sales tax here. They also pay relatively low corporate income tax and also property tax (because of lower assessment values not lower mill rates). While it may seem counter-intuitive NB businesses also pay less payroll tax than in most U.S. jurisdictions. US FICA, medicare and UI rates combined tend to be considerably higher than CPP and EI rates combined. I haven’t done workers compensation rate comparisons in over a decade but back then they were also competitive here in NB.
KPMG’s special report on tax environments last year confirmed NB had the lowest overall tax burden for business of any location in Canada, the US and Europe. Again, people get cranky when I say this but the data is what it is.
So now Forbes is claiming Canada has the best environment for business investment and singling out the HST. That makes sense to me because in many U.S. jurisdictions businesses pay sales tax on many of their inputs.
Cynics will say this puts too much burden for tax revenues on individuals and families – and that is partially true. In a place like New Brunswick, a very large equalization payment from the feds means the average family here will not pay more taxes than in a place like Ontario. Of course, we earn less on average here – a family making more than $120k or more here will likely pay more than a family in their exact same circumstances in Ontario.
In the end, it has been a public policy direction in Canada for a while to keep the overall business tax burden here lower than in the US. That’s just a fact.
This is the main reason why I opposed much of the Graham tax cut plan and why I have called for an increase in the HST – to balance the decrease in personal tax rates – with protection for those at the lower end of the scale.
As I have said before, my position on tax policy is simple. Keep your basic rate structure as competitive as possible – corporate and personal – and then use the tax code strategic to incentivize specific investments and activities that you need to make society a better place. This runs the gamut from tax incentives to attract industry through to tax credits to support healthy lifestyle objectives.
I’ll get negative comments on this but that is just the way it is. If other jurisdictions decide to stop using tax policy strategically then I will be in full agreement with multilateral disarmament. Otherwise, what is good for the goose should be good for the gander.