Saskatoon scores well on overall tax burden in C.D. Howe Institute report
29 Oct 2014
City scores well on overall tax burden in C.D. Howe Institute report
“IT IS TIME THAT GOVERNMENTS INCLUDE THESE TAXES IN THEIR METR MEASURES, WHICH WILL PROMPT A CLOSER EXAMINATION OF THEIR POTENTIAL DETRIMENTAL IMPACT ON BUSINESS INVESTMENT.”
C.D. HOWE INSTITUTE REPORT
THE STARPHOENIX If property taxes were included in calculating the tax burden on new business investment, Saskatoon would be the second-most desirable place to do business in Canada behind Calgary.
That’s according to a C.D. Howe Institute report released Wednesday that calculates both business property taxes and land transfer taxes in the total tax burden calculation on new business investment.
A key yardstick businesses use in looking at tax-related barriers to investments is marginal effective tax rate (METR) that includes corporate income, retail sales and capital taxes.
When a business is deciding whether to invest in new a plant or equipment, for example, it must estimate the METR on each dollar invested, which reduces the expected return on investment and its attractiveness. The METR measures the percentage increase in the rate of return an investor would need to cover the cost of taxes.
But METR ignores provincial and municipal property taxes and land transfer taxes which represents about two thirds of the total tax wedge on investment in Canada, the report said.
For example, using traditional METR estimates, Saint John, N.B., would face the lowest METR among the 10 cities in the report, which looked at the largest city in each province.
But if business property taxes and land transfer taxes were included, Saint John would have the highest METR among the 10 cities, while “Calgary and Saskatoon (would) lead the pack with the lowest overall METRs in Canada,” the report said.
Besides Saint John, Charlottetown and Montreal would have the highest overall tax burden, followed by Winnipeg and Halifax.
The report recommends the federal government — which provides the provinces with METR estimates — include business property taxes (BPTs) in its interprovincial comparison of METRs.
“A major tax on business — the business property tax — has been missing from prevailing tax-burden estimates,” the report said. “It is time that governments include these taxes in their METR measures, which will prompt a closer examination of their potential detrimental impact on business investment.”