Corporate tax revenues coming in to Ottawa were up slightly last year, even as the Conservative government was in the midst of an aggressive plan to lower the corporate tax rate.
The federal government raised $31.7-billion from corporate taxes in the fiscal year that ended March 31, up from $30-billion in 2010-11.
The new data on corporate tax revenues will be examined closely in Ottawa, where debate over the appropriate rate has been a dominant theme of recent election campaigns. The NDP built its election platform on the assumption that a higher corporate tax rate would bring in billions in additional revenue. Advocates of the Conservative tax cuts argued that there would be little to no impact on federal revenues because the lower rate would attract foreign investment and increase the number of corporate taxpayers.
Both sides will find numbers that support their view. Looking over the last four years of data, advocates of the tax cut could argue that cutting the rate has had virtually no impact on federal revenues. Critics of the tax cut could compare the latest numbers to the 2007-08 fiscal year and argue that revenues are down $8.9-billion.
CIBC World Markets chief economist Avery Shenfeld said it was always assumed that there would be some decline in corporate tax revenue in exchange for improvements in areas such as capital spending due to a lower rate.
“Given the weakness of the global economy, and the impact on capital spending, it’s too soon to judge how much of a boost we’ve seen from the lower corporate rates,” Mr. Shenfeld said.
The revenue figures, released by Finance Canada, also showed the overall deficit at $26.2-billion for 2011-12, $1.3-billion more than Ottawa had forecast in its March budget.
When Prime Minister Stephen Harper came to power in 2006, the federal corporate tax rate was 21 per cent. That was down from 24.5 per cent in 1990 and 30 per cent in 1980.
Ottawa reduced it to 19 per cent in 2009, 18 per cent in 2010, 16.5 per cent in 2011 and 15 per cent in 2012.
NDP finance critic Peggy Nash said it’s clear revenue is down from pre-recession levels and pointed to recent criticisms by the Bank of Canada that corporate Canada is sitting on piles of cash.
“Overall, we’ve not seen the increase in investment and job creation,” she said.
Even though the corporate tax rate is now half of what it was three decades ago, the amount of revenue from the tax has largely remained steady over the years.
Finance Canada numbers show that as a percentage of GDP, corporate tax revenues have averaged 2.2 per cent over the years 1966-67 to 2011-12. That places the current levels at slightly below average.
Corporate tax revenues are well below what they were during the first two years of the Harper government, a period that featured a blip of higher-than-average revenue. In 2006-07 they were 2.6 per cent of GDP, or $37.7-billion, and in 2007-08 they were 2.7 per cent of GDP, or $40.6-billion.
Separate Finance Canada reporting on monthly tracking of revenues for the first four months of the current fiscal year indicate that corporate revenues continue to rise. For April through July, Ottawa brought in $10-billion in corporate tax revenue, a 4-per-cent increase over the $9.6-billion for the same period the year before.