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Politics Mulcair gets current corporate tax rate wrong while explaining his promise to raise it

NDP Leader Thomas Mulcair speaks to the Economic Club of Toronto on Tuesday, June 16, 2015. In his visit to Toronto, the NDP leader emphasized the record New Democrat governments have when it comes to balanced budgets.

Colin Perkel/The Canadian Press

Thomas Mulcair's grasp of the economy came under attack from Prime Minister Stephen Harper Wednesday after the NDP Leader stumbled in an interview, failing to accurately recall the current corporate tax rate that his party plans to hike.

In a loud and heated Question Period that will likely be the last House of Commons faceoff between party leaders before the election, both Mr. Mulcair and Mr. Harper went back and forth on many topics for much longer than they normally would.

Suddenly riding high in the polls, Mr. Mulcair has been touring the country to promote his party as a moderate government-in-waiting with a solid economic agenda.

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Mr. Harper took a shot at the NDP Leader by pointing to an interview broadcast that morning on CBC Radio's The Current, in which Mr. Mulcair spoke of his plan to raise corporate taxes but could not recall the current rate.

"When asked, 'What is the tax rate exactly?' he did not know and stated it was three points lower than it actually is," said Mr. Harper. "That is typical of the NDP. It does not know what the taxes are; it just knows everybody's taxes have to be higher."

The Conservative government reduced the federal corporate tax rate to 15 per cent in 2012, down from 18 per cent in 2010 and 21 per cent in 2006. But the NDP is counting on higher corporate taxes as a key revenue source to pay for various campaign promises.

In the radio interview, Mr. Mulcair was asked several questions about his plan, which he has not yet fully outlined.

Mr. Mulcair said he would raise the rate to "something in the 18-to-19 [per cent] range," which he said was in line with other Group of Seven countries.

He was then asked what Canada's current corporate tax rate is.

"We're about 12, 13 [per cent]. Something like that right now," he said.

Speaking with reporters later on Parliament Hill, Mr. Mulcair acknowledged the mistake and explained that he was thinking of the difference between the rates of Canada and the United States.

"I'll take responsibility, as I always tend to do, for any lack of clarity there. That would be my fault," he said.

"But we've always said one thing. We want to make sure that the Canadian tax rate for our large corporations remains below the U.S. combined rate and we're going to continue to work on that. But we also say that all Canadians are expected to pay their fair share of taxes. The only Canadians not paying their fair share right now are Canada's largest corporations," he said.

Mr. Mulcair also said the corporate tax increases will be implemented gradually, and he noted that the NDP will lower the small-business tax rate.

University of Calgary tax expert Jack Mintz, who advocates for low corporate taxes, said estimating future revenue gains from higher corporate taxes can be a challenge. He said corporations will shift profits elsewhere in response to higher taxes, and the higher the combined federal and provincial tax rate, the higher the percentage of profits that will be shifted.

The new NDP government in Alberta recently confirmed that it will raise its corporate tax rate from 10 per cent to 12 per cent.

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Federal Finance Minister Joe Oliver criticized that plan Wednesday.

"I think it's the wrong thing to do," he said. "I spoke to the new Minister of Finance, Joe Ceci, [Tuesday] and told him that."

By focusing on the corporate tax rate, the NDP is attacking what the Conservatives view as one of their key accomplishments. The Tories argue that a lower tax rate can boost revenue by encouraging international firms to locate their headquarters in Canada.

The NDP says there is room to raise the federal rate while still remaining well below the similar rate in the United States and elsewhere.

Proponents for both arguments can pick timelines to support their case. The statistical record is complicated by the fact that the reduction in the rate overlapped with the 2008-09 recession, making it a challenge to measure the impact of corporate tax cuts.

Federal revenue from corporate taxes as a percentage of gross domestic product has declined to 1.9 per cent in 2013-14 from 2.6 per cent in 2006-07.

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However, in dollar terms, corporate tax revenues have increased for the past four consecutive years, reaching $36.6-billion in 2013-14. That is still below the prerecession peak of $42-billion in 2007-08.

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