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Canada’s corporate tax lowest among developed countries

Feng Yu/iStockphoto

Canadian businesses may gripe about a lot of things, but they shouldn't moan about their taxes.

The tax burden for businesses in Canada is second lowest among 14 major countries and lowest among developed countries, according to a KPMG survey of international tax competitiveness.

"This helps our attractiveness around the world and helps us compete," said Elio Luongo, KPMG's Canadian managing tax partner. "We need this to compensate for other costs."

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Mr. Luongo pointed that while Canadian taxes are low, other costs that governments can't easily control may hurt competitiveness, such as labour rates, the high dollar, transportation costs and real estate prices.

"The tax system is often what tips the scales [in attracting investment]," Mr. Luongo said. "It's a delicate ecosystem."

India had the lowest overall tax levels. China, Mexico and Russia ranged third, fourth and fifth.

Among developed countries, Britain ranked second, followed by the Netherlands, the United States, Germany, Australia and Japan.

KPMG uses a tax index composed of corporate income tax, capital taxes, sales taxes, property taxes, local business taxes and statutory payroll taxes. The study uses tax rates applicable as of Jan. 1, 2012.

KPMG also compared major international cities, and again, Canada fairs well. Toronto, Vancouver and Montreal are all in the top 10 among 55 cities with populations of more than two million.

All 16 Canadian cities analyzed in the report had lower tax burdens than the least taxed U.S. city – Baton Rouge, LA. Income tax rates are generally 25 to 30 per cent in Canada, compared to roughly 40 per cent in the U.S., Mr. Luongo said

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Canada ranked first among all 14 countries in the study on taxes on research-and-development. Ottawa and most provinces offer generous R&D tax credits.

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