Don’t touch corporate tax cuts, companies tell politicians ahead of election

Corporate Canada has a message for all the political parties as they hurtle towards an election: Don’t touch the corporate tax cuts.

“Once you begin to roll these back you begin to raise doubts in the minds of investors,” said Jayson Meyers, president and chief executive of the Canadian Manufacturers and Exporters association.

“We’re in a period of time when businesses are making major investments coming out of a recession and in my mind uncertainty about what any future government would do about the corporate tax cuts certainly doesn’t help.”

Meyers noted that while the corporate tax rate, on its face, is competitive with the rest of the world, after accounting for all of the deductions allowed in other jurisdictions, Canadian companies do not fare as well.

“Our businesses in Canada are still paying more in corporate taxes than they are in the United States,” he said.

While the budget contained some goodies for the business community, the key for business leaders is the regime of corporate tax cuts that has already been put in place.

The federal corporate tax rate was cut at the beginning of the year from 18 per cent in 2010 to 16.5 per cent for 2011. The rate is scheduled to be cut again to 15 per cent in 2012. Finance Minister Jim Flaherty has defended the cuts as a cornerstone to the country’s economic recovery.

The Liberals have said they want to roll back to the 2010 rate of 18 per cent, while the NDP have said scrapping the cuts for 2011 and 2012 would bring in an additional $6 billion a year for government coffers.

Faced with troubling job growth in February, the economic recovery has slowed after a strong finish to 2010.

The Canadian economy disappointed last month, creating fewer than expected new jobs and an outright decline in full-time work. Part-time employment accounted for all the gains and more, increasing by 38,900 during the month, while the private sector shed 20,000 jobs.

However support for the corporate tax cuts isn’t universal.

Ken Neumann, national director for the United Steelworkers, which represents more than 225,000 workers in Canada, called the cuts greedy and dismissed their role in creating jobs.

“If you look over all these tax cuts that have taken place over the last several years and yet we continue to lose jobs. This trickle down effect sure hasn’t been working,” he said.

“It is a failed jobs strategy.”

Neumann said job creation is of utmost importance.

“I’m not opposed to having incentives in regards to investment in equipment and technology to get the productivity rate up and all those sorts of things, but to just give straight across the board tax cuts to the very top doesn’t make any sense,” he said.

Thomas Caldwell, chairman and chief executive of Caldwell Securities Ltd. called the corporate tax cuts prudent.

“Make no mistake about it, it is helping businesses,” he said.

“In my company, if I pay less tax, then I have more cash to hire people — you don’t have to be in Mensa to work your way through that one.”

But Caldwell was optimistic that even if any of the opposition parties form the next government, the tax cut plan would remain in place.

With a Canadian dollar trading above the U.S. currency and the country’s main export market still mired in a sluggish economic recovery, companies face a difficult future.

“This is very helpful, particularly in the industrial base in Ontario and Quebec, we really need to be able to compete and it’s tough,” he said of the tax cuts.

“I don’t think they would do it, that’s just my best guess and my guess is as bad as anyone else’s.”