According to a study by the Fraser Institute, Canadian taxpayers paid out $352.1 billion in business subsidies between 2007 and 2019 at all levels of government. The study’s authors, Tegan Hill and Joel Emes, senior economists at the think-tank, recommended that Canadian governments re-evaluate such spending given the ongoing budget deficits and the questionable efficacy of business subsidies in achieving widespread economic growth. Having spent $327.5 billion on national defence during that same 13-year period, governments should be cautious about corporate welfare, the report states.
After adjusting for inflation, federal, provincial, and local subsidies totaled $76.7 billion, $223.3 billion, and $52.1 billion, respectively. The cost per tax filer by province was $18,785 in Saskatchewan, $18,334 in Quebec, $14,811 in Prince Edward Island, $13,285 in Alberta, $12,627 in Ontario, $11,573 in British Columbia, $11,290 in Manitoba, $8,511 in Nova Scotia, $7,057 in Newfoundland and Labrador, and $6,048 in New Brunswick. Government subsidies have little academic evidence to show widespread economic growth or job creation. Instead, there may be a negative impact on economic development since subsidies are an attempt to “pick winners by interfering in the free market,” explains the report.
Furthermore, the study reviewed the cost of subsidies in “a budgetary context,” showing the amount of taxes that could be reduced or eliminated in the absence of subsidies. The report found that P.E.I had the highest level of provincial subsidies as a share of corporate income tax revenue, averaging 162.9%. Therefore, the province could have eliminated all corporate income taxes over the period if it had ended subsidies to businesses and still had money left over. Quebec and Manitoba spent approximately all corporate income tax revenue on provincial subsidies, while Saskatchewan and British Columbia also had high spending on provincial subsidies. Ontario and Nova Scotia’s business subsidies represented around half of all corporate income tax revenue. In New Brunswick, Alberta, and Newfoundland and Labrador, business subsidies represented between 30 and 40 percent of corporate income tax revenues on average. The study concludes that governments could reduce business income taxes to foster a pro-economic growth environment that gives all businesses the opportunity and incentives to succeed, instead of giving preferential treatment to certain companies and industries.
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