Canadian corporate tax attracts U.S. companies
Canada has become the latest frontier for U.S. companies fleeing the high cost of business, spurred by low corporate taxes and a policy that keeps international earnings out of the clutches of the Internal Revenue Service.
It’s “not fair” that companies can renounce their U.S. citizenship by filling out paperwork, a White House spokesman said yesterday.
In addition to avoiding U.S. taxes on global earnings, companies like Burger King can take advantage of Canadian tax rates that have been cut by about a quarter in the past eight years.
“We have now made it a lot more attractive for companies to say Canada is a good place to set up shop,” said Jack Mintz, director of the University of Calgary’s School of Public Policy.
“The real bang for the buck here is potential tax savings on Burger King’s non-U.S. earnings,” Edwards said by phone yesterday. “It’s not just the earnings in Canada, it’s the earnings everywhere in the world that might be able to escape that second layer of U.S. tax.”
“What’s driving this is not so much the Canadian tax code but the U.S. tax code,” Edwards said.
Under Canadian law, any foreign investment transaction above C$354 million ($322 million) is reviewed based on the long-term interest of the economy, said Jake Enwright, a spokesman for Industry Canada Minister James Moore.
Low corporate tax rates helped the country rise to second place in a Bloomberg ranking of best countries for doing business in January, behind only Hong Kong.
“We are proud that our low tax environment in Canada attracts businesses,” Carl Vallee, a spokesman for Harper, said by e-mail yesterday.
Canada has taken steps in the past to curb a decline in corporate tax revenue. The government introduced a tax on income trusts in 2006 after companies including Telus Corp. and BCE Inc. tried to join a wave of companies converting to the equity structure to lower their taxes by paying out more of their earnings to shareholders through dividends.
Source: bloomberg
