OTTAWA—Corporate Canada is bracing for the latest economic challenge out of Washington: a tax-cutting plan for U.S. businesses that many fear would pose a considerable threat to Canadian competitiveness as well as Ottawa’s bottom line.
The White House announced a tax-reform package on April 26 that included a proposal to significantly slash the top U.S. corporate rate from 35 percent to 15 percent.
But concerns the plan would inflate U.S. federal shortfalls mean it could face a difficult road to implementation.
Still, if it were to come into force, such a “dramatic” tax reduction would push the U.S. effective corporate rate about seven percentage points below Canada’s effective rate, said tax expert Jack Mintz.
Mintz said the change would erase Canada’s current tax advantage over the Unites States of about four percentage points, once multiple factors—including federal and provincial rates—are factored in.
That difference, Mintz warned, would entice businesses to move their investments and profits south of the border, starving public treasuries in Canada of up to $6 billion per year in revenues.
“People are going to take money out of Canada and put it into the U.S.,” said the University of Calgary professor, who has closely studied the issue.
“And it’s not just the American companies. There will also be Canadian companies with operations in the United States. ... So, this is a real negative for Canada, no question.”
“Many are just sitting on cash waiting to see what happens,” John Manley, head of Business Council of Canada, said of Canadian firms.
