Canada’s three levels of government doled out $52 billion in 2022 to prop up businesses across the country, according to a recently released report.
Government spending on business subsidies more than doubled from $24.5 billion in 2007 to $52 billion in 2022, the Fraser Institute report found.
Provincial subsidies experienced the highest increase over the period, rising from $13.2 billion in 2007 to $35.4 billion in 2022 while federal subsidies grew from $7.4 billion to $11.2 billion.
“These subsidies for businesses—also known as corporate welfare—come with huge costs to government budgets and taxpayers while doing little if anything to stimulate economic growth,” said Fraser Institute associate director of Alberta policy Tegan Hill.
The study refers to business subsidies as unrequited government transfers to businesses and does not include other forms of government support such as loan guarantees or direct investment.
Federal subsidies rose substantially due to COVID-related programs for businesses, reaching $88.5 billion in 2020 and $47 billion in 2021, the report showed. On average, federal business subsidies represented 13.2 percent of federal corporate income-tax revenue from 2007 to 2019.
Provincial Subsidy Spending
Subsidies were an even larger share of corporate income tax revenue at the provincial level.Prince Edward Island was the worst offender for spending more on business subsidies than it collected in corporate income-tax revenues, the study said. It had the highest level of provincial subsidies as a share of corporate income-tax revenue, coming in at 160.8 percent, on average, from 2007 to 2019.
“In simple terms, Prince Edward Island could have eliminated all corporate income taxes over the period if it had also ended subsidies to businesses—and still have had $365 million remaining,” the authors of the report wrote.
Quebec spent 100.8 percent of its corporate income-tax revenue on provincial subsidies while Manitoba spent 97.5 percent, Saskatchewan 88.6 percent, and British Columbia at 70.4 percent.
Business subsidies represented roughly half of all corporate income tax revenue for Nova Scotia and Ontario coming in at 47.3 percent and 45.9 percent respectively.
In the three remaining provinces—New Brunswick, Alberta, and Newfoundland & Labrador—business subsidies came in below 40 percent of corporate income-tax revenues.
Provincial subsidies in New Brunswick sat at 39.6 percent, followed by Alberta at 35 percent, and Newfoundland & Labrador at 30.7 percent.
Taxpayer Cost
Business subsidies may be coming out of government coffers, but the cost is ultimately borne by taxpayers, the report pointed out. Residents in some provinces shell out much more than others, however.Quebecers pay the most for federal, provincial, and municipal business subsidies, the report showed. The cost of total subsidies per taxpayer from 2007 to 2019 was $30,579 in Quebec, closely followed by Saskatchewan at $29,414, and PEI at $21,298.
Alberta ranked fourth at $19,662, while Ontario came in at $18,898, B.C. at $17,898, and Manitoba at $17,224.
Nova Scotia, Newfoundland & Labrador, and New Brunswick had the lowest annual averages coming in at $12,987, $11,090, and $9,484 respectively.
Not only do business subsidies delivered through government spending come with significant costs to federal and provincial budgets, it is costly for Canadian taxpayers, the report authors said.
“Rather than give preferential treatment to certain companies and industries, it’s high time Canada reduce business taxes and help foster a pro-economic growth environment that gives all businesses the opportunity and incentives to succeed,” Fraser Institute director of fiscal policy Jake Fuss said. “Business subsidies stand out as a key area for spending reform.”
