An economic think tank in Canada has ranked 81 developed and developing countries according to their tax treatment of business investment. “The 2006 Tax Competitiveness Report,” from the C.D. Howe Institute, pays special attention to how Canada’s tax system ranks against the international competition when judged on general corporate income tax and effective tax rates on capital for the 2006 fiscal year. The report ranks Canada’s effective tax rate on capital as sixth-highest among industrialized countries -- following China, Brazil, Germany, Russia and the United States. The top five rates for developing countries were found in the Republic of Congo, Argentina, Chad, Pakistan and Iran. Prepared by Jack Mintz, a professor of business economics at the University of Toronto’s Rotman School of Management, the study notes that while Canada’s federal and provincial governments have made progress in reducing marginal income tax rates in recent years, the pace of tax reform has been slow compared to some other developed countries, such as Australia, Finland, Ireland and the Netherlands. Mintz also makes the point that Canada’s productivity growth, as well as its income growth, has been slow. And in the years to come, he suggests that achieving better growth may pose stiff challenges, as the population ages. Specifically, the report recommends the Canadian government consider a number of tax reforms aimed at promoting growth, such as:
- Lowering clawback rates for income-tested benefits;
- Increasing limits for contributions to pension and registered retirement savingsplans;
- Increasing tuition tax credits;
- Reducing federal corporate income tax rates 4 percent, to 15 percent, by 2010; and,
- Improving the tax treatment of foreign investors.
The full report is available at
