The 13th edition of the Paying Taxes report released by PwC and the World Bank Group ranks Canada 19th out of 190 countries and 1st out of the G7 countries for the ease of paying taxes. Despite US tax reform and the recently signed USMCA, the report finds that Canada's tax regime is still considered favourable for small businesses but is significantly less attractive than other countries for large businesses.
On average, small to medium-sized Canadian companies make eight payments per year on their taxes (vs. an average of 24 globally), and take 131 hours (vs. an average of 237 hours globally) to comply with the tax regulations.
"The competitiveness of Canada's tax regime was put front and centre when the US announced its tax reform. Canada's federal government's response in the latest fall economic update was a solid step in the right direction to encourage investments by small, medium and large businesses, and most importantly, to protect Canadian jobs," said Peter van Dijk, National Tax Policy Leader, PwC Canada.
The Canadian tax system is a critical component of the country's investment climate. As a result of US tax reform, the effective average and marginal tax rates for Canadian businesses - which rates are critically important for making business investment decisions - were all of a sudden significantly higher than the US. The tax measures announced in the fall economic update have mitigated this impact. "In previous years, Canada's comparatively low corporate tax rate was attractive, but now the US tax reform poses a serious risk to future investments," adds van Dijk. A recent report authored by PwC Canada for the Business Council of Canada on the impact of the US tax reform on Canada's economy suggests a resulting loss of economic activity in Canada.
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