Why are some Canadian companies paying almost no tax?
Duncan Hood
The government has been creating tax loopholes for business while clamping down on regular taxpayers
For instance, we found that Canadian Pacific Railway paid an average effective cash tax rate of just 1.8% over the past decade. Manitoba Telecom paid 4.1%. Gildan Activewear paid 5.5%. And First Capital Realty has gone for years without paying any cash taxes at all.
These companies are using several different strategies to lower their taxes, but the government just keeps adding to their arsenal. A new policy that just came into effect in 2009 allows Canada to sign tax information exchange agreements with countries such as Bermuda, the Cayman Islands and the Isle of Man. It was intended to allow authorities to ferret out scofflaws hiding their money in offshore accounts. Instead, it ended up allowing companies to set up subsidiaries in these jurisdictions and bring their profits home tax-free.
(…)
When the Guardian newspaper in Britain revealed that Starbucks had paid just £8.6 million in taxes on £3 billion in U.K. sales since 1998, there was a public outcry, and a committee of MPs released a report accusing the coffee chain of an “immoral” use of royalties, secretive jurisdictions and Byzantine company structures to avoid paying taxes on British profits. It will be interesting to see how Canadians react when they discover that not only are some Canadian corporations paying tax rates that are almost as low—their own government is helping to make it all happen.