Canada Tax Cuts Will Add Jobs, Grow Revenue, Manufacturers Say

Canadian Prime Minister Stephen Harper’s plan to reduce corporate tax rates over the next two years will generate new jobs, boost investment and help raise government revenue, according to a report today by the country’s manufacturing lobby group.

The Conservative government’s decision to cut the federal rate by 1.5 percentage points to 16.5 percent this year, and to 15 percent next year, will generate 49,900 net jobs and add C$25.8 billion ($26.1 billion) to the economy over two years, the Canadian Manufacturers and Exporters said in a study.

Harper has come under pressure from opposition parties to cancel the corporate tax reductions at a time when the country is running record deficits, with opposition Liberal Party Leader Michael Ignatieff pledging to reverse the cuts if his party wins power. The Conservatives hold a minority of seats in parliament and rely on the support of opposition lawmakers to govern.

“The numbers show that corporate tax cuts are critical drivers of the Canadian economy,” Jayson Myers, chief executive of the manufacturers’ group, said in a statement. “The question is not if we afford can corporate tax cuts; it’s can we afford not to make tax rates in Canada competitive.”

Myers said the reductions are necessary to bring corporate taxes into line with other industrial economies. The Canadian Chamber of Commerce, the country’s largest business lobby group, has also been campaigning against the Liberal Party’s efforts to reverse the cuts.

The report by the Canadian Manufacturers and Exporters estimates the reductions, poised to cost the federal government C$6.2 billion in 2012, will generate as much as C$9.9 billion in additional revenue for provincial and federal governments because of the faster growth.

Including planned tax corporate tax cuts by provincial governments, the reductions will generate a total of 98,800 jobs, according to the report.

To contact the reporter on this story: Theophilos Argitis in Ottawa at targitis@bloomberg.net.

To contact the editors responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net; David Scanlan at dscanlan@bloomberg.net.

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