Tax Freedom Day – For Canadian Corporations is Today, January 30th.

Unsure of year
Corporate Tax Rates Around the World.

Corporate Tax Freedom Day, or the day that corporations will have paid their taxes to all levels of government, is today, January 30th, 2013. But don’t feel left out, if you are not a shareholder of a Canadian Corporation, because Personal Tax Freedom Day is also on its way – not as quickly mind you because Corporations have the ability to make much more money, much quicker than the average employee and the Corporate tax rates are considerably smaller than personal income tax rates.

From the CRA;
  • 15% on the first $43,561 of taxable income, +
  • 22% on the next $43,562 of taxable income (on the portion of taxable income over $43,561 up to $87,123), +
  • 26% on the next $47,931 of taxable income (on the portion of taxable income over $87,123 up to $135,054), +
  • 29% of taxable income over $135,054.

Then there are the Provincial tax rates;

Provincial/territorial tax rates (combined chart)
Provinces/territories Rate(s)
Newfoundland and Labrador 7.7% on the first $33,748 of taxable income, + 12.5% on the next $33,748, + 13.3% on the amount over $67,496
Prince Edward Island 9.8% on the first $31,984 of taxable income, + 13.8% on the next $31,985, + 16.7% on the amount over $63,969
Nova Scotia 8.79% on the first $29,590 of taxable income, + 14.95% on the next $29,590, + 16.67% on the next $33,820, + 17.5% on the next $57,000, + 21% on the amount over $150,000
New Brunswick 9.1% on the first $38,954 of taxable income, + 12.1% on the next $38,954, + 12.4% on the next $48,754, + 14.3% on the amount over $126,662
Quebec Go to Income tax rates (Revenu Québec Web site).
Ontario 5.05% on the first $39,723 of taxable income, + 9.15% on the next $39,725, + 11.16% on the next $429,552, + 13.16 % on the amount over $509,000
Manitoba 10.8% on the first $31,000 of taxable income, + 12.75% on the next $36,000, + 17.4% on the amount over $67,000
Saskatchewan 11% on the first $42,906 of taxable income, + 13% on the next $79,683, + 15% on the amount over $122,589
Alberta 10% of taxable income
British Columbia 5.06% on the first $37,568 of taxable income, + 7.7% on the next $37,570, + 10.5% on the next $11,130, + 12.29% on the next $18,486, + 14.7% on the amount over $104,754
Yukon 7.04% on the first $43,561 of taxable income, + 9.68% on the next $43,562, + 11.44% on the next $47,931, + 12.76% on the amount over $135,054
Northwest Territories 5.9% on the first $39,453 of taxable income, + 8.6% on the next $39,455, + 12.2% on the next $49,378, + 14.05% on the amount over $128,286
Nunavut 4% on the first $41,535 of taxable income, + 7% on the next $41,536, + 9% on the next $51,983, + 11.5% on the amount over $135,054
Canadian Corporate Tax rates for 2013 are;
The basic rate of Part I tax is 38% of taxable income, 28% after federal tax abatement.

For Canadian-controlled private corporations claiming the small business deduction, the net tax rate is 11%.

For the other corporations, the net tax rate is decreased as follows:

  • 19% effective January 1, 2009
  • 18% effective January 1, 2010
  • 16.5% effective January 1, 2011
  • 15% effective January 1, 2012

Provincial or territorial rates

Generally, provinces and territories have two rates of income tax – a lower rate and a higher rate.

Lower rate

The lower rate applies to the income eligible for the federal small business deduction. One component of the small business deduction is the business limit. Some provinces or territories choose to use the federal business limit. Others establish their own business limit.

Higher rate

The higher rate applies to all other income.

Provincial and territorial tax rates (except Quebec and Alberta)

The following table shows the income tax rates for provinces and territories (except Quebec and Alberta, which do not have corporation tax collection agreements with the CRA).

These rates are in effect on January 1, 2012, and may change during 2012.

Province or territory Lower rate Higher rate
Newfoundland and Labrador 4% 14%
Nova Scotia 4% 16%
Prince Edward Island 1% 16%
New Brunswick 4.5% 10%
Ontario 4.5% 11.5%
Manitoba nil 12%
Saskatchewan 2% 12%
British Columbia 2.5% 10%
Yukon 4% 15%
Northwest Territories 4% 11.5%
Nunavut 4% 12%

For more information, go to Dual tax rates.

Corporations also have to pay the CRA employer share of payroll source deductions for the year for employee pay and bonuses as well as any GST/HST if they are selling more than they are purchasing and also don’t forget the dividends Corporations pay out of earning to you, your friends, neighbours, parents and grandparents.

If you read some of the mainstream, err, left-leaning media tales of Corporate Tax Freedom Day you would think that we should be taxing these evil Corporations at 50% or more because all they do is pay out insane salaries and bonuses to their CEO’s and Board or Directors while giving little back to the community or the country.

For all that, I call bullshit, and not because I agree with insane salaries, bonuses, buyouts and golden handshakes – I hate them in sports and entertainment as well – but Corporations are free to operate in whichever town, city, province or country they choose to and a raise in Corporate tax rates increases the risk that corporations will back up their belongings and flee where rates are more favourable.

So while it’s great to call out Corporations for all their flaws, it would be nice once in a while if mainstream media reported on those cities and towns left with high unemployment and no jobs because a Corporation propping up their area closed up or left for a different location.

Now there are some legitimate arguments around how accountable Canadian Corporations should be and what they do with their reserves, especially in light of the recessionary times we currently live in, and by holding on to these reserves in case the economy worsens, Corporations are keeping a nest age they hope to not have to dip in to, but this “dead money” may never see the light of day when the economy picks back up and it gets swallowed up as profits or paid out as a bonus when it should be put to work right away to invest in Canada and create jobs.
Might there be other ways to increase government revenues so that the government will need to borrow less money to finance programs – driving up the debt and deficit – possibly. One suggestion by the head of the Canadian Labour Congress (CLC), Ken Georgetti, suggested that “the government should target tax credits to companies that invest in machinery and increase productivity.”

With Canadian Corporate taxes are already lower than (unconfirmed) elsewhere in the G7 nations, organizations like the CLC disregard the fact that business investment had increased by 6.2% since the official start of the recession, September 15th, 2008. If consumer confidence remains weak or if a Liberal government were to take power in Canada, look for the vultures to circle looking to pick through the remains of any and all Canadian Corporations which remain here after an increase in the Corporate Tax Rate.

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Author: Warren Orlans

Welcome to the blog for Intaxicating Tax Services, www.intaxicating.ca. My name is Warren Orlans and I am the owner of inTAXicating Tax Services. With over 17-years experience in the taxation industry, 11 of them working for the Canada Revenue Agency (CRA), and the rest working in the private sector at large financial institutions responsible for resolving tax issues for corporations and individuals and the Canadian lead for a large US bank on FATCA implementation. My tax career began pretty much out of university at the CRA, in Collections, where I moved up, across, over and up again through their division with stops in Enforcement, Taxpayer Relief (then Fairness), Audit, Directors Liability, Training, Mentoring, GST, GST/HST, Payroll, Corporate Tax, Personal tax, and probably much more. If you have a collections, compliance or audit issue with the CRA, MRQ, IRS or with the CRTC, WSIB or any aspect of those agencies, inTAXicating is the place you need to contact. inTAXicating Tax Services has strategic partnerships which allows my team to include amazing tax lawyers, insolvency practitioners, mortgage brokers, debt counselling experts and much more. When dealing with governments, knowledge is power. We possess strong understanding of government so we know what the next step is before the government does. When you have a collections problem with the CRA, do you hire a graphic artist? No, you get a former collector who trained the staff, and who worked as a resource officer for 5 years. Then you know you are on the right track to resolving your tax problem(s). Others offer suggestions. We offer solutions! info@intaxicating.ca

2 thoughts on “Tax Freedom Day – For Canadian Corporations is Today, January 30th.”

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