We could take shares instead of taxes.
Corporate Taxes in Nova Scotia are a mess. They are not working for anyone. And if there’s one reason why no one cares, it’s because they are such a mess that the tiny amount they generate is near immaterial to our provincial budget.
But Corporate Taxes do matter. The 'carrot and stick' of corporate tax is one of the few levers of economic progress in our reach.
So why would I advocate abolishing them?
Nova Scotia has a personal income tax system that is among the most progressive in the world. Though it sometimes hurts it’s something we can be proud of. Here’s the deal – we all contribute fairly to a common fund that pays for our public goods and services, invests in our future, economic, cultural and social objectives and looks after the poorest and most vulnerable among us making Nova Scotia among the cleanest, healthiest, safest and most prosperous places ever in the history of the world.
Take a look:
It happens that those making over $150k are the “1%” in Nova Scotia. There’s a little over 6,000 taxpayers in that 1% bracket and they are paying 21% of all the income taxes. Damn decent I’d say.
But there are other parts of the tax system that just aren’t working.
Nova Scotia has the highest Corporate Income Tax Rates in Canada and the lowest small business threshold. And yet you don’t see Corporate Tax in the chart above. The total amount collected in corporate and capital taxes is only about half what Service Nova Scotia collects in registrations, fees and taxes per year. It’s lumped in with “other sources” and forgotten.
Most large corporations operating and selling goods in Nova Scotia pay little or no taxes. New car sales account for the second largest element of consumer spending after food yet Ford and all the other car companies pay no taxes in Nova Scotia. Worse, the banks are taxed on any capital they employ in Nova Scotia leaving them a huge incentive to move all deposits out of Nova Scotia and not invest anything here they don’t have to – so we’re left with mortgages… and that’s about it.
Before “income tax” became a thing in Nova Scotia there were still taxes but they were levied - sensibly - on the people and companies wanting to do business in Nova Scotia, give us junk, and extract wealth.
It's time again to tax not the creation of wealth, work and income in Nova Scotia, but tax the extraction of wealth and recover the cost of all the disposable junk, packaging and garbage shipped in to Nova by global commerce.
Here are three ideas about corporate taxes ranging from obvious and conservative to… BFI
1/ If we want to be competitive and attract industry our corporate tax rates should be lower than the main provincial competitor. And that seems to me to be Ontario. Because of our well-understood geopolitical disadvantages, we can’t be market leaders in taxation. A simple strategy would be to set rate 5% lower than Ontario and small business thresholds 5% higher and take on a fast first follower strategy, keeping our tax rate competitive with theirs.
2/ We should structure corporate taxation to encourage the employment of capital in Nova Scotia, not the extraction.
3/ Here’s the big f%^king idea. Currently corporate taxes accounts for only 4.9% of Nova Scotia provincial revenues. To put that in perspective it’s only about 1 tenth of the amount raised by income tax and HST. Why don’t we just give up on corporate taxes all together, save the cost of administrating a complicated and unproductive system and simply require large public corporations that want to do business in Nova Scotia to pay us in shares for the right to do business in Nova Scotia.
As above, the rate – paid annually - would match competitively with Ontario. Tax avoidance would be basically eliminated. Corporate, government and public interests would be aligned, and Nova Scotia – meaning the people of Nova Scotia – would be creating a global, long-term investment in the way the world is inevitably going. Collectively we would again become owners of capital, earning dividends and capital gains, perpetually, driven in part by our own market, instead of victims of corporate globalization endlessly extracting our regional wealth and aggregating it in global centres.
This idea is not new. It’s been around for generations but in times and places where corporate taxation is working to advantage it’s not pursued. Nova Scotia is not in that time and place.
It’s a creative idea that could do the job. More revenue/ dividends, more capital, more control, less tax avoidance, less administrative and overhead costs. Even talking about it would put us on the global map and on the radar of corporate interests look for an advantage. And nothing could send a stronger signal to the markets and owners of capital that we’re ready, willing and able to do something 'bold', 'innovative', 'new' and partner in the long-run for shared interests instead of undermining quarterly results.
Writing about life, citizenship, and Nova Scotia.