Adopting a Pro-Growth Tax Policy

RSP

By Ryan Scarth, AIMS Intern

Editors note: the following is an excerpt from the op-ed “The case for lower business taxes”. The full text can be found on the AIMS website, here: http://www.aims.ca/commentary/case-lower-business-taxes/

In many countries, tax rates are primarily dictated by the central government. Irrespective of a province’s population or natural resources, its geographical traits or contribution to GDP, all adhere to an equal national rate. In contrast, Canadian provinces are able to adjust their tax rates at will, more or less unencumbered by the federal government.

The flexibility offered to Canadian provinces, in being able to independently adjust tax policy, gives them a substantial advantage over foreign counterparts. The need for the Atlantic Provinces to create conditions conducive to economic growth and prosperity has never been greater, nor the timing more fortuitous.

Private business investment, a crucial indicator of the health and intentions of local businesses, has declined in Atlantic provinces over recent years – a fact publicly acknowledged by all four Atlantic provincial governments. Short-term thinking by these provincial authorities is hurting local economies. Prioritizing greater tax revenue to cover proportionately high expenditure, rather than the long term economic well-being of the population is irresponsible. By lowering business taxes, the revenue they generate as a percentage of GDP will decline, but through the rise in economic activity and employment levels over time, absolute government revenue will increase.

Provincial authorities have the tools required to create an economic advantage relative to their competitors and neighbours. The importance of using these policy tools cannot be overstated. In Atlantic Canada economic prosperity can be achieved, but it begins with provincial governments opting for fiscal policy that adopts a pro-growth approach to our tax policy.

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