The high cost of corporate welfare paid by Canadian taxpayers

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Corporate welfare by federal, provincial and municipal governments cost Canadian taxpayers more than $350 billion in the 13 years from 2007 to 2019, according to a study by the Fraser Institute released Tuesday.

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Adjusted for inflation, the federal government spent $76.7 billion on business subsidies during that period, the provinces $223.3 billion and municipalities $52.1 billion.

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The total of $352.1 billion from 2007 to 2019 — the year before the pandemic hit — was almost $25 billion more than the federal government spent on national defence during that period.

“These subsidies for businesses — also known as corporate welfare — come with huge costs to government budgets and taxpayers while doing little if anything to stimulate economic growth,” said Tegan Hill, co-author of “The Cost of Business Subsidies in Canada,” released by the fiscally conservative think tank.

“Rather than give preferential treatment to certain companies and industries, governments could reduce business income taxes and help foster a pro-economic growth environment that gives all businesses the opportunity and incentives to succeed.”

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The study says the total cost of all corporate welfare for every Canadian who filed income taxes from 2007 to 2019 was highest in Saskatchewan at $18,785, followed in descending order by Quebec ($18,334); Prince Edward Island ($14,811); Alberta ($13,285); Ontario ($12,627); British Columbia ($11,573); Manitoba ($11,290); Nova Scotia ($8,511); Newfoundland and Labrador ($7,057); and New Brunswick ($6,048).

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Among the provinces, total provincial subsidies (excluding federal and municipal financial support) to businesses was highest in Quebec at $79.6 billion, followed by Ontario at $73.4 billion and B.C. at $22.9 billion.

In P.E.I. and Quebec, total provincial subsidies to businesses on average exceeded the amounts they received in provincial corporate income tax revenue by margins of 162.9% (P.E.I.) and Quebec (100.9%).

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In Manitoba, the comparable number was 97.6%; Saskatchewan, 88.6%; B.C., 70.7%; Nova Scotia, 47.6%; and Ontario, 46.1%.

In New Brunswick, Alberta and Newfoundland and Labrador,  business subsidies represented between 30% to 40% of all corporate income tax revenues on average. 

“It is important to note that this is not a comprehensive measure of government support to businesses, which would include all amounts delivered through tax expenditures, loan guarantees, direct investment, and regulatory privileges extended to particular firms or industries,” the study says. “The true level of government support to select businesses would be even higher.”

The report also doesn’t include pandemic-related financial support to businesses that began in 2020.

“The data presented in this report show that business subsidies delivered through government spending over the 2007-2019 study period came with significant costs to government budgets and to Canadian taxpayers generally,” the report concludes.

“To the extent that subsidies do not foster widespread economic growth — as the (economic) literature suggests is the case — business subsidies stand out as a key area for spending reform.” 


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