Canada’s tax system is the easiest in the G7 because it imposes the lowest burden on small- to medium-sized companies, says a report from PwC and the World Bank Group. The 12th annual Paying Taxes report put Canada tops in the G7 and 16th out of the 190 countries measured.
On average, small to medium-sized Canadian companies make eight tax payments per year (vs. an average of 24 payments globally), and they take 131 hours (vs. an average of 240 hours globally) to comply with the tax requirements, the report says.
The authors note Canada’s current ranking could suffer under the federal government’s proposed changes for taxing private corporations.
“The Canadian tax system is a critical component of our Canadian investment climate,” said Peter van Dijk, PwC national tax policy leader, in a release. “The recent proposals for private corporations by the government will increase the amount of taxes small and medium-sized businesses will have to pay, diverting money away from future investments and job creation.”
The Liberal government announced a number of proposed changes to the Income Tax Act in July, but modified the proposals in October after criticism from various business groups. They also announced they would reduce the small business tax rate to 9% by 2019.
On Wednesday, the Finance Department provided details about the provisions around income sprinkling.
The PwC and the World Bank Group report says the proposed legislation would increase the total tax burden and make compliance more complex.
Overall Paying Taxes ranking year over year
About the report: Called “Paying Taxes 2018,” the report measures the overall ease of paying taxes for small- to medium-sized domestic companies based on the following criteria: number of tax payments per year, time required to compile returns and submit tax payments, total tax liability as a percentage of pre-tax profits, and post-filing index which measures the time to obtain a VAT refund, correct a corporate income tax return, and deal with the corresponding audits.
Read the full report here.