Government subsidies and handouts are a huge cost to Canadian taxpayers

Canadians provided business with $19 billion (about U.S. $19.2 billion) in subsidies in 2004, the equivalent of $1,295 (about U.S. $1,312) from each Canadian taxpayer, according to a new report by the Fraser Institute.

In addition:

  • The 2004 figure was almost double the $10.3 billion (about) U.S. $10.4 billion governments doled out in business subsidies in 1995.

  • Taxpayer-funded subsidies to business totalled almost $144 billion (about U.S. $146) billion between 1995 and 2004 (the most recent year for which data is available).

  • That is the equivalent of $11,030 (about U.S. $11,174) per tax payer (all figures adjusted for inflation to 2007 dollars).

    Mark Milke, study author and public policy consultant, points out that one of the main problems with corporate welfare is the lost opportunity to use the money for other purposes such as tax relief:

  • If the federal government ended corporate welfare in 2004, the government could have reduced the federal corporate income tax rate to 14.6 per cent from 21 per cent.

  • In other words, eliminating federal corporate subsidies could have resulted in a 30.5 per cent reduction in the federal corporate income tax rate.

    To deal with the problem, Milke makes several recommendations, including:

  • Winding down and ending business assistance programmes as well as requiring companies to repay already allocated subsidies as per the terms of their contracts and agreements.

  • Supporting international efforts to end subsidies, including bilateral and multilateral agreements, as well as efforts to strengthen existing country-to-country treaties and to initiate new ones.

  • Use the money that would have been spent on business subsidies for business tax reductions.

    "This money could be put to much better use by providing Canadian taxpayers with broad-based tax relief. Not only will this put more money in Canadians' pockets, research shows it will be much more successful in stimulating investment and economic growth," says Milke.

    Source: Government subsidies and handouts to business cost each Canadian taxpayer $1,295, Fraser Institute, November 21, 2007.

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    FMF Policy Bulletin/ 04 December 2007
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