Finance Minister Victor Boudreau says it’s unlikely the province would ever eliminate corporate income taxes.
The discussion paper on tax reform released by the provincial government earlier this summer outlined three options for cutting corporate income taxes from 13 per cent to a 10 per cent rate, a seven per cent rate or a five per cent rate as part of a series of changes to the tax system in New Brunswick.
The Atlantic Institute for Market Studies, a Halifax-based think-tank, has suggested that New Brunswick consider scrapping corporate income taxes altogether.
“The idea of going to 10 per cent would basically be to meet a challenge that was put out by the federal government that all (provincial) jurisdictions go to 10 per cent,” said Boudreau.
“But I’ve said all along, that if all we do is meet what everyone else is doing, that doesn’t necessarily give us an advantage so we’re looking at going to seven or going to five.”
But cutting the corporate income tax altogether would be difficult, said Boudreau.
“Can we go to zero? Well, no decisions have been made yet. We’re waiting on the (all-party) committee’s report, which will be given to government in September, probably,” he said.
“I know some have (talked) about going to zero, but going to zero obviously comes at a cost.”
Boudreau said any cuts to taxes will have to be balanced against other tax increases or government spending cuts because of the importance of maintaining a balanced budget.
“I would think it fairly unlikely that we would go to zero, but the options of going to seven or going to five are certainly out there.”
The finance minister also said while there has been widespread opposition to the idea of a provincial carbon tax, taking that levy out of consideration could mean changes to proposed cuts to personal and corporate income taxes.
“Based on the consultations we’ve seen obviously the carbon tax doesn’t seem to be a very popular item, but it is an item in the package that has $100 million attached to it,” he said. “So if you don’t do the carbon tax, well then how do you make up for that $100 million, do you make less of a reduction to the other rates or do you try and cut spending even more?”
Charles Cirtwill, executive vice-president of the Atlantic Institute for Market Studies, has said that scrapping corporate income taxes could boost the value of existing New Brunswick businesses, which in turn could boost wages and investment.
Eliminating the tax could also be a powerful marketing tool.
New Brunswick is expected to take in $189.3 million in corporate incomes taxes in the 2008-2009 fiscal year. Corporate income taxes represent less than three per cent of New Brunswick’s budget revenue of $6.68 billion and just 4.5 per cent of the province’s own source revenue.
Cirtwill noted that provincial government spending increased last year by about eight per cent and two years ago by roughly 10 per cent.
“Even if they cut the growth in spending by half, they’d still have more money than they get from corporate income taxes.”