OTTAWA - A think tank has criticized the Conservative government's corporate tax-cut regime, saying it will only exacerbate existing inequalities in Canada's economy.
But Finance Minister Jim Flaherty doesn't buy it. A study released Thursday by the Canadian Centre for Policy Alternatives said the big winners from the Conservative cuts will be the oil-producing provinces, and the oil and finance sectors.
The study, by an economist from the Canadian Auto Workers union, said struggling industries and regions will glean little benefit from the new tax measures.
"Despite what Finance Minister Flaherty says, corporate tax cuts are an especially uneven policy tool," author Jim Stanford wrote. "These corporate tax cuts constitute a significant net fiscal shift in favour of Alberta, and away from Ontario and every other non-oil-producing province."
In a statement to The Canadian Press, Flaherty said the study is wrong to suggest that reducing taxes will not in some way stimulate the entire Canadian economy.
"Since taking office we have provided relief in every way the government collects taxes: personal taxes, consumption taxes, excise taxes and business taxes," Flaherty said.
The government is providing $21 billion in accumulated tax relief to Canadians and businesses this year - equivalent to 1.4 per cent of Canada's GDP.
"As a share of the economy, this is significantly greater than the stimulus package just now reaching U.S. households," the minister said. "It is also different in that it is sustainable - backed by a track record of balanced budgets - and permanent."
Stanford's study analyzed the distribution of corporate profits throughout the provinces and across 16 major industries.
It found Canada's three oil-producing provinces account for just 15 per cent of the population but generate 36 per cent of corporate profits. It said they can expect to reap a similarly large share of benefits from the corporate tax reductions.
Per capita, companies in oil-producing provinces can expect to receive three times as much benefit from the tax cuts as companies in the rest of the country, the study said.
Flaherty is "picking winners," Stanford said, but he added the winners Flaherty is picking are the provinces and industries that are already doing well.
"Corporate tax cuts, as expensive as they have been and will continue to be, have had no visible impact on the broad pattern of business investment at all," he said
"In addition to asking whether the regional and sectoral impacts of the Harper government's $15 billion annual corporate tax cuts are fair and acceptable to the majority of Canadians, we should also ask whether they will have any beneficial impact on Canada's economy at all."
