Canada is the Best Place in the World for Business Tax: KPMG Report

tax

Startups working out of the Great White North may be living the good life after all.

Toronto, Montreal and Vancouver placed first, second and third among worldwide cities and their tax competitiveness rank for business. It means that starting a business in Canada will cost you a lot less in term’s of the government’s cut than say, the United Kingdom, the United States, Mexico, the Netherlands and others.

The new figures came in KPMG’s Competitive Alternatives 2014: Focus on Tax, where Canada’s three biggest cities held the top three spots among the 51 major international cities (population of two million or more) included in the 2014 report.  A total of 107 cities were featured in the study, of which 15 were Canadian.

Edmonton ranked as the most tax competitive city in Canada, when all cities were factored in regardless of size.

“This year’s report demonstrates that once again Canada provides an attractive business tax climate,” said Elio Luongo, a Canadian managing partner at KPMG. “Our corporate tax policies ensure Canada remains a viable option and desirable location for businesses looking to locate or expand their operations.”

The study also revealed there is no standard approach in setting tax policy among the countries studied.  Although the types of taxes used to raise government revenues are more or less similar among countries, there is a large range in how these taxes are weighted and applied.

Some countries have a tax policy focused on delivering a low corporate income tax rate in order to compete for more businesses. These countries may need to rely more heavily on other taxes, such as sales or payroll taxes, to derive their tax revenues. Similarly, some countries use their tax policies to attract certain types of businesses with targeted incentives for activities such as manufacturing or research and development (R&D). The Organisation for Economic Co-operation and Development (OECD) continues to address these types of differences in its BEPS 15 Point Action Plan to introduce global collaboration to modernize the international tax system.

Overall ranking and total tax index* for featured countries

2014 Rank Country 2014  Total Tax Index* % tax cost advantage versus US   2014 Rank Country 2014  Total Tax Index % tax cost advantage versus US
1 Canada 53.6 46.4% 6 Australia 112.9 -12.9%
2 United Kingdom 66.6 33.4% 7 Germany 116.3 -16.3%
3 Mexico 70.2 29.8% 8 Japan 118.6 -18.6%
4 Netherlands 74.5 25.5% 9 Italy 135.8 -35.8%
5 United States 100.0 - 10 France 163.3 -63.3%

Ranking and total tax index for top 5 major international cities (population of two million or more)

2014 Rank City 2014 Total Tax Index
1 Toronto, CA 51.6
2 Vancouver, CA 54.5
3 Montreal, CA 55.6
4 Manchester, UK 58.1
5 Monterrey, MX 69.4

Smaller Canadian cities, in addition to the larger international ones, were also studied as part of the 2014 report.  The 15 featured Canadian cities ranked ahead of their US counterparts yet again; however there are some changes this year in the national rankings:

  • Edmonton is the most tax competitive city in Canada, having moved up from 2nd place in 2012 due to the former tax leader, Saskatoon, dropping to 6th place in 2014. Changes made to the Saskatchewan R&D tax credit in 2012 are the reason behind this drop for Saskatoon.
  • Atlantic Canada remains a highly tax competitive region in Canada with MonctonFrederictonSt. John’s and Halifaxrounding out the top five tax competitive cities in the country.
  • Quebec City moved up to 9th place this year primarily due to an innovative property tax provision that rewards owners who improve their properties, thus causing assessed value to increase.  Bio-pharma and e-business incentive enhancements also helped Quebec City secure this spot.

Ranking and total tax index for featured Canadian cities (international and smaller cities)

2014 Rank City 2014 Total Tax Index   2014 Rank City 2014 Total Tax Index
1 Edmonton 42.7   9 Quebec City 54.0
2 Moncton 42.9   10 Niagara Region1 54.4
3 Fredericton 43.0   11 Vancouver 54.5
4 St. John’s 43.8   12 Montreal 55.6
5 Halifax 47.9   13 Kamloops 55.8
6 Saskatoon 48.8   14 Winnipeg 55.9
7 Charlottetown 49.5   15 Sudbury 56.8
8 Toronto 51.6        
Joseph Czikk

Joseph Czikk

Joseph Czikk previously has written for the National Post, Montreal Gazette, Vancouver Sun, Regina Leader Post, Techvibes and BC Business Online. Joseph often goes crazy on twitter during NHL and NFL games.