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I think we've beat this issue to death on this site, but here is another party giving thier 2 cents....
Banking on the city: The financial services sector needs a healthy Toronto. Tax reform and infrastructure are key roles for Queen's Park and Ottawa
Janet Ecker, Financial Post
Published: Tuesday, March 14, 2006
Governments have many levers at their disposal to make this happen: competitive taxation, streamlined regulatory environment, human resources development programs, and so on.
Making Toronto work as a city is another step. That's why we are encouraging the federal and provincial governments to do all in their power to help Toronto tackle its infrastructure challenges. That means giving Toronto the resources and powers it needs to create the kind of environment that will make it work.
Among Toronto's strengths is its attractiveness as a head-office location. More than one-third of Canada's top 100 head offices are in the Toronto region, and of the 30 largest corporations in the land, eight are financial institutions based in Toronto. This head office concentration also supports the growth of specialized support services (legal, accounting, consulting).
But whether it's head office personnel or specialized service personnel, these individuals are highly mobile. They can, and do, go anywhere, and Toronto must be able to compete in terms of economic and social quality of life.
Of the many factors that influence head-office location, a crucial element is the cost of office space, which in turn is influenced by the level of property taxes. Regrettably, firms in Toronto are doubly disadvantaged in this regard. Not only do they pay a greater share of the total property tax pie, compared with the business sector elsewhere, but the education component of commercial property taxes is 25% to 45% higher than in neighbouring municipalities.
As the province of Ontario is directly responsible for the allocation of the education component of commercial property tax rates, the TFSA recommends that the province reduce the business education tax rate for Toronto to the average of the GTA municipalities. Otherwise, we fear that the tax on businesses will continue to lead to inefficient job migration out of the city to surrounding municipalities -- and work against Toronto achieving its potential as a headquarters location.
In the end, it's all about competitiveness: Toronto's competitiveness compared with other municipalities; Ontario's compared with other provinces and states in North America; and Canada's compared with the world. There is troubling news on all three fronts.
Of particular concern is our record on productivity, which is directly related to capital investment. The C.D. Howe Institute reported recently that Canada's annual private investment expenditure per worker lags behind that of OECD countries and the United States by $1,000 and $2,000 respectively, not surprising, since our marginal effective tax rate on capital for medium and large firms in Canada is higher than everywhere else in the world except China.
In Ontario, we tax capital in at least three different ways. The most obvious is the capital tax -- something unique to Canada. Moreover, this tax hits financial institutions particularly hard, undermining their ability to drive growth for the rest of the economy. While Ontario has recognized the need to eliminate this tax, the phase-out period, which stretches out to 2012, is far too long. We urge the government to pick up the pace.
The second way we tax capital in Ontario is the retail sales tax, which effectively adds 8% to the cost of capital goods that businesses buy. Businesses in Alberta do not pay this tax, because there is no sales tax in Alberta. Neither do businesses in jurisdictions such as Nova Scotia, where the provincial sales tax has been harmonized with the federal GST. By their nature, value-added taxes do not tax capital inputs. We recommend that Ontario remove its tax on business capital inputs, because this would be the most effective way to increase economic output. The federal Department of Finance calculates that every dollar reduction in sales tax on capital inputs generates an increase of $1.40 in economic well-being.
The final tax on capital involves maintaining a depreciation schedule for capital goods that overestimates the true economic life of the goods. We urge the government of Ontario to re-examine its schedule and make the appropriate changes.
Together, we believe these initiatives will make Toronto, Ontario and Canada even more attractive to the international financial services industry and support our own financial institutions as they expand their reach outside our borders -- ultimately bringing more jobs and prosperity to our community.
Janet Ecker is executive director, Toronto Financial Services Allicance
Banking on the city: The financial services sector needs a healthy Toronto. Tax reform and infrastructure are key roles for Queen's Park and Ottawa
Janet Ecker, Financial Post
Published: Tuesday, March 14, 2006
Governments have many levers at their disposal to make this happen: competitive taxation, streamlined regulatory environment, human resources development programs, and so on.
Making Toronto work as a city is another step. That's why we are encouraging the federal and provincial governments to do all in their power to help Toronto tackle its infrastructure challenges. That means giving Toronto the resources and powers it needs to create the kind of environment that will make it work.
Among Toronto's strengths is its attractiveness as a head-office location. More than one-third of Canada's top 100 head offices are in the Toronto region, and of the 30 largest corporations in the land, eight are financial institutions based in Toronto. This head office concentration also supports the growth of specialized support services (legal, accounting, consulting).
But whether it's head office personnel or specialized service personnel, these individuals are highly mobile. They can, and do, go anywhere, and Toronto must be able to compete in terms of economic and social quality of life.
Of the many factors that influence head-office location, a crucial element is the cost of office space, which in turn is influenced by the level of property taxes. Regrettably, firms in Toronto are doubly disadvantaged in this regard. Not only do they pay a greater share of the total property tax pie, compared with the business sector elsewhere, but the education component of commercial property taxes is 25% to 45% higher than in neighbouring municipalities.
As the province of Ontario is directly responsible for the allocation of the education component of commercial property tax rates, the TFSA recommends that the province reduce the business education tax rate for Toronto to the average of the GTA municipalities. Otherwise, we fear that the tax on businesses will continue to lead to inefficient job migration out of the city to surrounding municipalities -- and work against Toronto achieving its potential as a headquarters location.
In the end, it's all about competitiveness: Toronto's competitiveness compared with other municipalities; Ontario's compared with other provinces and states in North America; and Canada's compared with the world. There is troubling news on all three fronts.
Of particular concern is our record on productivity, which is directly related to capital investment. The C.D. Howe Institute reported recently that Canada's annual private investment expenditure per worker lags behind that of OECD countries and the United States by $1,000 and $2,000 respectively, not surprising, since our marginal effective tax rate on capital for medium and large firms in Canada is higher than everywhere else in the world except China.
In Ontario, we tax capital in at least three different ways. The most obvious is the capital tax -- something unique to Canada. Moreover, this tax hits financial institutions particularly hard, undermining their ability to drive growth for the rest of the economy. While Ontario has recognized the need to eliminate this tax, the phase-out period, which stretches out to 2012, is far too long. We urge the government to pick up the pace.
The second way we tax capital in Ontario is the retail sales tax, which effectively adds 8% to the cost of capital goods that businesses buy. Businesses in Alberta do not pay this tax, because there is no sales tax in Alberta. Neither do businesses in jurisdictions such as Nova Scotia, where the provincial sales tax has been harmonized with the federal GST. By their nature, value-added taxes do not tax capital inputs. We recommend that Ontario remove its tax on business capital inputs, because this would be the most effective way to increase economic output. The federal Department of Finance calculates that every dollar reduction in sales tax on capital inputs generates an increase of $1.40 in economic well-being.
The final tax on capital involves maintaining a depreciation schedule for capital goods that overestimates the true economic life of the goods. We urge the government of Ontario to re-examine its schedule and make the appropriate changes.
Together, we believe these initiatives will make Toronto, Ontario and Canada even more attractive to the international financial services industry and support our own financial institutions as they expand their reach outside our borders -- ultimately bringing more jobs and prosperity to our community.
Janet Ecker is executive director, Toronto Financial Services Allicance