The 2005 tax competitiveness report

Tax competitiveness is related to the size of the tax burden: The more resources used by governments to fund public services, the more taxes will impinge on the private sector’s desire to work, save, invest and take risks. [...] The marginal effective tax rate is a summary measure of the extent to which taxes impinge on investment decisions.3 It is the share of the pre-tax return on capital that would be required to cover the taxes, leaving a 3 The marginal effective tax rate calculations use the capital stock weights for Canadian manufacturing and services. [...] R. 17.5 6.1 8.3 8.1 Turkey 30.0 7.3 5.7 6.4 Singapore 20.0 5.8 6.6 6.2 Note: The marginal effective tax rate is the tax paid as a percentage of the pre-tax rate of return to capital, based on the assumption that the after-tax rate of return is sufficient to cover the cost of equity and debt finance provided by international lenders. [...] Despite the past and planned cuts in corporate rates, 5 A significant part of the reduction in Quebec’s effective tax rate on capital is the federal elimination of the capital tax. [...] Further, as a result of the increase in Quebec’s corporate income tax rate, the average statutory corporate income tax rate applied to corporate taxable income will rise by 2009 to over 35 percent unless other provinces reduce their corporate rates and the federal government proceeds with the rate cut initially included in the 2005 budget.