As tax filing deadline looms, The Conference Board of Canada measures personal and business tax burdens
OTTAWA, May 2, 2016 /CNW/ - Prince Edward Island has the second highest provincial tax burden on individuals among the provinces, according to a new report from The Conference Board of Canada, Benchmarking Provincial Tax Burdens.
- Prince Edward Island has a comparatively high provincial personal tax burden, but the provincial net business tax burden is relatively competitive with other provinces.
- The introduction of the HST likely improved the province's business tax competitiveness.
This report compares the provincial tax burden on businesses and individuals among provinces based on the calculation of average provincial tax burden ratios. The analysis is based on data through 2011 for business taxation and 2012 for personal taxation (which were the most recent data available at the time this research was completed).
"The tax burden on individuals is relatively high in Prince Edward Island," said Julie Adès, Senior Economist. "On the other hand, PEI's business taxation is more competitive relative to other provinces. And the province's ranking may improve once we begin to see the impact of the HST, which PEI adopted in 2013."
Prince Edward Island has one of the highest implicit personal income tax rates in all five main income brackets. Even when incorporating comparatively low property taxes, Prince Edward Island is second only to Quebec for the highest tax burden ratios for individuals.
In contrast, Prince Edward Island has a more competitive tax regime in business taxation. In terms of provincial corporate income taxes as a share of gross output in the business sector, PEI is second to New Brunswick for the lowest burden. PEI is also second only to New Brunswick for having the lowest business tax ratio when property taxes are included in the analysis.
PEI's ranking deteriorates sharply when including sales taxes in the analysis because of its former provincial sales tax regime. Now that Prince Edward Island has adopted the HST, the tax burden on businesses located in the province is expected to improve.
This report does not assess the goods and services financed by governments through tax revenues.
Business taxation includes: provincial corporate income taxes, social security contributions, payroll taxes, property taxes, and provincial sales taxes, as well as the provincial segments of the HST.
Personal taxation includes: provincial personal income taxes, social security contributions paid by employees, property taxes, and provincial sales taxes as well as the provincial segments of the HST.
Join Julie Adès and Matthew Stewart for a live webinar to discuss the findings for all provinces on June 1, 2016 at 3 PM AT.
The report was produced for the Centre for Tax Analysis, Fiscal Incentives and Competitiveness (TAFIC). Launched in 2014, TAFIC provides Canadian business leaders and policy-makers with credible, leading-edge quantitative research on all aspects of the Canadian system of taxation and fiscal incentives. Using sophisticated econometric tools to measure the impact of proposed reforms on the Canadian economy, TAFIC publishes evidence-based and accessible reports on key issues related to taxation and fiscal incentives.
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