Taxation systems in Canadian provinces can work against the objective of stronger economic growth and wealth creation, especially in how payroll and provincial sales taxes are applied, says a report by the Centre for Tax Analysis, Fiscal Incentives and Competitiveness, at the Conference Board of Canada. ‘Benchmarking Provincial Tax Burdens’ shows sales taxes that are value-added and harmonized with the federal system reduce the tax burden on businesses compared to conventional retail sales taxes still in place in several provinces. Payroll taxes significantly increase the business tax burden in the four provinces that have them. In both business and personal taxation, Quebec has the highest tax burden among the provinces. On the business side, Saskatchewan, New Brunswick, Alberta, and Newfoundland and Labrador have the lowest net tax burden ratios. Businesses in provinces with conventional retail sales taxes ‒ Manitoba, Saskatchewan, and Prince Edward Island (in 2011) ‒ face higher average sales tax burdens than those in provinces with value-added taxes, such as a harmonized federal-province sales tax. Whereas businesses only pay value-added sales taxes once, retail sales taxes can be applied to product inputs many times before the final sale. This form of tax raises business costs and discourages business investment.
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