Canada’s largest corporations avoided $30 billion in taxes last year, report finds

Canada's largest corporations are making record profits and paying income tax at record-low rates, according to a new report from the non-profit Canadians for Tax Fairness.

The report found an enormous increase" in the gap between what corporations would pay at the corporate rate stipulated in the tax code and what they actually paid. That gap grew to $30 billion in 2021 - an amount the organization says represents an unexplained loss" to the country.

The report analyzed the profits and taxes paid by 123 of the country's largest corporations with a market capitalization of $2 billion or more over the past five years. It found the annual tax gap in the three years before the pandemic averaged $13.5 billion, but that amount more than doubled - to $30 billion - in 2021.

This was due to record high profitability combined with corporations pushing their effective tax rates down to record lows," the report's author, DT Cochrane, told the Star.

The findings raise transparency questions about tax tactics - from perfectly legal deductions to tax planning manoeuvers of questionable legality," according to the report - that enable companies to avoid paying tax.

The usual statutory tax rate for Canadian corporations is 26.5 per cent of profit, according to the report. In 2021, tax avoidance lowered the effective tax rate to just 15 per cent for the 123 companies.

The difference in 2021 between the statutory rate and the effective rate is the largest since the 2008/9 global financial crisis," says the report, which notes that no significant corporate tax rule changes came into effect in 2021.

Amid inflation, growing deficits and a looming recession, obviously this lost public money is concerning," Cochrane said. This unexplained loss of $30 billion could not come at a worse time."

Alternative investment management company Brookfield Asset Management topped the list of companies with the largest corporate tax gap for 2021, which reduced its tax bill by a whopping $3.5 billion," according to the report.

We calculated how much you'd expect them to pay if they paid at the rates in the tax code and contrasted that with how much they actually paid," Cochrane said.

In a statement, a spokesperson for Brookfield said it complies with all tax laws and regulations of the countries in which it operates."

There was no immediate response from the second corporation on the list, Canadian Natural Resources, which paid $2.6 billion less than the usual statutory tax rate," according to the release.

A Canada Revenue Agency official was not immediately available for comment.

The report says corporations employ a variety of means to avoid paying the right tax.

It calls on the federal government to take immediate action to close the corporate tax gap loophole, suggesting that it raise the federal corporate income tax rate to 20 per cent from 15 per cent.

It also calls for the government to implement a minimum tax on book profits, similar to recently passed Inflation Reduction Act in the U.S., and to close the capital gains loophole: currently, only half of capital gains are subject to income tax.