Which is why I thought to myself, hey, if this is such a pain-in-the-budget topic, I should probably take a minute to understand exactly what the word means before I cast my vote.
What is corporate tax?
Just as we the people have to pay tax on our income, companies have to pay tax on the money they earn as well. They pay tax on "profit income" and on capital (cash or goods used to generate income). And, just like us, corporations have to file a tax return, a T2. If you've ever wondered what a T2 looks like you can check it out here.
Who has to file a T2? Any corporation with a Canadian address (except registered charities) has to file a T2 every year even if there is no tax due. This includes non-profits, tax-exempt corporations and inactive corporations.
And, in case you wanted a history lesson, it seems that corporate tax has been around longer than individual income tax in Canada. Corporate tax was introduced at the end of the nineteenth century while income tax was introduced in 1917 as a "temporary" way of funding World War 1.
Corporate tax rates, by the way, are:
19.5% effective January 1, 2008
19% effective January 1, 2009
18% effective January 1, 2010
16.5% effective January 1, 2011
15% effective January 1, 2012
Individual tax rates in Canada for 2011 are:
15% on the first $41,544 of taxable income
22% on the next $41,544
26% on the next 45,712
29% on taxable income over $128,800
Our Parities & Our Pain-in-the-Budget
The Liberals vow to keep the corporate tax rate at the 2010 level of 18%. The NDP promises to keep the combined federal/provincial corporate tax rate (which is about 26%) below the U.S. federal corporate tax rate of 35%. This means that the NDP will boost the federal corporate tax rate to 19.5%. The Conservatives will keep lowering the rate to 15% in 2012. The Bloc Quebecois and Green Party do not have explicit plans to either raise or lower the corporate tax rate.
There is some additional vocabulary that comes up when individual and corporate tax obligations collide including: dividends, shareholders, tax credit, double taxation, capital gain, capital cost allowance and income trust. But I am not going to touch on any of that moola lingo today. The point of this post is to clarify what corporate tax is so that we can better decide which party's earning-spending-growing-sharing plan we want to support on May 2nd. Happy voting!
Copyright 2011. Laura Thomas. All Rights Reserved.
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