The Canada Advantage
Canada’s national coffee — Tim Hortons — is leaving Delaware and coming home, for all the right reasons.
That is, after years during which Canadian business rightly complained of being at a tax disadvantage compared to its U. S. competitors, the pendulum has swung and Tim Hortons now reckons it will do better north of the border. To be sure, the reasons it believes so are naught for our comfort. The implications of massive deficit spending by the Obama administration are higher taxes, and possibly a devalued dollar. That farsighted companies are seeking to improve their position by bailing out of a country that’s our largest market, is not good news overall.
However, it shows Canada is doing something right. Rule one in public economics is that people respond to the incentives they’re offered. That a company such as Tim Hortons is prepared to go through the upheaval of moving its head office to take advantage of a lower tax environment shows business tax cuts by successive federal governments are starting to work.
By 2012, federal corporate tax will be down to 15 per cent; Alberta’s corporate tax is 10 per cent, and Ottawa is urging other provinces to match it, giving Canada a blended 25 per cent rate.
Meanwhile, U. S., corporate tax rates will top out at more than 30 per cent.