Tax Advantages in British Columbia

Vancouver ranks first with the lowest tax index out of the 41 major international cities studied as part of the 2010 Competitive Alternatives

The 2010 Special Report: Focus on Tax, part of KPMG's Competitive Alternatives 2010, ranked Vancouver first, Montréal fourth, and Toronto fifth out of 41 major cities. Vancouver moved up from fourth place among a similar group of 35 large international cities studied in 2008.

Vancouver's also ranked first among the 41 cities for the corporate and IT services industries with its improved tax regime benefiting Vancouver firms in this sector, including software and video game developers, corporate regional offices, and firms managing international financial and logistics activities between Canada and Asia.

Canada has the second lowest tax cost for businesses among 10 countries studied by KPMG. The report assesses the general tax competitiveness of 95 cities in 10 countries, focusing on 41 major cities with populations greater than 2 million, and compares the total tax burden faced by companies, including income tax, capital tax, sales tax, property tax, miscellaneous local business taxes, and statutory labour costs.

The report compares the total tax cost between countries and cities using a Total Tax Index (TTI) score for each location, expressed as a percentage of total taxes paid by corporations in the US. A lower score is better since it means lower tax costs for businesses. By this measure, Vancouver, with a score of 50.5, compares favourably with Seattle, its natural US counterpart, which scored at 92.1.

In the country rankings, Mexico came in first, with Canada second and the Netherlands third, followed by Australia, the UK, the US, Germany, Italy, Japan, and France.

The report also compares tax costs between industries, which vary widely. In a breakdown by business sectors, Canada comes second in manufacturing with a score of 67.7, compared to 100 for the US, with Vancouver, Toronto and Montréal placing in the top five cities.

Total Tax Index for Services

Rank        City         Total Tax Index

    1        Vancouver, CA        50.5

    2        Monterrey, MX        59.8

    3        Mexico City, MX      60.0

    4        Montreal, CA         60.3

    5        Toronto, CA          67.6

    6        The Hague, NL        76.1

    7        Amsterdam, NL        76.7

    8        Manchester, UK       77.4

    9        Melbourne, AU        78.9

    10       Baltimore, US        81.8

    11       Sydney, AU           82.8

    12       Minneapolis, US      86.5

    13       Boston, US           87.9

    14       Philadelphia, US     88.9

    15       Detroit, US          90.7

KPMG's Competitive Alternatives 2010 report and its Special Report: Focus on Tax are available at www.competitivealternatives.com/download.

British Columbia’s Tax Advantage

• Effective January 1, 2010, British Columbia’s corporate tax rate was reduced to 10.5% from 11%. The corporate tax rate will be further reduced to 10% as of January 1, 2011.
• Effective April 1, 2008, British Columbia’s capital tax on financial institutions will be eliminated. (B.C.’s capital tax on corporations other than financial institutions was eliminated in 2002.)
• A number of major personal income tax reductions have also been enacted in British Columbia, cutting income tax rates by a third with the result that as of January 1, 2010, British Columbia will have the lowest income tax rates in Canada for incomes up to $118,000.

Canada’s Tax Advantage

• Over the past eight years, the Federal government has reduced corporate tax rates in Canada by 30%. The most recent reduction was announced in 2007: the corporate tax rate is being reduced from 22.12% to 15% by 2012. The rate for 2010 is 18.0% and rates for the next years are being phased in on January 1:
  • 2011    16.5%
  • 2012    15.0%
• Other measures undertaken by Canada to improve the business environment:
• The corporate surtax was eliminated for all corporations January 1, 2008.
• The federal capital tax on large corporations was eliminated January 1, 2006.
• Eligible arm’s length interest payments are not be subject to domestic withholding tax as of January 1, 2008.
• Eligible corporations can report their income for Canadian tax purposes in a functional currency other than the Canadian dollar.

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