The differences that lie between what Corporations pay for tax compared to what other types of Canada tax payers are hit with, is really becoming a source of contention for many. Some are of the mind that it sets the scene for the “rich get richer and the poor get poorer”.
It is true that when you look at the whole tax picture that large businesses do seem to get a lot better of a rate when it comes to their tax calculation and the government has an answer for this. Their main reason according to them, is so they can stimulate foreign investment which in turn is supposed to stimulate the economy
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Many times when you first here the governments explanation as to while they implement certain regulations for tax it sounds like it may be a good plan, then somewhere along the way it seems to divert from its intended purpose. In order to determine whether these business tax breaks are reaching their objectives one would have to keep a close eye on the foreign investment as well as how it relates to the Canadian economy. Many would say that the economy in its present state is not all that impressive.
It is important however that expenses do be kept down for businesses provided they are going to use any potential tax savings for the good of all. If it just means that they have a lot more left in their Company to pay out dividends to themselves at the end of the year, then the success of this type of tax program is restricted. However, if the situation is where some excess business funds can be put back into the growth of the Company and stimulate more jobs then the tax savings have served a good purpose.
Many businesses who are taking the brunt of the criticism of the lower taxes respond by saying they are faced with many other types of payments that end up being utilized for government spending. To some this is a weak argument because the same applies to the average tax payer who also has the GST/HST costs as well as property costs as well as others.
If you are deciding to take your small proprietorship business to the next level by incorporating it, then be sure you make your decision based on all financial factors and not just the lower tax rate. You may want to use a quality Toronto tax accountant that can guide you with some of your decision making as well as your tax preparation at any business level.
