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Productivity, Prosperity, and Business Taxes

Type: Research Studies
Date Published: January 12, 2006
Authors:
Research Topics:
Taxation
Productivity growth in Canada is falling behind that of other industrialized nations and our relative standard of living is also falling as a result. Worse still, the policies enacted to increase productivity over the last number of years have been misguided or have simply not gone far enough. The purpose of this study is to highlight the impending productivity crisis in Canada and to offer recommendations that will place Canada on the path to greater productivity.

The first section of this paper shows the importance of productivity growth with particular emphasis on improving Canada's standard of living. Canada's productivity is reviewed in both a North American and a broader international context. The first section concludes with a discussion of the main determinants of productivity and prosperity.

Section 2 examines the impact that business taxes have on capital formation and gives a review of independent research into the impact of business taxes on capital formation and the effects of taxes on business activity, business location, and foreign direct investment. Finally, this section summarizes studies investigating the economic costs of different types of taxes.

Section 3 discusses the international competitiveness of Canada's business tax system. Section 4 presents a proposal for reducing business taxes that is aimed at improving productivity growth by altering the incentives for investment in Canada.
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