VANCOUVER, BC-Canadians provided business with $19 billion
in subsidies in 2004, the equivalent of $1,295 from each
Canadian taxpayer, according to a new report released today by
independent research organization The Fraser Institute.
The 2004 figure was almost double the $10.3 billion
governments doled out in business subsidies in 1995.
Taxpayer-funded subsidies to business totalled almost $144
billion between 1995 and 2004 (the most recent year for which
data is available), the equivalent of $11,030 per tax payer
(all figures adjusted for inflation to 2007 dollars).
"There is no concrete evidence showing that government
subsidies to business provide any net benefit to Canada's
economy. Instead, these subsidies merely encourage the transfer
of wealth from one set of taxpayers to another, often from
small businesses to large businesses, and from taxpayers in
general to special interests," said Mark Milke, author of the
Corporate Welfare: A $144 Billion Addiction.
"Canada's business community needs to dump corporate welfare
in favour of corporate tax cuts."
Milke's report looks at the amount of money Canadian
governments of all levels spent on corporate welfare over a
10-year period. It provides repayment records by year with
respect to specific programs or agencies involved in corporate
welfare. It notes the cash-in-hand position of companies or
parent companies that have received corporate welfare as well
as offering an opportunity cost calculation for such
"Governments justify the subsidies by claiming they help
start-up companies. But many of the companies receiving the
largest subsidies are anything but start ups," Milke said.
The report lists the top 50 business subsidy recipients,
which include the Ford Motor Company, Rolls-Royce, Noranda,
IBM, General Dynamics, Pratt & Whitney, Lockheed Martin,
Milke points out that one of the main problems with
corporate welfare is the lost opportunity to use the money for
other purposes such as tax relief.
"If the federal government ended corporate welfare in 2004,
the government could have reduced the federal corporate income
tax rate to 14.6 per cent from 21 per cent. In other words,
eliminating federal corporate subsidies could have resulted in
a 30.5 per cent reduction in the federal corporate income tax
Milke finds that although there is virtually no economic
evidence supporting the use of business subsidies, governments
historically pursue corporate welfare policies because they
want to be seen to be "doing something" for their
"By subsidizing or bailing out failing businesses,
politicians can tell voters they are saving jobs, or they can
appeal to voters with interests in specific industries," Milke
said. "At the same time, civil servants rarely oppose corporate
welfare policies, often because these policies provide them
with additional status or budgets."
In the end, he makes four recommendations for dealing with
1. Wind down and end business assistance programs.
2. Require companies to repay already allocated
subsidies as per the terms of their contracts and
3. Continue to support international efforts to end
subsidies, including bilateral and multilateral agreements, as
well as efforts to strengthen existing country-to-country
treaties and to initiate new ones.
4. Use the money that would have been spent on business
subsidies for business tax reductions.
"With $144 billion spent between 1995 and 2004 and $19
billion allocated in 2004 alone, corporate welfare to business
is hurting Canadian taxpayers. Governments need to end these
hand outs," Milke said.
"This money could be put to much better use by providing
Canadian taxpayers with broad-based tax relief. Not only will
this put more money in Canadians' pockets, research shows it
will be much more successful in stimulating investment and