OTTAWA -- Canada has moved up three places to eighth in a global comparison of the most advantageous places to pay corporate taxes, placing the country in the top 10 for the first time.
The annual study by PwC, in conjunction with the World Bank and the International Finance Corp., shows Canada moving sharply up in a 185-country comparison.
Canada placed 28th as recently as 2010, but continuing reductions of the corporate rate both federally and provincially, as well as reduced red tape, has dramatically improved its standing.
The advance, from a business point of view, coincides with the federal government's efforts to brand a 25 per cent national corporate tax rate, harmonization of sales taxes in Ontario and improvement in the ease of filing taxes.
"As far as most countries are concerned, we're actually a pretty friendly jurisdiction," said Jason Safar, a partner with PwC's tax service in Toronto.
"Canada's current tax laws have attractive tax regimes, which impact all companies -- in particular small to medium-sized domestic companies."
The new study, which was issued early today, is not the only one to have judged Canada's corporate tax regime favourably from a business viewpoint.
Last year, Forbes magazine ranked Canada the best country in the world to do business, citing its dropping tax rate, sound banks, investor protection and relative lack of red tape.
The PwC comparison looks at three specific metrics -- tax rates, the average number of hours businesses devote to paying taxes each year and how many times a year they must file. The latter two relate to the ease of operating in the country, and PwC says it is more important than many believe.
"The economic analysis to compare the paying taxes indicators with gross domestic product and foreign direct investment suggests that while higher business taxation can be linked to slower economic growth and international investment, reducing the administrative burden and complexity of the tax system can potentially be linked to a greater change in overall growth," the report states.
"The implication is that minimizing the time and effort which businesses need to spend on complying with the tax system is equally important for governments when considering how best to stimulate and sustain economic growth."
Safar said the tax-ease indicator may simply be measuring the efficiency of a country's economy.
Africa and South America score poorly on the measures, while North America is near the top of the class.
PwC said it took an average 131 hours for a typical Canadian company to comply with its annual tax obligations, just over half the global average. As well, while a typical Canadian firm makes six payments a year, the world average is 27.
In the overall comparison, the United Arab Emigrates, Qatar and Saudi Arabia place in the top three. Ireland, at six, is the only other designated industrial country in the top 10. Among Canada's direct economic competitors, the United Kingdom scores the closest at number 16, followed by France at 53, the United States, 69, Germany 72, Japan, 127 and Italy, 131.
Canada's total average tax rate on medium-sized domestic companies is listed as 26.9 per cent, the U.K.'s at 35.5 per cent and the United States at 46.7 per cent.
Safar said the amount individual companies pay in specific jurisdictions may vary -- but in the real world most firms pay less taxes in Canada than comparable companies in the U.S. "And that's different from what it was in the 1990s. Canadian corporate rates used to be up in the low to mid-40s, now the top corporate rate is in the mid-20s," he said.
-- The Canadian Press