Quebec has highest personal, business tax burden

Growth and wealth creation are not at the forefront of provincial tax system design.

May 2, 2016   by PLANT STAFF

Provincial tax burden on businesses  Image: Conference Board of Canada

Provincial tax burden on businesses
Image: Conference Board of Canada

OTTAWA — Taxation systems in Canada’s provinces may be working against stronger economic growth and wealth creation, according to a report by the Conference Board of Canada.

Benchmarking Provincial Tax Burdens assessed and compared the tax attractiveness of each province based on tax burden ratios for businesses (2011 data) and households (2012). It found in both cases Quebec has the highest tax burden among the provinces.

On the business side, Saskatchewan, New Brunswick, Alberta, and Newfoundland and Labrador have the lowest net tax burden ratios. Alberta, Saskatchewan, BC and Manitoba have the lowest personal tax burden ratios.

The report, from the Conference Board’s Centre for Tax Analysis, Fiscal Incentives and Competitiveness, says the rankings on business taxation are greatly affected by payroll and sales taxes. Each of the four provinces with payroll taxes – Quebec, Ontario, Newfoundland and Labrador and Manitoba – slip significantly when these levies are included in the analysis.


Businesses in provinces with conventional retail sales taxes – Manitoba, Saskatchewan, and PEI (in 2011) – face higher average sales tax burdens than those in provinces with value-added taxes, such as a harmonized federal-province sales tax. Since 2011, PEI has adopted a harmonized sales tax; meanwhile, BC repealed its harmonized value-added sales tax to return to a retail sales tax.

The downside of the retail sales tax is Conference Board is that can be applied to product inputs many times before the final sale, which raises business costs and discourages business investment. Businesses only pay value-added sales taxes once.

Ontario has the second highest provincial net tax burden on businesses among the provinces.

The province, where manufacturing is prevalent, has a comparatively high provincial corporate income tax burden as a share of gross output in the business sector. The report notes social security contributions, payroll taxes and sales taxes add to the burden compared to businesses in other in other provinces. Only Quebec had a higher provincial net business tax burden than Ontario in 2011.

Ontario has the fifth-lowest overall provincial personal tax burden among the provinces, behind the four western provinces.

“Ontario’s overall ranking is based on a relatively modest provincial personal income tax burden for tax payers earning less than $100,000, but a relatively high burden on those making more than that,” said Julie Adès, senior economist.

The analysis looked at tax rates in five ranges—$0 to $29,000; $30,000 to $49,999; $50,000 to $69,999; $70,000 to $99,999; and $100,000 or more. Comparing tax to income, Ontario has the third-lowest ratio in three of four lower income ranges (and fourth-lowest in the lowest income range). In the highest-income range, Ontario has the fifth-highest ratio.

The analysis does not take into account changes to taxation in the province since 2012. For instance, Ontario introduced a new tax rate of 12.16% in 2014 for those earning between $150,000 and $220,000.

Click here to access the report.

Print this page

Related Stories