The Tax Foundation released its 2014 International Tax Competitiveness Index (ITCI) of 34 OECD countries and Canada’s overall rank was 24 out of 34 countries. Despite our recent snagging of Burger King, we are apparently in the bottom third of OECD countries when it comes to tax competitiveness. Interestingly enough, the United States did even worse than us coming in 32nd place – ahead of Portugal and France. However, despite our low overall ranking, we were in the top third when it came to consumption taxes where we ranked 10th out of 34 (in this category the United States ranked 4th). This was our best performance.
So it is worth examining how we did in some of the sub-categories used to construct the consumption tax ranking. Figure 1 shows that the Canadian consumption tax rate (calculated as the federal rate plus the average of the provincial rates) was the 8th lowest of the 34 OECD countries. Figure 2 shows the complexity of a country’s consumption tax system as measured by the number of hours a year a business needs to comply with the tax. Here, Canada is about in the middle - in 16th place.
Figure 3 is a measure of the broadness of the consumption tax base – the consumption tax base as a percent of total consumption with broader bases meaning fewer exemptions and a better tax. Here Canada is in 20th place, getting close to being in the bottom third.
Overall, Canada could probably move up the consumption tax rankings by broadening its base, lowering its rate and reducing the complexity of compliance.
In terms of the other taxes, Canada was 19th in the corporate tax ranking (the USA was 33rd by the way), 23rd in property taxes (the United States was 31st), and 24th in individual taxes (both income and payroll-the United States was 26th). Canada is not a top performer when it comes to tax competitiveness in the OECD but then our economic history shows that our primary concern is not having our tax system and rates too out of whack with the adjacent United States. It turns out we seem to be meeting this objective.