Canada's Lower Corporate Tax Rate Raises More Tax Revenue

Canada is apparently becoming an attractive place to do business. This week Burger King announced plans to move its headquarters to Canada, via a merger with Tim Hortons. Other U.S. companies that have recently moved or announced plans to move to Canada include Bausch and Lomb, Allergan, and Auxilium. A Bloomberg analysis indicates Tim Hortons was once a U.S. company, until it inverted to Canada in 2009.

Part of the attraction is the substantial tax reforms that occurred over the last 15 years in Canada. First among these is the dramatic reduction in the corporate tax rate, from 43 percent in 2000 to 26 percent today. The U.S. currently has a corporate tax rate of 39 percent, but lawmakers are reluctant to do what Canada did, i.e. lower the tax rate, for fear of losing tax revenue.

The natural question is: How much tax revenue did Canada lose?

Answer: None.

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