Business showing limited concern over NDP's proposed corporate tax.

Business showing limited concern over NDP's proposed corporate tax

While the corporate community is still in the dark concerning the NDP government's proposed minimum corporate tax, some spokesman indicate that concern is not widespread.

The NDP proposed during the election to levy a minimum corporate tax which would, it estimated, add approximately $1 billion in government revenue.

The tax, coupled with other proposals such as increasing the minimum wage, had some people speculating that the new government may end up at odds with the business community.

But a representative of Inco Ltd. said that it is still too early to tell exactly whom the tax will affect and to what degree.

Vince Alicandri, Inco's director of Canadian tax, said last month that the NDP had not explained how the tax would be calculated.

"All the NDP has said is that it wants a minimum corporate tax."

Alicandri noted that Ontario corporations already pay the "Tax on Large Corporations." This federal tax came into effect on July 1 and is paid by corporations conducting business in Canada which have taxable Canadian capital exceeding $10 million.

Patrick Reid, president of the Ontario Mining Association, said the 45 member companies of his association have not shown any concern over the proposed provincial tax.

"Companies that are already paying taxes won't be affected by the minimum tax," he said.

Reid speculated that the mining industry will not be greatly affected by the tax. He does not believe the tax was designed to generate much revenue.

Linda Ganong, director of provincial affairs in Ontario for the Canadian Federation of Independent Business, agrees with Reid that the tax will not have much of an impact.

"I don't expect the tax to cut a huge swatch across business," she said.

Ganong said the business community must "wait and see" how the new government will apply its policies.

The corporate tax proposal is contained in the NDP's 10-page pre-election policy document entitled An Agenda for the People.

According to Sheila Block, an NDP researcher and economist, there has been much confusion concerning the rate of the tax.

She explained that the actual rate charged to a company will depend on which business sector the company falls within.

The rates charged will equal half the statutory rates presently levied against corporate taxpayers. Small businesses are taxed at a statutory rate of 10 per cent, resource-based industries at 14.5 per cent and corporations outside the resource sector at 15.5 per cent.

According to the NDP, Statistics Canada indicates that 93,000 Canadian companies paid no income tax on profits of $27 billion during 1987.

Block stated that "one must realize that the tax will not be a simple thing to implement but, judging from other jurisdictions (such as the United States), it can be accomplished."

She added that the New Democrats have four and half years to accomplish the task.

According to Dave Perry, senior research associate with the Canadian Tax Foundation, companies have traditionally been able to avoid paying taxes in one of three ways.

He said a company may escape paying tax by bringing forward past losses to be subtracted from current income.

A holding company may avoid paying if it receives after-tax dividends from an operating company because, according to Perry, "the income tax system endeavors to avoid the imposition of a double-edged tax."

Or, a company may take advantage of tax breaks created to encourage such things as research and development or mineral exploration.

"There are all sorts of companies that don't pay," admitted Perry. "There are also a lot of companies that have struggled for years to get into the black."