In today’s day and age of hyper-competitiveness between jurisdictions, private companies are wielding more and more power.
Federal governments are constantly playing a game of chicken with one another to cater to international conglomerates to secure the lifeblood of any politician – jobs.
We see it with Donald Trump saying he wants to slash the corporate tax rate from 35 per cent to 20 per cent in order to increase U.S. competitiveness when it comes to attracting companies.
This comes on the heels of a tax bill that will see the super-rich receive tax breaks for things like private jets.
Currently, corporations in Canada pay a net tax rate of 15 per cent after tax abatements and reductions.
The federal government justifies a low corporate tax rate as the only way to attract businesses to the country. As a result, we see a race to the bottom when it comes to different countries lowering their tax base to woo foreign companies.
This is the result of decades of legislation that has knocked down economic barriers between nations in the form of free trade agreements and the like.
We’re often told that if we raise the tax rate, these companies will relocate to a cheaper jurisdiction and take their precious, precious jobs with them.
It seems these private businesses have our governments over a barrel.
Look no further than the plethora of municipalities willing to give all kinds of perks and benefits to Amazon in order to convince the company to locate its second headquarters in their jurisdiction.
Even Ottawa got in on the sweepstakes by putting together a sales pitch for the Amazon head honchos. The city created a marketing video that showed off the potential development options for Lebreton Flats and suggested Amazon would fit perfectly.
But Ottawa is in a tough spot as it is just one of 237 North American cities scrambling to entice Amazon to come to their city.
In fact, Chicago recently pitched the idea that Amazon can keep the estimated $1.32 billion of the personal income taxes paid by its workers annually. Workers will be paying their employer a tax to work there so that politicians can point to all the jobs that were created.
Who needs roads and schools when you can pay taxes to your employer just for giving you a job – which employers clearly benefit from otherwise they wouldn’t have hired employees.
These companies aren’t going around with their magic employment wands altruistically giving out jobs to the less fortunate. They are private companies who are out to make a profit. They need employees to do the work.
You would think Amazon would pick their location based on the skills of the workforce, but not having to pay taxes is one heck of a selling point.
Even right here in the Pontiac we see the power of coercion when it comes to private companies.
Last year, the Municipality of Pontiac paid $99,000 for its snow removal contract for roads and sidewalks in Quyon.
This year’s bids came in at $388,040 and $275,940 respectively.
According to Municipality of Pontiac Director of Communications Dominic Labrie, the two companies weren’t happy that the municipality doled out $12,000 in fines last year to snow removal companies for not meeting the specifications of the snow removal contract.
In the meantime, the municipality now has to rent a truck and a public works employee will be responsible for snow plowing until a third contract is tendered.
What can be done to combat this? It’s a good question, and there are no clear answers.
But something needs to be done, and soon. This has been going on for decades and only seems to be accelerating.
It may be that the cat is already out of the bag, but that shouldn’t stop us from trying to reign in some of the power wielded by private companies and giving it back to our governments.
Chris Lowrey
