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Cost of Doing Business
The Canadian Advantage | Ontario’s Competitive Income Tax Rates | Ontario’s Competitive Payroll Tax Rates | Employer Paid Benefits |
R&D Tax Credits Supporting Innovation | Toronto Region’s Low Business Costs
The Canadian Advantage
Canada is the second least costly place to do business according to the KPMG 2010 Competitive Alternatives Study.
The study compares business costs in 10 select industrial countries.
The business costs covered in the study are:
- Land/building/office costs
- Labor wage/salary/benefits costs
- Transportation and distribution costs
- Utility costs
- Financing costs
- Depreciation Charges
- Financing Costs (Interest)
- Taxes Other Than Income (Capital, Property, Sales, Land Transfer)
- Federal/state/local taxes
Canada is Ranked 2nd for the overall cost of doing business.
Overall Cost of Doing Business in Select Countries
Source: KPMG: Competitive Alternatives, 2010 (US set as basline score of 100.00; lower is better)
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Ontario’s Competitive Income Tax Rates
Ontario’s tax rates are highly competitive: corporate tax rate is 6.1% lower than the U.S. average.
Manufacturing and Processing Corporate Tax Rates for Selected U.S. States and Ontario, 2010
Source: Ministry of Finance 2010
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Ontario’s Competitive Payroll Tax Rates
| Ontario and Federal Tax Rates, 2010 * |
| $25,000 | $3,003 | $21,997 | 12.01% | 20.05% | 10.03% | 0.00% | 2.77% |
| $45,000 | $7,619 | $37,381 | 16.93% | 31.15% | 15.58% | 9.76% | 16.64% |
| $65,000 | $13,849 | $51,151 | 21.31% | 31.15% | 15.58% | 9.76% | 16.64% |
| $85,000 | $21,143 | $63,857 | 24.87% | 43.41% | 21.70% | 22.25% | 28.82% |
| $105,000 | $29,825 | $75,175 | 28.40% | 43.41% | 21.70% | 22.25% | 28.82% |
| $125,000 | $38,507 | $86,493 | 30.81% | 43.41% | 21.70% | 22.25% | 28.82% |
Source: Ernst & Young, 2010 Personal Tax Calculator (5/2010); InvestOntario, 2010
Employer Paid Benefits
Overview of Employer Benefit Costs
| A Guide to Employer Benefit Costs |
| Canada Pension Plan (CPP) |
* to maximum premium of Cdn$2,163.15/year (2010)
|
4.95% |
| Employment Insurance Commission |
* to maximum premium of Cdn$1046.30**/year (2010)
** Unless a reduced premium rate applies
|
2.42%** |
| Workplace Safety and Insurance Board |
| * Varies (depends on industry and # of employees) |
| Rate for Motor Vehicle Assembly Operations (2010) |
3.03% |
| Rate for Electric Power Generation (2010) |
0.76% |
Rate for Pharmaceuticals & Medicines (2010)
|
0.80% |
Employer's Health Tax (EHT)
Applied to eligible payroll over Cdn$400,000
|
1.95% |
Vacation
|
4.00% |
Paid Public Holidays
|
3.60% |
Pension Contribution
|
N/A |
| Group Insurance |
* Life, Health, Sickness, Dental, Vision, Physical/Mental Fitness
|
N/A |
| TOTAL |
19.95% |
|
Source: Canada Revenue Agency; Workplace Safety and Insurance Board; Employment Standards Branch, Ministry of Labour; Ministry of Finance; Statistics Canada; 2010
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R&D Tax Credits Supporting Innovation
The GTA benefits from Canada’s substantial R&D investment – the most generous among G7 countries. (Source: KPMG Competitive Alternatives G7-2004 Edition).
For instance, in Canada, refundable R&D tax credits can result in “negative” income tax (net government subsidies) for R&D operations.
For more information on R&D funds and tax credits, go to Government support programs.
| Real After Tax Cost of a $100 R&D Expenditure - 2009 Taxation Year |
| Gross expenditure |
$100.00 |
$100.00 |
| Ontario - 20% OBRI tax credit 2 |
|
($20.00) |
| Ontario – 4.5% ORDTC 3 |
($4.50) |
($3.60) |
| Federal investment tax credit - 20% |
($19.10) |
($15.28) |
| Tax deduction 4 |
| $76.40 x 31.0% |
($23.68) |
|
| $61.12 x 31.0% |
|
($18.95) |
| After-tax cost of $100 expenditures |
$52.72 |
$42.17 |
Source: Reviewed by Canada Revenue Agency — Ontario Region; Ministry of Finance, May/June 2008 (9/2008)
NOTES:
| 1 |
Eligible Ontario research institutes include universities, colleges of applied arts and technology, research hospitals and other entities in Ontario. |
| 2 |
The 20% refundable Ontario Business-Research Institute Tax Credit (OBRITC). |
| 3 |
The 4.5% Ontario Research and Development Tax Credit. |
| 4 |
2009 tax rates for large manufacturers: Federal 19.0% plus Ontario 12.0% = Total 31.0%. |
Compared to the United States, a much broader range of costs qualify for R&D tax credits:
| Wages and Salaries |
√ |
√ |
| Capital Equipment |
√ |
|
| Materials |
√ |
√ |
| Overhead |
√ |
|
| Consulting Fees |
√ |
65% to 75% |
Source: Ontario Investment Service / Ontario Ministry of Economic Development and Trade.
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Toronto Region’s Low Costs
Overall business costs for manufacturing, R&D, and software operations are lower in Toronto than in comparable U.S. jurisdictions.
| Cost Index - Toronto vs Select US and International Cities |
| Toronto |
95.8 |
| Atlanta |
96.3 |
| Miami |
97 |
| Houston |
97.9 |
| Philadelphia |
98.3 |
| Detroit |
98.5 |
| Paris |
100.1 |
| Los Angeles |
101.4 |
| Berlin |
101.6 |
| London |
101.7 |
Source: KPMG Competitive Alternatives 2010
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| |
Mandatory Paid by Employer |
| Canada Pension Plan (CPP) |
| * to maximum premium of Cdn$2,163.15/year (2010) |
4.95% |
| Employment Insurance Commission |
| * to maximum premium of Cdn$1046.30**/year (2010) |
2.42%** |
| ** Unless a reduced premium rate applies |
| |
| Workplace Safety and Insurance Board |
| * Varies (depends on industry and # of employees) |
|
|
| Rate for Motor Vehicle Assembly Operations (2010) |
3.03% |
| Rate for Electric Power Generation (2010) |
0.76% |
| Rate for Pharmaceuticals & Medicines (2010) |
0.80% |
| Employer's Health Tax (EHT) Applied to eligible payroll over Cdn$400,000 |
1.95% |
| Vacation |
(2 weeks) |
4.00% |
| Paid Public Holidays |
(9 days) |
3.60% |
| Pension Contribution |
|
N/A |
| Group Insurance |
| * Life, Health, Sickness, Dental, Vision, Physical/Mental Fitness |
N/A |
| TOTAL |
19.95% |
|
