Year after year, Canadian governments—federal, provincial and even municipal—feel it necessary to provide our tax dollars to giant corporations. You do not have to look far to find examples—big and small:

• Canada agrees to billions in incentives for EV battery plant.
• Canada spent more than $50 billion on corporate welfare across provinces in 2022.
• Ottawa is spending $1.7M for 10 new jobs at a pasta plant. Are such loans and government aid worth it?
• Are Canada’s green corporate subsidies a new race to the bottom or a path to the top?

According to a Fraser Institute article, “federal, provincial and local governments in Canada spent $352.1 billion (inflation-adjusted) subsidizing firms from 2007 to 2019—more than was spent on national defence over the same period.” Such unwarranted spending comes with huge costs to government budgets, and to us, the taxpayers. These subsidies, which the report notes “exclude other forms of government support such as loan guarantees, direct investment and regulatory privileges for particular firms or industries,” are not warranted and distort the usual functioning of the economy.

Consider the following:

1. Fundamentally, it is not the role of governments to pick winners by interfering in the free market. This ultimately distorts private decisions and mis-allocates resources. The same article notes: “When the government attempts to select winners and losers in the economy, it often makes the economy less efficient than if those decisions were left to individuals.” The CHP could not agree more as our economic policies favour smaller government. The article continues: “Indeed, the better option is to let Canadians make their own decisions about where to spend their money and subsequently determine what businesses will succeed.”
2. Providing a subsidy to one business or community causes others to ask for similar or equal treatment. This is often referred to as a subsidy war. [For example, Stellantis Gets $11 Billion From Canada, Surpassing Volkswagen's Subsidy.]
3. Every dollar spent on these payments is a dollar unavailable for tax cuts or other spending priorities.
4. A significant body of research indicates these subsidies don’t produce widespread economic growth or job creation. In fact, I believe they may actually hurt the economy. Subsidies depress economic activity in some parts in order to encourage it in others. “Yet research suggests the benefits of corporate welfare are, at best, fleeting and rarely successful in attracting high-skilled, high-paying jobs. Politicians may score points with voters when they cut the ribbon on a new plant, but many economists argue such incentives only serve to destroy competition, distort labour markets and inflict long-term damage on the economy.”
5. As these subsidies are often paid for through government debt, there are economic costs (like higher taxes and inflation), which ultimately discourage desired economic activity.
6. If a subsidy does entice a firm to relocate, such a business can just as easily be lured away by another jurisdiction anytime.
7. It makes no sense to build an economy around artificial stimulants as that may mean the firm isn’t a good fit for the region or community anyway.

A recent Fraser Institute study found that these “business subsidies come with significant costs to Canadian taxpayers and government budgets. To the extent that these subsidies do not have broad economic benefits, as the literature suggests, this is a key area for spending reform.”

This is not to say there is no role for governments in creating a positive economic environment. As the article says: “. . . instead of giving preferential treatment to select firms and industries, it should help foster a pro-growth environment that gives all businesses the opportunity to thrive by reducing business income tax rates.” The CHP policy on the National Sales Tax would go even further. Remove business taxes altogether! This is not some wild, off-the-wall policy either. In fact, the study “found that government spending on corporate welfare represents a significant share of business income tax revenues. For instance, Quebec and Manitoba spent roughly the same amount of money on business subsidies as they collected in business income tax revenues from 2007 to 2019. In other words, the provincial government could have effectively eliminated provincial business income taxes if it had ended provincial corporate welfare.” (Emphasis added)

CHP policy in this area is quite clear—subsidies of this kind are not the role of government. “[T]he primary function of government is not to provide grants, devise grant-related social programs to create temporary employment or assume the role of job creator and employer.” Eliminating corporate welfare and business income taxes would stimulate investment, job creation and economic growth. Those are the results a CHP government would endeavour to create.

As National Leader, Rod Taylor said: “…our many policies on economic and other issues are not as well known [as our social policies]. We believe they are also critical to the growth and stability of Canada, and in fact, that they are inextricably entwined with issues of morality and social values.”

You can learn more about CHP's policies at CHP.ca.