The federal Liberal government’s plan to reduce corporate taxes by 2010 would stimulate $56 billion in capital investments by Canadian businesses, says a new C.D. Howe Institute e-brief.

The Institute’s George Weston Tax Analyst Duanjie Chen and President and CEO Jack Mintz, Deloitte & Touche LLP Professor of Taxation at the Joseph L. Rotman School of Management, University of Toronto, wrote the e-brief, entitled “Federal Corporate Tax Cuts Would Lift Canada’s Standard of Living”.

In the report Chen and Mintz note that “Provisions in the 2005/2006 federal budget to cut corporate taxes by 2010, along with further reductions set out in earlier budgets, will stimulate $56 billion in capital investments by Canadian businesses. Those investments will boost Canada’s gross domestic product by $5 billion annually and create 340,000 jobs at little fiscal cost to Canadian governments.”

They argue that “the reduction in corporate income tax rates will help reduce the incentive for companies to shift income to low tax-rate jurisdictions from Canada.”

“By helping reverse income-shifting, the federal corporate tax cuts will cause little overall loss of revenue,” they say.

The authors say that providing further corporate tax cuts, is the right approach to improving Canada’s investment climate.

“With significant economic benefits that pay for themselves, corporate tax rate cuts are a slam-dunk in publicpolicy terms,” the authors conclude.