By Fraser Institute ——Bio and Archives--March 14, 2023
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VANCOUVER—The Ontario government spent $73.4 billion (inflation-adjusted) subsidizing businesses over a 13-year period, finds a new study released today by the Fraser Institute, an independent, non-partisan, Canadian public policy think-tank.
“These subsidies for businesses—also known as corporate welfare—come with huge costs to government budgets and taxpayers while doing little if anything to stimulate economic growth,” said Tegan Hill, economist at the Fraser Institute and co-author of The Cost of Business Subsides in Canada.
Federal, provincial, and local government spending on business subsidies totalled $352.1 billion (inflation-adjusted) from 2007 to 2019. For perspective, Canada spent $327.5 billion (inflation-adjusted) on national defence over the period, $24.6 billion less than was spent on business subsidies. Such spending came with significant costs to Canadian taxpayers and government budgets. Given ongoing budget deficits, and the questionable efficacy of business subsidies in achieving widespread economic growth, Canadian governments should carefully re-evaluate this area of spending.
(In the study, business subsides include unrequited government transfers to businesses but exclude other forms of government support such as loan guarantees and direct investment.)
More specifically, Ontario government spending on business subsidies (excluding federal and local subsidies) increased (after adjusting for inflation) from $1.5 billion in 2007 to $11.8 billion in 2019 (the latest year of available pre-COVID data).
Or, on a per-tax filer basis, from $171 to $1,138—an increase of $967 over the 13-year period.
“Rather than give preferential treatment to certain companies and industries, Queen’s Park should reduce business taxes and help foster a pro-economic growth environment that gives all businesses the opportunity and incentives to succeed,” Hill said.
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The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 86 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute’s independence, it does not accept grants from governments or contracts for research. Visit fraserinstitute.org.
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