In this essay, I will choose Marina Jimenez’s “Domestic Crises” as the foundation from which to form an argument about the need for taxation reform in Canada. As we can see in this text, the St. Lucian girl, Joyelle, is an illegal immigrant who is working as a nanny for a Canadian family who lives in Toronto. Jimenez discusses why families such as these choose to hire illegal immigrants, and this is usually because they are much cheaper than people who are from Canada. These families are unable to afford a person who is able to work in Canada legally because legal workers often find employment elsewhere and aren’t available for hire at a low price. Furthermore, as Jimenez points out, the taxes and insurance associated with the costs of hiring domestics is too much for some families to bear. In this essay, I will focus on the tax aspect on the “Domestic Crises.” In order to address this issue, the Canadian government should consider lowering the income tax of employment and raising the taxes for corporations. This topic is interesting to me because I have experienced taxation both as an employee and as a business owner, where I am paying tax on my net income at about 17 per cent. The essay will deal with taxation and how it is applied to personal income tax and on corporate taxes in Canada. The money that people save on their income taxes can be used to help stimulate the economy through hiring Canadian workers. Also, by hiring local workers, there will be fewer immigrants coming to Canada in the hopes of finding work.
Currently, the average business only pays about 15 per cent tax on their net income, according to the Canada Revenue Agency. That number is decreasing every year. In 2009, the rate was 19 per cent, then 18 per cent in 2010, before falling to 16.5 per cent in 2011 and then 15 per cent in 2012. The provincial tax rate in B.C. is even lower, at 10 per cent and that is tied for the lowest in Canada, along with New Brunswick, (Corporation Tax Rates, 2012). In Toronto, where the family in “Domestic Crises” has hired Joyelle, the provincial rate is 11.5 per cent.
Canada once had the highest corporate taxes out of all the G8 countries. But in only five years, that number has changed to the lowest in the G8, (KPMG, 2006). The overall corporate tax of 28.8 per cent is much lower than the United States’ 44.8 per cent. “Under the Harper government, tax rates have slowly decreased. The Tories have said that corporate tax rates will be reduced to 15 per cent by 2012, a policy position parties have challenged,” (Canada’s, 2012). The taxes were at 28 per cent about 10 years ago. Both the Liberal and the Conservative governments have been responsible for the excessive cuts, (Bittker, 2012).
The majority of Canadians are opposed to the low corporate taxes, according to Ottawa-based research from Abacus Data. The research found that the vast majority of Canadians weren’t aware of the taxes corporations pay in Canada, compared to those paid in other countries. When they were told, the people doing the survey were surprised and said they don’t approve of Canada having such low corporate tax rates compared to other countries. “In total, 52 per cent strongly or somewhat oppose the government’s plan, while 26 per cent support or strongly support it,” (Canadians, 2011).
The Harper government has said that the lower taxes for businesses make Canada a more attractive nation for those who want to open businesses here. This business investment helps to build jobs and it helps improve an economy that, like the rest of the world, has been relatively stagnant, (Canada’s, 2012). But I argue that these tax benefits are only helping those in Canada who are wealthy. Many businesses that open here are already established and they are able to open because the business owners have a lot of money. “Only 21 per cent of respondents buy the job creation argument when given the alternative to spend more on health care or to reduce the deficit,” (Canadians, 2011).
Spending money on health care and reducing the deficit are worthy causes, but that money could instead go to decreasing the burden on the regular income taxpayer. Once the taxpayer is able to save money, they will be better equipped to pay regular fees for hiring a nanny, for example. A significant amount of money could be saved by each person every year if instead of giving tax breaks to corporations, the general public is given tax breaks.
The Conservative government argues that jobs will be created by providing tax cuts to corporations. However, the money that people are saving will allow them to employ Canadians instead of immigrants, when they need to pay for health care. Many people rely very heavily on the assistance of others to get them through their everyday lives. It is not as though they can simply do these errands themselves, they need the help of others that can do these jobs for them. This need, and the inability to hire Canadians, has caused the demand for foreign workers. And these foreign workers know that there are Canadians willing to hire them if they come to Canada. “People come here and they know it’s risky, but they also know there is demand for them. And back home, it’s hard to get a job. The key is to get a good family,” (Jimenez).
The argument that the corporate tax cuts will create jobs is also in contrast to what has happened as a result of the cuts. There is no clear connection between any increase in the number of jobs and with the tax cuts. When criticized, those who support the drop in taxes say there isn’t a tangible way to measure whether the cuts have been effective, (Viera, 2001). Well, I don’t know if I’ve heard a bigger copout. The claim on Parliament Hill during election debates in 2011 was that there would be long-term job gains of around 100,000 and an increase in business investment of about $30 billion. However, no facts have been given that indicate such an increase. Even if the $30 billion is realized, that is money coming in at the expense of income tax payers, (Brooks, 2005).
Supporters of the tax cuts will also argue that the money that is saved by the companies is not only going towards hiring workers, but also to improving equipment and increasing productivity. But this productivity isn’t doing much for the vast majority of Canadians who haven’t seen any benefits. Possible effects of the reduced corporate tax rate such as the increased production and improved equipment does not benefit many people in Canada like increased jobs would – but, as mentioned, there has been no evidence of any increase in jobs. And, any increase in employment wouldn’t necessarily depend on a decrease in corporate taxes because a decrease in personal taxes could have the same outcome due to the ability of people to afford to buy Canadian workers: “The truth is, we couldn’t afford to pay a Canadian live-out nanny … They had degrees in early childhood education and wanted as much as $32,000 a year. I’m not saying they don’t deserve it, but we just couldn’t do it on our salaries. We were lucky to find Joyelle,” (Jimenez).
When corporate taxes were first lowered from 29.12 per cent in 2000 to 22.12 per cent by 2005, there was no documented increase in the number of businesses opening in Canada. The stats further speak against the new corporate tax structure given the dismal 0.7 per cent a year increase in productivity at Canadian corporations, and this is much lower than what was recorded by other industrialized countries, (Markle, 2009).
In order to address the number of illegal immigrants in Canada, the Conservative government needs to make Canada less attractive to them. Currently, people in other countries know there is a demand for nannies to work here. And, as we have seen in “Domestic Crises,” this is because there is a demand for foreign workers who are willing to do the job for little pay. In order to make Canada less attractive, the government needs to lower personal taxes so that Canadians can afford to hire other Canadians. The most logical way to lower the personal taxes is to increase the corporate taxes, which have been nearly cut in half over about one decade. The original intention of the government to increase the number of jobs by lowering the corporate taxes, has not come to fruition, and so the government should begin phasing the regular rates for corporate taxes back in, while decreasing the taxes that are charged to the personal income tax payers.
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