Business Subsidies

Taxpayer subsidies to business are always well-intentioned efforts to foster job creation and economic growth, often in particular regions or sectors. As a general principle, however, subsidies are less efficient than measures of equivalent cost delivered broadly through the tax system. Subsidies have been reduced considerably over the past decade. In principle, those that remain should be abolished provided that the resulting savings are used to reduce the corporate tax burden.

• The record of industrial policy based on corporate handouts and attempts to "pick winners" is clear. Subsidies, directly through cash grants or loans and indirectly through procurement preferences and the Employment Insurance system, have had at best temporary impacts on employment, but have led to higher taxes and a less dynamic and less competitive business environment.
• The only case in which business subsidies may still be justified, temporarily, is as a direct response to subsidies offered to the global competitors of Canadian-based firms by other governments. Canada should work vigorously to support multilateral trade rules that will reduce and eventually eliminate export subsidies globally, including those affecting trade in agriculture, resources, manufacturing and services.