http://www.cbc.ca/money/story/2008/02/15/telus-4q.html
Tax cuts drive Telus profit higher
In the fourth quarter of 2007, Telus posted that they had a 66% profit increase due to tax adjustments made by the government. From that quarter their revenue increased from $2.25 billion to $2.33 billion, which was a $159.6 million increase in profit. Telus had a tax rate of 33.6%, but they only had to pay 15.6% due to favourable tax settlements and reassessments from previous years. Finance Minister Jim Flaherty had a five year plan to reduce corporate income taxes across Canada by $14.1 billion. The expected federal rate in 2008 is 19.5%, a 1% reduction, and by 2012, decreasing to only 15%.
Businesses such as Telus are heavily taxed, and as seen a slight percentage change will altar the profit greatly. With billions of dollars in revenue, a one percentage change could save up to at least $10 million. Through favourable tax settlements and reassessments earned from previous years they were able to avoid paying the full load of 33.6%. With the lower amount of money that the government receives, they will be able to spend less on certain aspects such as Medicare and education.
It makes me wonder that if Telus had a tax reduction; it would mean that the government is receiving less money to fund for projects around Canada. Also, shouldn’t private businesses such as Telus be taxed at a high rate such as 33.6% because they still make profits in the millions? Where is it that the government will receive the extra funds since it seems Canada isn’t fully developed across the nation and any funding would easily make a difference to the society? I think that the tax rate should remain the same instead of decreasing. Even then, the profits for Telus should be increasing since their revenue increases annually due to population increase.
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On the other hand, Telus and other such business provide thousands of jobs each year and tax breaks give incentives (as well as a sort of subsidy) towards increasing employment. That is probably one of main the rationales of the government for giving Telus favourable tax settlements and reassessments. Another rationale could be that corporations don't technically use all the services that are provided by the government and the taxation for corporations would be more on a benefits-received basis.
Although a decrease in the corporate income tax rate would decrease government revenue, the plan to reduce corporate income taxes may also be a longer term solution to the economic slowdown. By allowing corporations to keep more revenue they can then stimulate the economy by creating new jobs and further investment and help cushion us in the economic downturn in the world markets.
You have a valid point that our needs for government services continues to grow as our population both expands and ages and we depend on taxation income. However, the economic downturn seems to be more a pressing issue at the moment and I think that it would be wiser to stimulate the economy to alleviate the effects a possible recession brings.
I agree with Timothy. Taxes should either remain the same or even increase for businesses. Telus is making quite a substantial profit from its consumers already, so with tax cuts, they are only making more. If before the tax cut, the productivity was fine, after the tax cut, I’m unsure of what they could do to use the money to help support the economy more. However, for citizens, I find that they are overtaxed and perhaps they should have the decrease in tax. There are those that are struggling to make money for everyday expenses already. Also, if consumers have more money from tax cuts, they can spend it on goods and services to boost the spending within the economy. As Timothy said, population is constantly increasing. Telus should be fine on its own, with or without tax cuts.
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