The Republican standard-bearer said during a debate Tuesday with President Barack Obama that the U.S. can become more competitive and create jobs by lowering its general corporate tax rate from 35 per cent towards the 15 per cent level in Canada.
The actual combined Canadian and Quebec general corporate tax rate is 26.9 per cent, but it's just part of the overall burden companies face, the HEC Centre for Productivity and Prosperity's 2012 report said Wednesday.
In the end, Quebec companies pay 26 per cent more in overall taxes than the Canadian average and face almost double the tax burden of U.S. companies, it said.
Taxes represented 5.1 per cent of the gross output of Quebec businesses, compared with 4.1 per cent for Canada and 2.9 per cent for the United States, according to a Statistics Canada survey of 2008 data.
Ontario was the second least competitive province in terms of taxes at four per cent of gross output, followed by Alberta (3.9), B.C. (3.8), Nova Scotia (3.7), Manitoba (3.7), Newfoundland and Labrador (3.4), P.E.I. (3.1), Saskatchewan (3.0), and New Brunswick (2.6).
Payroll taxes were mainly responsible for the higher tax burden. They represented 1.1 per cent of the gross output or 22 per cent of taxes paid by Quebec business.
That compared with 0.4 per cent of output or 10 per cent of taxes paid in Canada as a whole and 12 per cent for Ontario. The United States and many Canadian provinces don't have payroll taxes.
The study said these taxes hurt employees and companies alike because they are applied whether the employer is generating profits or recording losses.
The study's author and centre director, Robert Gagne, said Quebec can boost its tax competitiveness on the continent by reducing payroll taxes by as much as $3 billion or $4 billion overall. The government could offset the revenue cut by reducing corporate subsidies by an equal amount, he added.
"This approach, this public policy of taxing heavily business firms and subsidizing them heavily is just not working from an economic point of view," he said in an interview.
"We have been doing that for decades and show me the beef. Where are the results. We are lagging behind in terms of investment, in terms of productivity, in terms of standard of living."
Gagne said small businesses need "air" in the form of lower taxes to thrive, yet the current system forces 95 per cent of companies to fund subsidies for just five per cent.
Although Quebec's taxes are higher than elsewhere in Canada and in the United States, they are lower than in several European countries. Quebec received $114 billion in total taxes in 2009, or 37.4 per cent of its GDP. That was higher than the 32 per cent recorded overall by Canada, but less than Denmark, Sweden, Norway and Finland, which surpassed 40 per cent.
Quebec companies faced a higher tax burden even after subtracting billions of dollars in government assistance. Net taxes paid represented 3.6 per cent of gross output, or about $17 billion. That's slightly higher than Ontario and Alberta and the Canadian average of 3.4 per cent.
The former Quebec Liberal government failed to live up to its promises to cut corporate welfare and Gagne doesn't see the Parti Quebecois doing any better.
"The results we are discussing now are the result of 25 years of bad public management," he said, adding that government shouldn't keep taxes high to fund its efforts to pick corporate winners.
Support should be limited to attracting corporations against competitive bidders, encouraging investment in R&D and promoting environmental stewardship.
Premier Pauline Marois said in Paris that her government would consider giving tax credits to firms investing in Quebec's Plan Nord — its program for developing the north — if they process the metals and minerals locally.
It's a model that was used to help Montreal become a multimedia and video game hub. But Gagne called the tax credits a form of subsidy.
"They think they know better than you and me what will be the next Apple in this province," he said.