Don’t Tax Success by Forcing Big Employers to Pay More

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The government’s role should not be to create jobs, but to create the economic conditions in which companies can create a growing number of stable, secure, well-paying jobs for Canadians. The more workers a Canadian company employs, the more they contribute to the Canadian economy as a whole.

So why do some politicians claim to stand up for Canadian workers while at the same time condemning the Canadian companies that employ the most workers? How can these elected officials from across the political spectrum balance their veneration of workers and denigration of the companies they work for?

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According to Statistics Canada, large businesses in Canada – including companies with 500 or more workers – employed 4.4 million Canadians in 2022, or 36 per cent of the private sector workforce. However, these numbers do not give a complete picture of our largest employer. Canada’s largest companies each employ tens of thousands of Canadian workers, with some employing more than 100,000 workers nationwide.

Even this underestimates the true number of workers whose jobs are supported by Canada’s largest employers, as it does not take into account the millions who work for the small and medium-sized businesses that are part of their integrated value and supply chains.

And let’s not forget how many more people big companies continue to hire. Some of the country’s largest employers plan to hire hundreds, if not thousands, of new workers here in Canada this year alone.

Canada’s largest employers include companies operating in sectors as diverse as consumer retail, transportation, manufacturing, civil engineering, banking, financial services, telecommunications, natural resources and energy. In each of these sectors there are several large employers who actively compete with each other at home and abroad.

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Are there enough of them? Let’s start by recognizing that there is no global free-market consensus that dictates the exact number of banks, grocery chains, airlines or telecommunications companies that a country of 41 million people should have. In a capitalist economy the number will be as large as the market can bear.

Here in Canada, there are no restrictions on the number of large companies that can be funded by Canadian investors and exist in most sectors. When a business case exists, such as when a particular market segment is underserved, entrepreneurs can create new competitors and expand or develop disruptive technologies to upend the status quo.

Although not every small to medium-sized business aspires to become one of Canada’s largest employers, virtually all of Canada’s largest employers started out as small businesses. We should encourage smaller companies to think big and develop into internationally competitive companies. Instead, political rhetoric suppresses ambition, innovation and competition through size discrimination.

With the right economic conditions, including globally competitive tax and regulatory systems, the Canadian market could grow and accommodate an ever-increasing number of large, domestic companies that can compete openly and fairly across the country and around the world.

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Unfortunately, Canada’s current economic policies do not conform to free market principles. Instead of stimulating the economy, federal government decisions are downsizing Canadian companies through a combination of higher taxes, burdensome red tape and capricious changes to the country’s competition laws.

This “big is bad” policy discourages more business investment than it attracts. Private sector employers around the world will not invest in or remain in markets where the national government actively intervenes to limit profits or reduce their market share.

Furthermore, they will not remain or invest in markets where governments invent and impose new taxes on top of existing taxes – including so-called “excess profits” surcharges. This is not free enterprise; It is the government that imposes an arbitrary ceiling on success.

If the government limits profits by imposing an additional tax or surcharge on after-tax profits – that is, after these companies have already paid their employees and paid their corporate taxes – it would be another nail in the coffin for business investment in Canada.

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To be clear: The federal government has expressly ruled out limiting the market share of small and medium-sized companies or taxing their profits above a certain percentage. These quotas are reserved for Canada’s largest employers – those with the most employees.

Any politician who claims to support workers should not single out Canada’s largest employers and the more than 4.4 million Canadians they employ. Disadvantaging these workers because of the size of the company they work for is not free enterprise, but a futile intervention.

It defies common sense to suggest that we can promote workers and protect their wages by letting the government cut market share and limit the profits of the employers who pay them. Lower-performing, less profitable companies employ fewer Canadian workers.

Goldy Hyder is executive director of the Business Council of Canada.

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