Tax reforms, debt shifting and tax revenues: Multinational corporations in Canada

An analysis of Canadian corporate income tax revenues during the 1984-94 period shows a relative shifting of tax revenue shares between Canadian and foreign-controlled corporations, and a substantial change in the debt levels of foreign-controlled corporations, as well as Canadian-based multinationals. We claim that these changes may have been associated with the tax reforms undertaken by the United States and Canada in the mid-1980s resulting in the relative change in the tax rates between the two countries. We also hypothesize that if this difference persists and in Canadian-controlled corporations continue to aggressively expand abroad, the Canadian corporate tax base could experience further pressure.

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