Government spending on corporate welfare rose to $52 billion in 2022, more than double what it once was only 15 years ago, according to a new study by the Fraser Institute.
The report released on Tuesday titled, The Cost of Business Subsidies in Canada: Updated Edition, revealed a dramatic increase in corporate welfare spending at every level of government since 2007.
Between 2007 and 2019, federal, provincial and municipal governments spent a combined $352.1 billion on business subsidies.
“These subsidies for businesses — also known as corporate welfare — come with huge costs to government budgets and taxpayers, while doing little if anything to stimulate economic growth,” said co-author Tegan Hill, who also serves as associate director of Alberta policy at the Fraser Institute.
The annual amount of spending has more than doubled what it was in 2007, going from $24.5 billion a year to $52 billion in 2022 when adjusted for inflation.
Meanwhile, federal business subsidies went up exponentially in the post-pandemic era, spiking up to $88.5 billion in 2020 before decreasing to $47 billion the following year.
To put that figure into context, federal spending on corporate welfare was only $6.5 billion in 2019.
Corporate welfare spending increased most at the provincial level, going from $13.2 billion in 2007 up 4o $35.4 billion in 2022, however, that has not always been the case historically.
“In 1961, real federal subsidies were nearly nine times as large as real provincial subsidies. This gap shrank consistently over the decades,” reads the report. “Real provincial subsidies surpassed federal subsidies in dollar value in 1992. This trend remained consistent in all but two years from 1992 to 2019. During the final pre-COVID year, in 2019, real provincial subsidies were more than four times as large as real federal subsidies.”
According to the report, Quebec and Prince Edward Island spent more on corporate welfare than they received in corporate tax revenue from 2007 to 2019, with P.E.I spending at a rate of 160.8% and Quebec at 100.8%.
Quebec taxpayers spent the most of any province, paying out $30,570 in corporate welfare taxes per person from all levels of government over the same time period, followed closely by Saskatchewan, where taxpayers paid $29,413 per person.
Taxpayers in New Brunswick paid the lowest, for a combined total of $9,484 from 2007 to 2019.
However, these figures are conservative estimates at best, notes the report, as they only factor in direct government transfers to private businesses as well as government business enterprises.
“To be clear, the report does not provide a comprehensive measure of government support to businesses, which would include all tax expenditures, loan guarantees, direct investment and regulatory privileges extended to particular firms or industries,” reads the report.
One of the reasons that Fraser Institute can’t get precise figures is due to a lack of government transparency surrounding the amount it spends on businesses.
According to the report, this failure remains ongoing and the government has yet to provide “comprehensive accounting detailing such support in all forms.”
While corporate welfare can stimulate the economy, the Fraser Institute found that it’s Canadian taxpayers who bear the brunt of these costs, which often don’t nurture economic growth in the way that they’re intended to.
It does increase the government deficit, however, with a longstanding poor track record when it comes to government selection regarding which businesses get the funding.
“Rather than give preferential treatment to certain companies and industries, it’s high time Canada reduced business taxes and helped to foster a pro-economic growth environment that gives all businesses the opportunity and incentives to succeed,” said study co-author Jake Fuss.
The Fraser Institute concluded “that business subsidies delivered through government spending since 1961 came with significant costs to government budgets and to Canadian taxpayers generally” and that despite what the literature may suggest, it’s these subsidies that “stand out as a key area for spending reform.”
