Incorporated businesses in Nova Scotia pay about $500 million in provincial taxes, a fraction of the $3.5 billion levied by the province on households. However, corporate taxation is particularly important because business decisions about investment and production determine the economic climate that supports jobs and wages earned by households.
As with households, it is important to look at the tax burden by size of taxpayer.
For businesses, gross revenue from Nova Scotia operations is a good indicator of firm size. Tax planning decisions can distort other size measures, such as taxable income, salaries and wages, capitalization, and asset values. Note that revenues are not the same as profits: high revenue companies can have low margins and vice versa.
The figure below divides Nova Scotia’s 32,000 incorporated companies into six categories of gross revenue and measures their provincial share of:
- Number of companies
- Gross corporate revenues from Nova Scotia operations
- Taxable income allocated to Nova Scotia
- Provincial taxes on corporate income and capital
- Salaries and wages paid by corporations
Note that this does not include ‘business’ taxation of unincorporated enterprises and partnerships that pay taxes through the personal income tax system. Nor does it include capital taxes levied specifically on certain financial institutions.
Nova Scotia Corporate Taxes by Company Size
(Click chart to enlarge)
Companies with gross Nova Scotia revenues in excess of $10 million make up the overwhelming portion of revenues, taxable income, taxes paid and salaries. Specifically, these 800 companies comprise:
- almost 75 per cent of gross revenues earned in Nova Scotia
- over 50 per cent of the taxable income in Nova Scotia
- almost two-thirds of corporate tax revenues
- over 40 per cent of salaries and wages paid in the province
These high-revenue companies actually have a disproportionately lower share of corporate taxable income (51 per cent) and salaries and wages (44 per cent) allocated to Nova Scotia operations relative to their share of corporate gross revenue in Nova Scotia (74 per cent). In contrast, the 17,200 companies with revenues between $0.1 million and $10 million represent higher shares of provincial wages and taxable income than revenues.
Companies with smaller revenues may be able to take advantage of the Province’s small business rate reduction and pay disproportionately lower taxes relative to their taxable income, while larger companies pay a disproportionately larger share of taxes relative to taxable income because of capital taxes.
The distribution of corporate revenues is highly concentrated among high revenue companies. This is important in determining how much of a burden the provincial tax system can exert on specific groups and the kind of revenue yield the province can expect.