‘Wasteful’ government spending on ‘corporate welfare’ could be replaced by business tax relief, says study

When accounting for both inflation and population, spending on subsidies has increased in every province and at the federal level between 2015 and 2024. Photo by Tony Caldwell /Postmedia

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Federal and provincial government spending on “corporate welfare” increased by 142 per cent between 2019 and 2024 — an expense that leaders at the Fraser Institute call “wasteful spending.”

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The independent think tank published a study on Tuesday which found that there was a marked increase in spending on corporate subsidies beginning in 2015.

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Between 2007 and 2015, the data shows, spending on subsidies increased from $22.2 billion to $25.1 billion when adjusted for inflation, or 12.8 per cent. But from 2015 until 2019, spending increased more rapidly, by 44.2 per cent.

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After the pandemic, spending on corporate subsidies increased each year from 2022 to 2024, with the inflation-adjusted level of spending in 2024 at $87.7 billion, more than triple the figure from 2015.

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The Fraser Institute defines “corporate welfare” as “payments from government to private businesses intended to achieve specific objectives that are not payments for goods or services rendered.” They are paid with an economic objective, such as job growth or to boost a particular industry.

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The study found that, when accounting for both inflation and population, spending on subsidies has increased in every province and at the federal level between 2015 and 2024.

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Proponents of corporate subsidies argue they drive economic growth through job creation, technological advancements and improving international competitiveness. But Alex Whalen, director of the Atlantic Canada Prosperity Initiative at the Fraser Institute, called them “wasteful.”

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“Despite their current prevalence in Canada, research has consistently shown that corporate welfare is largely wasteful and generally fails to achieve its stated goals,” he said in a news release.

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“The massive recent increase in government spending on corporate welfare should concern all Canadians,” he added. “It’s wasteful spending at the expense of Canadian taxpayers and places government in the position of picking favoured businesses. Better policies exist to drive economic growth.”

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According to the authors, corporate subsidies are unfair to businesses that don’t receive them, and research shows “there is little connection between sustained, widespread economic growth or job creation and corporate subsidies.”

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They cite several studies offering various conclusions around the “wasteful” nature of corporate subsidies, including the incentive for firms to lobby government rather than deliver better services, the interference with private decision-making in the marketplace, the possibility of job growth in one area causing job losses elsewhere, and the likelihood that subsidies fund businesses to conduct activity they would be doing anyway.

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After comparing corporate income tax with spending on corporate subsidies, the authors suggest “corporate welfare” could be eliminated, with the resulting savings being directed to lowering business taxes by over 80 per cent.