‘Wasteful’ government spending on ‘corporate welfare’ could be replaced by business tax relief, says study
- Federal and provincial government spending on corporate subsidies, termed “corporate welfare” by the Fraser Institute, increased by 142% between 2019 and 2024, reaching $87.7 billion in 2024—more than triple the 2015 level.
- The Fraser Institute study highlights that corporate welfare payments are largely wasteful, failing to achieve their goals of job growth or economic advancement, and create unfair advantages for some businesses over others.
- Researchers suggest eliminating corporate subsidies and using the saved funds to significantly reduce business taxes, which they argue would better stimulate economic growth than current subsidy programs.
- The issue has generated political debate, with Conservative Leader Pierre Poilievre criticizing corporate welfare as benefiting insiders at taxpayers' expense, while the newly established Canada Strong Fund faces scrutiny over potentially enabling more government handouts to corporations.
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.”
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.
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.
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.
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.
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.
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.”
“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.
“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.”
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.”
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.
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.
“The increased spending on corporate subsidies has occurred in Canada during a period of economic stagnation and renewed interest in policies that can drive economic growth,” the Fraser Institute says in the research. “Governments in Canada have an opportunity to substantially boost economic growth by eliminating corporate subsidies and directing the savings to broad-based business tax relief.”
Conservative Leader Pierre Poilievre has also previously railed against “corporate welfare,” taking aim at it in his first major keynote speech abroad in March, saying it “enriched insiders at taxpayers’ expense.”
Meanwhile, Prime Minister Mark Carney’s new sovereign wealth fund, the Canada Strong Fund, has faced criticism from other Conservative thinkers for allowing the government to hand out more “corporate welfare.”