Governments in Canada have a long history of corporate welfare, doling out cash subsidies and tax breaks to specific businesses favoured by politicians. And according to our new study, corporate welfare is rapidly on the rise.
Federal and provincial government spending on subsidies increased from $22.3 billion in 2007 (the earliest year of available data) to $87.7 billion in 2024 (the latest year of available data) — a near-quadrupling in less than two decades after adjusting for inflation. Provincially, the Ontario government led the way with $19.9 billion spent on corporate welfare in 2024, followed by Quebec ($10.7 billion) and British Columbia ($4.2 billion).
Meanwhile, between 2020 and 2024, per-person GDP — a broad measure of living standards and economic growth — declined by 2.0 per cent, the worst five-year decline since the Great Depression. So it’s perhaps understandable that governments like the idea of dishing out corporate welfare to boost growth. The problem? It doesn’t work. Corporate welfare benefits the politician and the recipient, but not the broader taxpaying public. And on balance, research shows there’s no boost to economic growth.
This makes sense when you consider the incentives at play. When governments enter the subsidy game, businesses are incentivized to increase their lobbying efforts rather than deliver the best possible products and services to consumers. Consequently, governments may pay businesses to do things they would do anyway, and effectively weaken businesses that become dependent on government handouts to stay in business. At the same time, politicians get to bask in the limelight and make promises about jobs and prosperity. This is a lose-lose scenario — taxpayer money wasted on making private businesses less efficient.
Consider Canada’s recent experience with electric vehicle (EV) manufacturing. Between 2020 and 2024, governments in Canada spent up to $52.2 billion on EV-related manufacturing (batteries, automobiles, etc.). Back in 2023, when announcing a $13 billion handout to Volkswagen for an EV battery plant in southern Ontario, François-Philippe Champagne (the current federal finance minister who was then the federal innovation minister) said it was a “game changer” and that “these are good jobs that pay for mortgages and feed kids and build communities. They’re not … short-term jobs that people slip in and out of. You can build a career on them.”
Yet according to a 2024 analysis by economist Jack Mintz, $35 billion in government subsidies for EV manufacturing in Canada, spread across three companies (Volkswagen, Stellantis and Northvolt), produced roughly 8,500 jobs. This works out to more than $4 million per job. And despite Champagne’s claims, many of these “jobs” no longer exist. Northvolt went bankrupt. And Stellantis moved production of its Jeep Compass EV model from a Brampton plant to Illinois, despite billions in promised subsidies from Ottawa and the Ontario government.
Clearly, corporate welfare is no way to drive sustainable economic growth. So what’s the solution?
It’s twofold — eliminate corporate welfare and cut business taxes, and the former will almost pay for the latter. According to our study, governments across Canada could use the money spent on corporate welfare to eliminate 81.2 per cent of all business taxes (using 2024 data).
Then, rather than picking winners and losers in the economy, governments would simply create a level playing field for all businesses to compete equally. Not only is this more fair, it removes government from the impossible position of deciding which industries to prioritize. In reality, these decisions are best made by businesses and consumers interacting in the marketplace, not bureaucrats in provincial capitals and Ottawa.
Finally, some will argue that, despite any savings from eliminating corporate welfare, now is not the time to cut taxes. The Carney government plans to run massive budget deficits for years to come, and many provincial governments are deeply in the red. But business tax relief is also among the best options to help boost economic growth because business tax rates reduce the incentives to create businesses, invest and innovate — the primary drivers of higher living standards, economic growth and indeed tax revenue for government.
The data clearly shows that politicians have been on a spending spree, rewarding favoured businesses with your taxpayer dollars. To boost growth, increase fairness and reduce waste, governments in Canada should eliminate corporate welfare.
