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Costs
Ontario’s Cost Advantage
KPMG’s comprehensive 2006 Competitive Alternatives Study report found that Canada’s business costs are the lowest of the G7 countries — on average, our costs are 6.5% lower than the United States. For software development, contact centers and back office operations, costs in Ontario are 5%–20% lower than the U.S. average. Lower wage rates (including employer health care costs) are a key contributor to this advantage.
Telecom costs in Canada are also low. The Conference Board of Canada’s fourth annual Connectedness Index (2004) of 10 leading Organization for Economic Co-operation and Development (OECD) countries reported that:
- Overall, Canada’s costs are the lowest
- Canada charges the lowest prices for Internet access
- Canada charges significantly less than the United States for broadband Internet access
- Fixed telephone charges are lower in Canada than in the United States
- Canada’s mobile telephone prices are among the lowest in the 10 countries.
Ontario’s highly competitive business costs help make the decision easier. Contributing cost inputs include:
- Construction costs that are among the lowest in North America
- Low commercial real estate leasing costs
- Competitive electricity rates
- Low payroll taxes
- A very favorable exchange rate.
The cost of employing and retaining workers in Ontario is the most cost-effective in the G7 countries (Canada, France, Germany, Italy, Japan, U.K. & U.S.A). A 2006 KPMG study found that while Canada lead the G7 countries in terms of low business costs, with a cost advantage of 5.5% over the US. Canada also has retained its top ranking among G7 countries. The lowest benefit costs combined with below average compensation rates give Canadian companies considerable competitive advantage.
Other Benefits Include:
Lower Corporate Tax Rates
Ontario’s tax rates are highly competitive. Our corporate tax rate is 4% lower than the U.S. average. There is no Ontario sales tax for 1-800/888 business telephone service. We also offer a range of programs to help defray hiring and job training costs.
- The combined federal and provincial corporate tax rate for 2006 is 36.12%
Low Benefit Costs
Salary and wage costs are lower than in the U.S.—and a very favorable exchange rate lowers them even more.
Ontario payroll taxes range from 14% to 23% and generally average 17% - which is lower than in the U.S.
| Statutory Benefits (% Total Payroll) |
| Social Insurance Rate (CPP) |
4.95% |
| Employment Insurance |
2.73% |
| Workers Safety Insurance (call centers) |
0.30% |
| Payroll Tax for Province (health tax) |
1.95% |
| Vacation (after one year) |
4.00% |
| Total |
13.97% |
Source for Statutory Benefits and Optional Benefits tables: PriceWaterhouseCoopers 2006
| Optional Benefits (Employer Sponsored) |
| Retirement and Pension Plan Payments |
5.40% |
| Life Insurance and Death Benefits |
0.50% |
| Hospital, Surgical, Medical and Major Health Insurance |
1.40% |
| Short-term Disability, Sickness or Accident and Long-Term Disability of Wage Discontinuation |
1.20% |
| Vision Care, Physical/Mental Fitness Programs |
0.50% |
| Maximum Total |
22.97% |
Source for Statutory Benefits and Optional Benefits tables: PriceWaterhouseCoopers 2006
Low Construction Costs
- Construction costs are among the lowest in North America.
Low Commercial Real Estate Leasing Costs
- These range from a high of US$15.40/sq.ft. (Cdn$22/sq.ft.) A space in Toronto’s financial district to US$2.20/sq.ft (Cdn$3.14 sq.ft.) for C space in smaller communities and there are many communities with at least one building with 40,000 sq.ft. or more.
Infrastructure Support
- The federal and provincial governments provide infrastructure support for projects in northern Ontario communities.
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