Report

Corporate loss utilization

Feb 16, 2023

This report analyses the utilization of net operating and capital losses by Canadian corporations over 2000 to 2020 across different sectors of the economy.

Highlights

Over 2000 to 2020, claimed carryback refunds and loss carryforward deductions, on average, reduced corporate income tax (CIT) by $8 billion ($2.7 billion in CIT carryback refunds and $5.3 billion in loss carryforward deductions), or 21.6 per cent per year.
During economic downturns, corporations increased their utilization of loss carrybacks. For example, in 2008 the loss carryback refund increased to $6.8 billion. For fiscal planning purposes, this stresses the importance of considering how many losses could be generated during downturns and their associated carryback CIT refund.
From a fiscal planning perspective, the stock of loss carryforwards represents a fiscal risk, since profitable corporations may utilize some, or all, of their accumulated loss carryforwards to reduce their corporate income taxes payable in that year.
Based on past experience, $12.3 billion of the current stock of unused losses could be further used as carryforward deductions in a given year, annually lowering corporate income tax revenues by an additional $1.7 billion, which represents 2.1 per cent of our October 2022 CIT revenue projection.