The C.D. Howe Institute report compiled by Duanjie Chen and Jack Mintz shows Canada's marginal effective tax rate on capital has fallen to 28 per cent from 28.9 per cent last year.

But current scheduled tax changes by federal and provincial government will take that rate to 18.9 per cent by 2013, about average among 80 countries worldwide, the authors say.

Proponents of lower corporate taxes say reducing such levies on businesses helps Canada attract new job-creating investments and makes it easier for multinational companies to locate or expand operations in this country instead of moving to Mexico, the United States or overseas, where taxes may be lower.

Critics say businesses often get lucrative tax breaks for research, job training and exports and should be required to pay their fair share of taxes to finance Canadian social programs and other government spending..

The report takes provincial governments to task for offering preferential tax rates to certain troubled sectors, such as manufacturing and forestry, which the authors argue diverts investment to more productive parts of the economy.