In the recent election campaign, the provincial Tories raised eyebrows when they promised to cut corporate taxes by billions of dollars a year with the aim to promote job creation.
Public sector unions railed at the planned 30-per-cent cut and said taxes  should be raised to recover $5 billion in corporate tax revenue lost since 2009 - money badly needed for health care and education.
The winning Liberals said they'd freeze the current provincial rate at 11.5 per cent until the budget is balanced. Meanwhile, the NDP proposed to hike the tax rate and end other loopholes to raise another $1.4 billion from corporate Ontario.
With a $12.5 billion deficit and a government plan to wipe out the red ink by 2017-2018, the Liberals are under pressure from progressives and unions to hike corporate taxes as they run the province with a majority government over the next four years.
A study released Tuesday suggested there may be room for such hikes since Canada remains the world's most tax competitive country for business.
KPMG's annual Focus on Tax report reveals that  Canada's top international ranking is mainly as result of low effective corporate income taxes, combined with moderate payroll costs as well as harmonized sales taxes, such as the HST.
Britain ranked second, Mexico in third, the Netherlands fourth and the United States fifth in global tax competitiveness.
Toronto, Vancouver and Montreal held the top three spots among the 51 major international cities in the 2014 report. A total of 107 cities were studied, including 15 from Canada.
"This year's report demonstrates that, once again, Canada provides an attractive business tax climate," said Elio Luongo, KPMG's Canadian managing partner for tax. "Our corporate tax policies ensure Canada remains a viable option and desirable location for businesses looking to locate or expand their operations."
Luring foreign investment in a globally competitive business environment has been a pillar of the Liberal government's economic growth strategy for years and is behind the move to cut corporate taxes over the past five years.
Combined with its "partnerships" with business, the strategy seems to be paying off. Ontario was the top destination in North America for direct foreign investment last year, ahead of Texas and California.  Ontario attracted more than $7.2 billion in foreign direct investment in 2013  – 12.46 per cent of the total money that flowed into the continent from abroad.
"Ontario's tax system is highly competitive internationally," the Liberals said in its May 1 budget. The government said more than $10 billion in annual savings for business in the past five years has been created with lower taxes, HST reforms and other measures.
Combined with the federal corporate tax of 15 per cent, Ontario's combined rate of 26.5 per cent is among the lowest in Canada. That compares with  25 per cent in Alberta, 26.9 per cent in Quebec, 29 per cent in Newfoundland, 26 per cent in British Columbia, 31 per cent in Nova Scotia and Prince Edward Island and 27 per cent in New Brunswick, Manitoba and Saskatchewan.
The KPMG study also revealed there is no standard approach in setting tax policy among the countries studied. Although the types of taxes used to raise revenues are more or less similar among countries, there is a large range in how these taxes are weighted and applied.
Some countries want low corporate taxes to compete for more businesses, but have to rely more heavily on other taxes, such as sales or payroll taxes, to raise revenues, said KPMG. Some use their tax policies to attract certain types of businesses with targeted incentives for manufacturing or research and development.
In the campaign, the NDP proposed a $500 million tax credit aimed at manufacturers to create what the third party said would be 170,000 new jobs.

Canada most competitive in business tax, KPMG finds

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