Immigrant-Owned Firms Pay More Tax Per Worker Despite Productivity Gaps, Study Finds

Immigrant entrepreneurship is now central to Canada’s economy. Immigrants already represent 23.0% of the population and are projected to reach almost 32% by 2041, and they tend to own businesses at higher rates than people born in Canada. New analysis using the Canadian Employer-Employee Dynamics Database from 2001 to 2020 sheds light on how immigrant-owned firms perform on productivity and tax contributions, and what this means for immigration and business strategy.

What the data say about productivity in immigrant-owned firms

The studies distinguish between two types of immigrant-owned firms:

• Firms with immigrant majority ownership
• Firms with immigrant minority ownership (co-owned with non-immigrant owners)

After adjusting for firm characteristics such as size, capital, industry and province, firms with immigrant majority ownership had labour productivity that was, on average, 9.4% lower than similar firms owned by Canadian-born individuals. By contrast, firms with immigrant minority ownership were actually 2.4% more productive than firms owned entirely by Canadian-born owners.

Firm size matters a lot:

• Among very small firms with fewer than 5 employees, immigrant majority-owned firms showed a productivity gap of 8.8% compared with Canadian-born-owned firms.
• Among large firms with 100 or more employees, this gap widened to 20.9%.
• For immigrant minority-owned firms, productivity was slightly higher than Canadian-born-owned firms among businesses with fewer than 100 employees, but for firms with 100 or more employees they were 10.3% less productive.

This pattern suggests that as firms grow, structural constraints facing immigrant owners, such as financing and market access, can become more visible.

The characteristics of the immigrant owner also matter:

• Firms owned by immigrants admitted in the business class (principal applicants) were 3.4% more productive than firms owned by immigrant economic class principal applicants. This points to a meaningful payoff from previous business experience.
• Education has a strong effect. Compared with owners with high school or less:
  • Owners with a doctoral degree were associated with firms that were 16.4% more productive.
  • Owners with a master degree ranked second in productivity, followed by those with a bachelor degree.

Language abilities also correlate with performance. Firms whose immigrant owners spoke only English or both English and French were more productive than those led by owners who spoke only French or neither official language. Firms with French-only owners had the lowest productivity, which may reflect narrower market access and language-related barriers.

Regional origin of owners shows additional differences. Immigrant-owned firms led by owners from some mature, advanced economies tended to be the most productive on average, while firms led by owners from certain Asian regions were, on average, the least productive among smaller and medium firms. However, among large firms with 100 or more employees, most of these regional productivity gaps disappear. In big firms, education remains the main differentiator: those with immigrant owners holding a bachelor or master degree are the most productive, while firms owned by doctoral-level immigrants are no longer at the top.

From a consulting perspective, this paints a clear picture: for small and medium firms with fewer than 100 employees, the owner’s education, business class background and strong proficiency in English and/or French can significantly improve firm performance. As firms grow larger, institutional systems and professional management reduce the impact of individual owner characteristics, but education still matters.

For prospective immigrant entrepreneurs, it is helpful to think in terms of what immigration programs and lenders look for:

• Strong formal education (ideally bachelor level or higher)
• Documented prior business or senior management experience
• Demonstrated proficiency in at least one official language, and ideally both
• A realistic business plan in sectors where productivity can scale, not only low-margin industries

These elements often align with requirements or selection criteria in business and economic immigration pathways.

Immigrant-owned firms and their tax contributions

On the fiscal side, immigrant-owned firms stand out in a positive way. After controlling for firm characteristics, firms with immigrant majority ownership paid, on average, 16% more in net taxes per employee than comparable firms owned by Canadian-born individuals. Firms with immigrant minority ownership paid even more, at 23% higher net taxes per employee.

This difference in net taxes comes from two sides:

• Immigrant majority-owned firms paid 10% more in total taxes before refunds and received 37% less in refunds or tax credits per employee.
• Immigrant minority-owned firms paid 16% higher total taxes and received 11% less in refunds per employee.

Within immigrant-owned firms:

• Immigrant minority-owned firms paid 16% more in net taxes per employee than immigrant majority-owned firms, even after accounting for firm and owner characteristics.

Higher net tax contributions are associated with:

• Previous business experience (as reflected in admission through a business class)
• Higher levels of education
• Proficiency in both official languages

Taken together, these results indicate that immigrant-owned businesses, especially those involving co-ownership with Canadian-born partners, make a disproportionately strong fiscal contribution relative to their size. In practice, mixed ownership structures may give immigrant entrepreneurs better access to networks, local knowledge and advisory support, which can translate into both higher productivity in smaller firms and higher taxable income overall.

From a policy and planning standpoint, it is reasonable to interpret these findings as support for:

• Carefully designed business and startup immigration streams that reward education, experience and language skills
• Programs that encourage partnerships between immigrant and Canadian-born owners
• Advisory and financing tools that help immigrant majority-owned firms scale sustainably beyond the small firm stage

For current and prospective immigrants, this research confirms that there is real opportunity in entrepreneurship, but also that success is influenced by factors immigration officers evaluate closely: education, experience and language.

Yet navigating these pathways can be challenging. Applicants must choose between economic and business streams, understand how to demonstrate real business experience, and show that their business plan is viable in the Canadian context, all while dealing with different rules for provinces and federal programs. These hurdles can affect both who is selected and how well the business performs after landing. Working with a regulated immigration consultant can help by preparing, advising and representing immigration applications so that business plans, human capital strengths and corporate structures are presented clearly and strategically, supporting both approval chances and long term business success in Canada.