U.S. tax reform to squeeze Canadian economy
One former Canadian finance minister believes Bill Morneau has the power to stem the growing concerns over the country’s competitiveness.
“The best, quickest, and easiest thing both politically and otherwise is to match the Americans on the immediate write-off of capital expenditures,” Business Council of Canada CEO John Manley told BNN Bloomberg on Wednesday when asked what the finance minister could do to improve Canadian competitiveness.
“That would create a better investment environment for Canada. It would help our corporations.”
Manley, who served as federal finance minister between 2002 and 2003, said Canada has enjoyed a competitive advantage dating back to the Chretien government of the early 2000s. He said that the tax changes implemented by U.S. President Donald Trump have closed the gap and reduced Canada’s ability to lure foreign investment.
Manley’s concerns echoed a PwC Canada study released Wednesday that found the Trump tax cuts could cost Canada 635,000 jobs and $85 billion in GDP over the next decade. The study was produced for the Business Council of Canada.
“We’ve enjoyed this tax advantage, really, on a comparative rate basis on corporate income taxes now for quite a number of years,” he said. “And, as they say, when the tide goes out you find out who on the beach isn’t wearing a bathing suit.”
“This really has highlighted a lot of our competitiveness issues, and I think the report makes a very clear point that in capital-intensive industries, this could be big.”
For his part, Morneau is reportedly planning to address competitiveness in his fall economic update.
Manley says that the language Morneau uses could be the first line of defence to prevent Canada from becoming a less-coveted destination for the world’s top talent.
“When we’re taking more than half of what people earn, they’re just not as motivated to earn quite so much. The way the (PwC Canada) report highlights that is to say ‘we’re in a global competition for talent, and some of those really smart people are looking at not just ‘would they like to live in Canada,’ but ‘what do I have at the end of the month?’” he said.
“We’re getting pretty expensive for individuals as well as corporations. That’s really not where I think we need to be.”