Prime Minister Justin Trudeau’s government could make meaningful progress in addressing the nation’s competitiveness challenges even without taking the costly step of lowering the corporate tax rate, according to the head of the country’s biggest business lobby.

Perrin Beatty, chief executive officer at the Canadian Chamber of Commerce, said adding tax breaks aimed at new investments to a broader review of the tax system would be an “important step forward.” The federal government is already running deficits, leaving little wiggle room for something larger like a corporate tax cut, he said.

“Triage is what we are talking about here,” Beatty said in a telephone interview. “It means it has to be targeted. It needs to be focused.”

Business leaders are pressing Trudeau for a response to extensive U.S. corporate tax cuts which they claim will aggravate Canada’s already poor track record on productivity and competitiveness. The executives have indicated they’d welcome partial steps as long as they’re focused on the main issue.

Canada’s combined federal and provincial corporate tax rate remains about 27 per cent while in the U.S. it fell to 21 per cent from 35 per cent. The U.S. also now allows companies to immediately and fully deduct capital spending.

Targeted Measures

While Finance Minister Bill Morneau has all but ruled out an across-the-board cut to the tax rate on business income, his department is planning targeted measures. Businesses are demanding an accelerated write-off allowance on capital investment and increased deductibility of interest payments. The government plans to address competitiveness issues in a budget update later this year.

Beatty said the federal government must take a serious and comprehensive approach to the issue, one that extends beyond taxation to include regulation, infrastructure and the overall business climate.

“We need to focus not on the nice-to-haves but the must-haves and the must-haves are Canadian competitiveness,” said Beatty. “Parliament needs to focus on the fundamentals instead of going off on side issues.”