Feds mulling targeted measures to bolster companies
Finance Minister Bill Morneau is looking at targeted measures to enhance Canada’s competitiveness rather than broad-based corporate tax cuts, sources say.
For months, the federal Liberals have been under pressure from business leaders to respond to a U.S. tax overhaul that many warn has put Canada at a disadvantage.
Morneau told reporters this week that he hadn’t ruled anything out when asked whether tax cuts would be part of his competitiveness plan.
But Morneau has been meeting with businesses across the country in an effort to find the best way to deal with the U.S. changes. And sources with knowledge of the federal approach who spoke on condition of anonymity say his emphasis has been consistently on targeted measures.
Morneau intends to announce plans in his fall economic update to bolster Canada’s competitiveness.
The Trump administration’s changes include big tax reductions for businesses and loosened regulations, which have created fears Canada has lost part of its edge as an investment destination.
Industry stakeholders have been calling for lower taxes — but a cut to the federal corporate rate would come at a cost. A tool on the parliamentary budget officer’s website estimates that a one-percentage point reduction to the rate would trim about $1.7 billion per year from federal revenues.
There are also recommendations that Morneau consider a cheaper option: allowing all firms to immediately write off new equipment purchases.
The U.S. tax package enables American firms to immediately write off the full cost of new machinery and equipment. Canada already offers this provision for its manufacturing sector and there are calls for it to be expanded to cover all industries.