Canada’s an­swer to U.S. tax plan won’t come till fall, Morneau says

The Globe and Mail (Prairie Edition) - - NEWS - BILL CURRY PAR­LIA­MEN­TARY REPORTER

Ottawa’s re­sponse to U.S. tax cuts won’t come until the fall as Fi­nance Min­is­ter Bill Morneau said his depart­ment is still study­ing their im­pact on Cana­dian com­pet­i­tive­ness.

Mr. Morneau told the Toronto Re­gion Board of Trade Thurs­day that he’s lis­ten­ing to busi­ness lead­ers from many sec­tors in or­der to un­der­stand how the U.S. tax changes are af­fect­ing busi­ness de­ci­sions north of the border.

Ma­jor tax changes were adopted this year in the United States that ef­fec­tively erased Canada’s cor­po­rate tax ad­van­tage.

The min­is­ter said this work is ex­pected to con­tinue through the sum­mer until Septem­ber or Oc­to­ber.

That time­line sug­gests the gov­ern­ment could re­lease its plan as part of the min­is­ter’s fall fis­cal up­date, although his of­fice said no fi­nal de­ci­sions have been reached.

“We know that the change in the United States is very sig­nif­i­cant,” he said.

“We need to un­der­stand that so that we can deal with it ap­pro­pri­ately. It’s not just about tax rates. … The good news is we think that we are still com­pet­i­tive. But we do need to think about the chal­lenges that we’re pre­sented with.”

The Lib­eral gov­ern­ment is fac­ing strong pres­sure from Cana­dian CEOs to lower cor­po­rate taxes and re­duce reg­u­la­tion.

Mr. Morneau ac­knowl­edged that he fre­quently hears con­cern – in­clud­ing from some in the room at the board of trade – that Canada must re­spond to those lower U.S. rates.

Yet Mr. Morneau stressed Thurs­day that the is­sue of com­pet­i­tive­ness is broader than sim­ply com­par­ing rates.

He said com­pet­i­tive­ness also means Canada must have an ed­u­cated work force, strong skills-train­ing pro­grams and sup­port for sci­en­tific re­search.

He also noted that the U.S. tax pack­age in­cluded other el­e­ments, such as in­cen­tives that make it eas­ier for busi­nesses to write off the cost of cap­i­tal in­vest­ments.

An­other con­sid­er­a­tion is the fact that the tax cuts are pro­jected to in­crease the size of the U.S. fed­eral deficit, Mr. Morneau said.

“The scale is big. The scale pre­cip­i­tates a very sig­nif­i­cant pos­si­bil­ity of a big, big deficit,” he said.

“So there’s some el­e­ments that made sense. There’s some other el­e­ments, we’re still work­ing our way through.”

The Lib­er­als’ Feb­ru­ary bud­get said the Fi­nance Depart­ment would be con­duct­ing a review “over the com­ing months” of the U.S. tax re­forms, but Mr. Morneau later told re­porters that there is still more work to be done.

“We’re not at the stage where we have any­thing to an­nounce in terms of how our sys­tem cur­rently looks in com­par­i­son,” he said.

“What I will be do­ing over the course of the next few months – be­tween now and Septem­ber, Oc­to­ber – is mak­ing sure that I’m fully un­der­stand­ing the im­pacts on busi­nesses and sec­tors and do­ing that home­work to make sure that we stay in a pos­i­tive sit­u­a­tion.”

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