Metro’s economic prowess hits bottom in key tax ranking
High housing costs also hurting region’s performance, board of trade report says
Canadian governments have to respond to U.S. corporate tax cuts because the lower rates make cities like Metro Vancouver less competitive, according to an argument that has emerged from a new Greater Vancouver Board of Trade report.
The suggestion comes from the board of trade’s 2018 Scorecard Report, compiled in conjunction with the Conference Board of Canada, which the organizations released Thursday.
One finding of the report was that, when it comes to a key measure of taxes on business investments, Metro Vancouver’s ranking fell from 10th in 2016 to dead last among 17 jurisdictions that reported data, according to the 2018 Scorecard, largely because of the U.S. cuts.
“What it says to governments is you can’t guess what the other folks are necessarily going to do, (but) at the same time you can’t stay where you are,” said Conference Board of Canada CEO Daniel Muzyka, who took part in the report’s unveiling.
“It may be unpleasant, it may not be something governments expected to do,” Muzyka said. “The reality is, you do have to at least be reasonably competitive,” but without getting “into a raceto-the bottom.”
The report compares Metro Vancouver’s relative performance on 38 economic and social variables with 19 cities ranging from Singapore to Rotterdam and including Calgary, Toronto, Montreal and Halifax.
Singapore ranked first on the scorecard with an A on economic factors and B on social factors. Calgary ranked second — up from fourth on the 2016 report — with an A in the social factors and B on its economy.
Metro Vancouver advanced two places to seventh on the ranking, with B grades in both economic and social factors.
Board of trade CEO Iain Black said the need for tax competitiveness will be a key message the organization will take to governments.
“The first expectation that we’re trying to establish with government is that there is no additional room to raise taxes,” Black said, following a series of tax shifts at both the federal and provincial level, “with virtually no consultation.”
“Our second message is (to) start looking for ways to see that pendulum star swinging in the other direction,” Black said.
However, some of the recent tax increases are going to programs that have benefits for the economy, argues Alex Hemingway, an analyst with the Canadian Centre for Policy Alternatives, such as better child care.
“That reduces pressure on household budgets and increases the ability for (household members) to get out into the economy,” Hemingway said.
Hemingway acknowledged that there is a case for creating PST exemptions on business input as a way to reduce B.C.’s marginal tax rate on investment, but argued that it shouldn’t be accounted for by reduced public spending.
“We’ve had a period of very large corporate tax cuts in B.C. for the last 15 or 16 years,” Hemingway said.
Stratospherically high housing costs was the other key concern raised by the scorecard report.
“Housing affordability has gone from being storm clouds on the horizon to having those clouds right over our heads,” said Black.
High housing costs prevent Metro Vancouver from attracting enough of the 25- to 35-year-old skilled workers the local economy needs to expand higher-value tech sector businesses capable of paying higher wages.
Because while Metro Vancouver is an attractive place to live, it scores poorly on measures of after-tax income and labour productivity.
Black said being Canada’s gateway to the Asia Pacific region is Metro Vancouver’s big strategic advantage, characterizing it as “the St. Lawrence Seaway of the 21st Century,” and a strength to build on.
“The risk we run, if we don’t correct some of this stuff, is that the (economic) momentum that we have enjoyed for the last 16 years is going to stall,” Black said.
Black said the board of trade will use the scorecard report’s results to inform its own advocacy on regional economic issues, starting with a set of its own recommendations on how to get municipalities, the province and federal government to deal with housing affordability.