Businesses applaud Liberal measures, but want to see U.S.-style tax cuts
Finance Minister Bill Morneau’s much anticipated bid to boost Canadian competitiveness will go some distance toward countering aggressive U.S. tax reforms and injecting new life into a sluggish business landscape, business leaders and economists said Thursday.
In crafting his fall economic statement, Morneau was expected to counter two headline reforms in the United States: measures allowing the full and immediate writeoff of investments in machinery and equipment, and a deep cut to the corporate tax rate — enough to wipe out Canada’s long-held advantage. The minister addressed at least one of those concerns, matching the U.S. writeoffs and extending them until 2024, two years longer than they will be available south of the border.
“The focus here was trying to improve Canadian competitiveness and that’s a positive step in the right direction,” said Doug Porter, chief economist at BMO Capital Markets. “But the cost is significant. I might not have used all my chips on one measure. I might also have reduced corporate income tax by a percentage point. But we’ll see how it works.”
For Canadian manufacturers and those who sell to them, the new ability to immediately deduct the full cost of machinery and equipment is “only a good thing,” said Rob Wildeboer, executive chairman of Martinrea International Inc.
“We like to be close to our customers and our customers determine where to set up their businesses based on the entire cost package,” he said. “So if they can write off investments that just makes things here more attractive for them.”
But writeoffs are just one consideration in attracting companies to establish operations in Canada, he added.
“If this is about Canadian competitiveness, well there are a lot of things that go into that,” Wildeboer said. “One is the corporate tax rate, another is the carbon tax.” In all, the new federal writeoffs will lower government revenues by $14 billion and deepen annual deficits. The measures come just in time for Calgary-based Pieridae Energy Ltd., which is looking to build a $10 billion liquefied natural gas project in Nova Scotia. “Generally speaking, I think it would be a good thing,” said Alfred Sorensen, president and CEO of Pieridae. “It would help put us on a level playing field with the LNG terminals in the United States.” Another measure that caught Sorensen’s eye was the government’s willingness to provide a 100-percent deduction for clean energy equipment, as Pieridae has been considering installing equipment at its proposed LNG facility that recycles waste heat into electricity. “That would probably have a significant impact on our decision to install that type of equipment,” Sorensen said.