U.S. tax changes helped kill the city’s pitch to snag Amazon’s second HQ
Toronto could set a bear trap for Amazon, but won’t have any more luck catching HQ2 than Calgary did.
Toronto is the only Canadian city on Amazon’s trimmed list of 20 finalists for the big second headquarters.
Imagine the American uproar if Amazon boss Jeff Bezos now chose one of ours, over all of theirs.
But why did only one Canadian city make the list?
There were lots of good bids, including Calgary’s. Amazon seemed genuinely interested in Canada.
But right near the end of the first-cut process, President Donald Trump and the U.S. Congress sharply lowered corporate tax rates.
The rates in Canada and the U.S. are now just about equal, at 26 to 27 per cent, when federal and provincial/state taxes are rolled in.
With the free trade agreement in serious doubt as well, Canada looks less appealing than it did when Amazon called for bids several months ago.
The very day the Amazon list was unveiled, Apple said it will repatriate up to US$250 billion in cash reserves held offshore.
Apple expects to pay about $38 billion in U.S. tax on that money — far less than the bill would have been under earlier repatriation tax rates.
The tech giant also promises huge investments in the home country.
With Trump throwing massive tax stimulation at American business, you can imagine Amazon executives shaking their heads over Canadian bids. Toronto might be on the list only because it would have looked insulting to ignore Canada entirely.
Mary Moran, CEO of Calgary Economic Development, agrees that the tax changes were likely a big factor.
The city heard kind words from Amazon officials Thursday, she said. Amazon was impressed with the only bid that appeared “non-governmental” — a high compliment, apparently. The company will keep Calgary in mind for future projects.
But Moran also talked about a serious problem — Calgary’s unbalanced high-tech workforce. To the American companies we’re trying to attract, it looks too heavy on energy, too light on artificial intelligence and computer science.
Moran made this point to the Herald, but she was most specific in comments to Global earlier in the day.
“I think what we’re not necessarily set up for is the economy of tomorrow,” she said.
“So whether it’s Amazon or Google or Microsoft, everybody’s trying to figure out how to digitize all the industrial sectors, and I think we don’t necessarily have the right talent.”
She added, rather provocatively, that Calgary has “the engineers of today, not tomorrow.”
Later, Moran told me Calgary schools are now training more AI and computer science students — about 1,000 a year in total. But many more are needed and the rebalancing will take years.
Mayor Naheed Nenshi hears about the problem when he talks to businesses in the U.S. Calgarians are often told flatly that the city’s tech expertise is too concentrated on oil and gas.
Just maybe, Toronto’s growing leadership in AI — not just international chivalry — helped it make the Amazon cut.
Ontario and Toronto are pouring hundreds of millions into training and research. They get help from Ottawa, of course. Toronto Mayor John Tory talked Thursday about continuing to focus on AI, whether Amazon comes to the city or not.
In Calgary, we can now be pleased to come out of this with reputation enhanced and no further temptation to beg.
Chances are that for all the fine talk of honed workforces and excellent buried dark fibre, the winning city will be the one offering the most money.
The current leader appears to be Newark, N.J., which offers up to $7 billion in tax credits and incentives.
Amazon now stands to reap U.S. tax bonanzas both from Trump and a host of local governments. In this context, Canada’s bidding cities were kind of like their NHL teams — quite good, but not nearly rich enough.