CIBC CEO calls for tax reform in wake of Trump changes in U.S.
Dodig cautions Canada missing out on potential capital flowing to other nations
The head of the Canadian Imperial Bank of Commerce says the federal government should engage in tax reforms of its own in the wake of the slate of changes ushered in by U.S. President Donald Trump.
CIBC president and chief executive Victor Dodig said Tuesday that the federal government should allow companies to expense their capital investments within a year, similar to what is now done in the United States, in order to better position Canada for attracting investment.
Dodig said Canada is already missing out on potential capital that is flowing to other countries.
“It’s competing, not only on some of the softer factors in the economy, but also on tax,” the CEO said after giving a speech to the Empire Club of Canada in Toronto.
“And the one area where I’d say there’s that glaring difference is on accelerated capital cost allowance. That’s something we should really be thinking about in Canada to be able to attract that capital on the margin.”
CIBC is not the only bank that has raised the issue of tax reform. Royal Bank of Canada boss Dave McKay told The Canadian Press earlier this year the tweak allowing U.S. companies to immediately write off the cost of new equipment would hurt Canada’s competitive position.
The Tax Cuts and Jobs Act signed by Trump last December also slashed the corporate tax rate south of the border, further adding to concerns.
Finance Minister Bill Morneau, meanwhile, has telegraphed that the federal government will tackle competitiveness issues in their upcoming fall economic statement.
But big domestic banks, such as CIBC, have a unique viewpoint that judges the difference between Canadian and U.S. competitiveness, as they have operations on both sides of the border.
Speaking with reporters, Dodig said that the corporate tax system remains fairly competitive, albeit in need of the capital cost allowance tweaks.
“I think there is a broad consensus that, just given the policy differential and the significant math involved, that we’re way better off having something like that in place to be able to compete,” he said. “We need to make sure that capital in the country that is considering investing either here or elsewhere stays here.”
Dodig, the head of Canada’s fifthlargest bank, spoke to reporters following a speech that was focused on Canadian competitiveness and on readying for the next downturn while the economic times are still relatively good.
“We know these periods of expansion come to an end,” Dodig said. “And while our economy is doing well, now is the time to prepare.”
The CEO suggested in his remarks that U.S.-inspired tax cuts and deregulation, as well as trade uncertainty, are combining to sap foreign direct investment in Canada. But some of the blame, he said, rests with Canada.
“Trans Mountain is an example of where it could be seen as difficult to get business done,” Dodig told reporters. “I’m confident it will get done.”
Likewise, Dodig said he was confident about a deal getting done in the talks between Canada and the United States on the North American Free Trade Agreement.
“Our economies are inextricably linked,” the CEO told reporters.
Dodig also pushed for progress on any interprovincial trade barriers that could stand in the way of the economy, as the CEO said those hurdles were an “embarrassment” to the country.
“Right now, at this point in time, at this point in the economic cycle, it’s really important that we get things right, and interprovincial trade barriers in and of themselves are a hurdle to Canadian growth,” Dodig told reporters.
We need to make sure that capital in the country that is considering investing either here or elsewhere stays here.