Feds focused on competitiveness, not tax cuts
OTTAWA — Finance Minister Bill Morneau is looking at targeted measures to enhance Canada’s competitiveness rather than broad-based corporate tax cuts, sources say.
For months, the federal Liberals have been under pressure from business leaders to respond to a U.S. tax overhaul that many warn has put Canada at a disadvantage.
Morneau told reporters this week that he hadn’t ruled anything out when specifically asked whether tax cuts would be part of his competitiveness plan.
But Morneau has been meeting with businesses across the country in an effort to find the best way to deal with the U.S. changes. And sources with knowledge of the federal approach who spoke on condition of anonymity say his emphasis has been consistently on targeted measures.
Morneau intends to announce plans in his fall economic update to bolster Canada’s competitiveness.
The Trump administration’s changes include big tax reductions for businesses and loosened regulations, which have created fears Canada has lost part of its edge as an investment destination.
The finance minister has been analyzing the impacts of the U.S. changes and has spent the summer on a “listening tour” to get feedback from the Canadian business community.
Industry stakeholders have been calling for lower taxes – but a cut to the federal corporate rate would come at a cost. A tool on the parliamentary budget officer’s website estimates that a one percentage point reduction to the business tax rate would trim about $1.7 billion per year from federal revenues.
There are, however, also recommendations that Morneau consider a cheaper option: allowing all companies to immediately write off new equipment purchases.
The U.S. tax package enables American companies to immediately write off the full cost of new machinery and equipment. Canada already offers this provision for its manufacturing sector and there are calls for it to be expanded to cover all industries.
Some experts believe this kind of measure should be combined with cuts to business taxes.