The Canadian Manufacturers and Exporters (CME), one of Canada's largest business groups, is calling on Ottawa to lower corporate taxes or risk an exodus of investment and jobs to the United States
CME, which represents 2,500 companies, released a report that paints a bleak picture of the business landscape in Canada, citing declining investment in new equipment and technology, a sharp drop in foreign investment and jobs moving south of the border.
At the same time, the CME report notes that investment in the U.S. is booming, fuelled by the uncertainty President Donald Trump is creating over the future of the North American Free Trade Agreement — and in part by his tax plan, released in December, that cuts the top corporate tax rate from 35% to 20% at the start of this year.
The report, entitled “Restoring Canada's Tax Advantage: A Need for Tax Reform,” says U.S. investment in Canada in 2017 was nearly half of the $40.6 billion recorded just four years earlier. Over the same period, Canadian investment south of the border more than tripled.
The Canadian Chamber of Commerce and the National Business Council already have called on Ottawa to lower tax rates and increase investment incentives. Finance Minister Bill Morneau has resisted those calls, saying his department won't react impulsively to the Trump tax plan and will study the impact on Canada's business climate. His department said this week that nothing has changed.
“A tax advantage is critical for Canada," said Dennis Darby, President of CME, in an interview with CBC radio. “We are a smaller and less attractive market than the U.S. and we have many non-tax costs of doing business through regulatory red tape.”
