Ensuring Canada remains competitive is the number one priority of Canada’s federal government, said Finance Minister Bill Morneau in an interview with Bloomberg News.
Speaking to Bloomberg from Buenos Aires, Minister Morneau said he and his government are turning their full attention to helping businesses tackle competitiveness challenges in the face of U.S. tax cuts and uncertainty around trade that have become a drag on investment.
The Finance Minister added that his governing Liberals will come up with a response only after undertaking a complete analysis of the impact of the U.S. tax reforms. But he cautioned tax issues are only one part of the competitiveness equation, and rejected criticism from business groups that he could have done more in his February budget to make Canada more competitive and attractive to investors.
“Job one on the centre of my desk for the next six months is going to be about competitiveness in Canada,” Minister Morneau said at a Group of 20 meeting in the Argentine capital. “We have to do our homework to get to a conclusion.”
He added: “There was no place in our budget for saying speculatively what we might or might not do in the future based on analysis that hasn’t been completed.”
Businesses say the problem was brewing even before the U.S. cut its corporate tax rate from 35% to 21%. They’ve called for a mix of reforms to address challenges from regulatory changes and new carbon prices, to minimum wage hikes and high electricity prices. Uncertainty over the fate of the North American Free Trade Agreement has added to the problems, prompting the Bank of Canada and others to warn that some firms are simply choosing to invest south of the border instead of in Canada.
Minister Morneau, whose February budget was focused on gender equality, has come under heavy attack from businesses for what they say was a failure to address the changing international tax landscape. The Business Council of Canada — which represents chief executives from dozens of major companies — had pressed the Finance Minister for an immediate response following the U.S. tax cuts passed into law last December.
“We’re hoping for a signal that the government is on the case. There’s really no indication in the budget that they’re on the case,” John Manley, a former Liberal Finance Minister and head of the business group, said after Budget 2018 was announced. “The first step to solving the problem is admitting that there is one. And they’re not admitting that there is one.”
Canada’s average corporate tax rate is about 27%, three percentage points above that of the world’s advanced economies, according to the Business Council. Minister Morneau has said the Trump administration’s reductions will lower the average American rate to about 26%.
