Some positive steps…but more action is needed to bolster Canada’s faltering competitiveness
The government’s intention to accelerate business investment through immediate write-offs for the cost of machinery and equipment used in the manufacturing and processing of goods is a positive move that will help to improve Canada’s competitiveness. While the Council notes this measure would have greater impact if applied more broadly across the economy, the new Accelerated Investment Incentive should make Canada a more attractive location for manufacturing and narrow the competitiveness gap with the United States and other trading partners.
“Today’s announcements, including increased investments in innovation in the forest sector, confirm that the government recognizes many of the competitiveness challenges facing Canada,” said Greg D’Avignon, President and Chief Executive Officer of the Business Council of British Columbia. “Canada is a slow moving country in a rapidly changing world. It is time to stop taking merely incremental steps towards enhancing innovation and productivity, but rather look at bold action to ensure we are positioned to compete and generate the prosperity that supports the high standard of living Canadians expect.”
The government’s plan to launch an Export Diversification Strategy aimed at increasing Canada’s overseas exports by 50 per cent by 2025 is also welcome.
“In B.C., we have seen the benefits of greater trade diversification and believe Canada as a whole needs to increase commercial ties with offshore markets, specifically in rapidly growing Asian markets that will fuel future global growth,” noted D’Avignon.
The Fall Economic Statement shows the country’s economic growth has been among the strongest of the G7 countries, supporting a decline in the federal deficit for this year through to 2023-2024.
“It is vital that the government accelerate efforts to reduce the federal deficit as the economy continues to grow. Now is not the time to increase our debt – not with interest rates rising and the business cycle approaching the next downturn,” said Jock Finlayson, Executive Vice President and Chief Policy Officer of the BCBC. “Despite Canada’s relatively strong economic performance in recent years, we must be ready for a period of slower growth, both globally and in North America, going forward.”
The competition for talent is already resulting in softer job growth in some parts of the country, including British Columbia. While Canada aims to become an innovation economy, key features of tax policy are working against that goal. As a country, Canada needs to attract and retain the best young minds if we are to secure our economic future. We are falling short in this area today.
“Personal income tax rates of 50 per cent or more facing skilled workers and others who drive innovation in most provinces are undermining efforts to make Canada a leader in the emerging digital economy. Punitive personal tax burdens also hamper entrepreneurial activity and make it less likely that our companies will scale their businesses,” commented D’Avignon.
The bold action required to fully address Canada’s economic competitiveness challenges will only be effective when the federal and provincial governments work in collaboration on issues such as taxation, regulation, internal trade barriers, and the pursuit of new trade opportunities. The Business Council encourages the federal government to launch a national working group of first ministers tasked with addressing interprovincial and national competitiveness barriers for the benefit of all Canadians.