IIAC president Ian Russell says it’s time for federal and provincial governments to boost capital formation—a key driver of job creation and economic growth.
Russell notes over the past 10 years, business spending has increased just 2.5%. “Canada has been well down in the list of OECD countries (where comparable data is available) when it comes to business spending as a share of GDP, generally ranking 15 or 16 out of 17 OECD countries in 12 of the last 18 years,” he writes in an industry letter.
He adds eroding corporate tax competitiveness, rising government debt burdens and the uncertainties surrounding NAFTA dampen the outlook for capital formation. But public policies can be re-oriented to take advantage of the improving global recovery and promote much-needed business investment in Canada.
“The immediate priority is to continue efforts to put pressure on U.S. negotiators to preserve and limit amendments to the NAFTA,” he writes.
Russell has three additional suggestions for governments.
- The federal government should present Canadians with a credible plan and clear timeline for balancing the budget. Fiscal discipline is the cornerstone of business, consumer and investor confidence, and critical to robust private sector investment spending and overall economic growth.
- The federal and provincial governments will need to collaborate to improve the competitiveness of the Canadian tax system, particularly corporate tax rates, requiring difficult choices on program spending to make room for lower taxes.
- Access to equity capital has been an obstacle for many small and mid-sized operating businesses, and measures need to be put in place to address this issue. One policy option is a deferral on capital gains earned on asset sales (such as real estate), as long as the proceeds are re-invested in the shares of small public and private Canadian businesses.