Business group calls for sweeping tax reforms ahead of federal election as competitiveness worries deepen

Business Council of Canada head Goldy Hyder argues that a deep, structural reform of the Canadian tax code could help unleash the country's economic potential

Business Council of Canada CEO Goldy Hyder says U.S. fund managers are starting to perceive Canada as presenting a “sovereign risk.” Ryan Emberley/Postmedia/File

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OTTAWA — A business group representing 150 Canadian corporations has been lobbying federal officials for a broad-based review of the tax code, part of a wider effort to renew awareness about Canada’s waning competitiveness ahead of the looming federal election.

Goldy Hyder, head of the Business Council of Canada, has met with a number of cabinet ministers, opposition leaders, labour groups and others to discuss the potential for a deep and structural reform of the Canadian tax code, which he argues could help unleash the country’s economic potential. The lobbying blitz comes amid concerns in the private sector that Ottawa has ignored calls for more business-friendly policies, particularly in its 2019 budget.

Business competitiveness became a mainstream political topic in 2017, when Finance Minister Bill Morneau introduced controversial tax reforms that helped stoke fears in the private sector about an increasingly burdensome tax system in Canada. Those worries, along with sweeping tax changes introduced by U.S. President Donald Trump and trade uncertainties, prompted Morneau to introduce a number of piecemeal tax incentives aimed at giving the business community a boost.

But executives and some politicians say Ottawa must go much further to properly address Canada’s declining business competitiveness, which they say threatens the the future of the Canadian economy.

“There are things that are holding the country back, and we can continue to punt that ball down the field, but understand that other countries are not doing that, they’re moving on, and they’re very aggressive and they’re very competitive,” Hyder said.

Hyder met with reporters on Thursday to discuss his concerns over the broader business environment, and the council plans to release a report on the subject next week.

He has met in recent months with Conservative leader Andrew Scheer, chief of staff to the economic development minister Gianluca Cairo, several high-level officials at Finance Canada and Simon Beauchemin of the Prime Minister’s Office, according to the lobbyist registry. The group has also met with a number of other politicians, labour groups and indigenous representatives.

Hyder, among others, has proposed that Canada undergo a deep, structural review of the federal tax code in order to attract more capital and workers to the country. Overlapping regulatory bodies and a cumbersome tax regime have become a drag on investment in recent years, some observers say — an issue that could become ever more pressing as Canada faces a “demographic crunch,” according to Hyder.

We can continue to punt that ball down the field, but understand that other countries are not doing that

He said U.S. fund managers are starting to see Canada as presenting a “sovereign risk,” based on discussions with a number of investors there. Citing one investor, Hyder said that the failure to build the Trans Mountain pipeline has been a particular sticking point with U.S. institutional investors.

“He said you want me to come and invest in a country in which your government bought a pipeline, it regulates it, it approved it, and it can’t build it?”

Tax experts and business executives have been calling for a widespread review of the tax code for years.

In December 2017 the Standing Senate Committee on National Finance released a report proposed “an independent comprehensive review of our tax system to ensure that it is not overly complex, maintains our economic competitiveness and is fair to all Canadians.”

“Canada needs a strategy to ensure our tax system encourages, rather than inhibits, innovation, entrepreneurship and economic growth,” the report said.

Politicians have long shied away from structural tax reforms. Brian Kingston, vice-president of policy at the Business Council of Canada, said that an attempt by the current government to review the tax system was ultimately scrapped due to the difficulty in eliminating any of the long list of tax credits and other expenditures.

“They realized every single tax expenditure has a constituency, and a vocal constituency,” he said. “The way you get over that though is you do a comprehensive review, you reduce the number of tax expenditures but you lower the overall rates so everyone benefits.”

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