This document discusses Canada's cost competitiveness compared to other countries. It summarizes that Canada has fallen in international rankings on taxation and productivity. Several factors impact competitiveness, including high hydro rates in some provinces, increasing regulatory burdens, and new policies around taxation, labor, and innovation funding. The US tax reforms will further improve US competitiveness by lowering corporate taxes to levels close to Canada's. The author argues that Canada needs to revise multiple policies, including tax policies, to encourage business investment and improve competitiveness.

1. Cost Competitiveness –
Canada – January 2018
BY: PAUL YOUNG CPA, CGA
DATE: JANUARY 27, 2018

2. Paul Young - Bio
• CPA, CGA (1996)
• Financial Solutions (FOPM/FPM)
• SME – Risk Management
• SME – Close, Consolidate and Reporting
• SME – Public Policy
• SME – Financial Solutions
• SME – Advance Technology and Market
Entry
• SME – Supply Chain Management
• SME – Business Strategy and
Restructuring
Contact information:
Paul_Young_CGA@Hotmail.com

3. Agenda
 Taxation
 Productivity
 Innovation
 Labor Rates/taxation burden
 Hydro Rates
 Regulatory Burden / Business Climate
 USA Manufacturing Focus
 Canada and USA PMI Index
 Labor Productivity
 Issues at Hand
 Blog - Taxation – Corporate and Business Taxes

4. Cost Competitiveness
 Market set prices for business
 Government set policies like environment laws, labour laws, trade/investment,
taxation
 It is not one policy that drives FDI, but many policies

5. Taxation / Ranking
Source - https://taxfoundation.org/corporate-income-tax-rates-around-world-2016/ or http://www.pwc.com/ca/en/media/release/canada-ranks-2nd-among-g7-nations-ease-of-corporate-tax-payment.html
Canada fell in 2017 from 9 to 17. Liberal Party of Canada Took over in 2016.

6. Ranking / Canada Productivity
Source - http://time.com/4621185/worker-productivity-countries/
Source -
https://www.forbes.com/sites/jackzenger/20
13/01/17/the-3-forces-that-drive-improved-
productivity/#3ff2246239a8 or
http://blogs.worldbank.org/growth/what-
drives-productivity
It is also called TFP (total
factor productivity) and
measured as a residual – the
difference between outputs
and a set of inputs (e.g. labor,
capital, and intermediate
goods, including energy, land
and buildings). Measurement
problems plague both inputs
(e.g. how do you account for
quality of labor or capital) and
outputs.

7. Innovation Ranking
 Source - http://www.wipo.int/pressroom/en/articles/2017/article_0006.html
• Canada has fallen 3
spots in 2016 from 15 in
2015 to 18 in 2016
• Liberals ran a platform
on spending on
innovation -
https://www.thestar.com
/news/canada/2017/03/1
2/liberals-nearing-
decision-on-how-to-
spend-800m-earmarked-
for-innovation.html

8. Labor Rates / Tax Burden
 Source - https://taxfoundation.org/comparison-tax-burden-labor-oecd-2016/

9. Labor Costs

10. Hydro Costs / Ranking
 http://www.worldatlas.com/articles/electricity-rates-around-the-world.html
• BC, MB and PQ generate the bulk of
their power through Hydro
• Ontario is out there when it comes
to high rates across North America
• Liberal Government is pushing FIT
at the federal level via their carbon
taxation policies -
http://www.torontosun.com/2017/0
7/20/canadian-youth-will-have-to-
wait-for-promised-green-jobs

11. Regulatory Burden
Source - https://www.forbes.com/sites/kurtbadenhausen/2016/12/21/sweden-heads-the-
best-countries-for-business-for-2017/#1215046c7ecd

12. Environmental Ranking
 Source – Yale University
Source -
https://issuu.com/2016yaleepi/docs/e
pi2016_final

13. Carbon Tax / Competitiveness
 Source - https://gncc.ca/business-costs-canadian-competitiveness-not-crying-wolf/?

14. USA Manufacturing - refocus
 http://mfgday.industryweek.com/2017/10/04/forty-percent-increase-in-u-s-manufacturing-is-achievable/?NL=IW-
07&sfvc4enews=42&cl=article_2&utm_rid=CPG03000001519274&utm_campaign=22234&utm_medium=email&elq2=e309b6bd6398
4baeb8d9b9f5691c9239

15. PMI Index – Canada and USA
Source - https://www.theguardian.com/business/live/2017/oct/02/uk-manufacturing-growth-hard-brexit-eurozone-monarch-airline-fails-business-live or http://www.marketpulse.com/20171002/canada-ihs-markit-manufacturing-pmi/
USA PMI Canada PMI

16. Canada Labour Productivity
Source - http://www.statcan.gc.ca/daily-quotidien/171206/dq171206c-eng.pdf

17. Blog - Corporate and Business Taxes
 http://business.financialpost.com/news/economy/major-tax-bill-passes-in-u-s-big-consequences-big-debates-ahead-for-
canada
“it reduces American corporate taxes, which were among the highest in the industrialized world, down to levels
equivalent to Canada’s when combined with state and provincial rates.
 Some observers say Canadian policy-makers will feel pressure to respond, either by reducing corporate rates or using other
policy tools to make the country a more attractive investment destination.
 Tax planning will change – Companies will look at how the managed their shared services in terms of cost sharing.
 Capital investment – Canadian companies may look at expanding their operations in the USA to take advantage of the lower
corporate tax rates
 Deferred Income Taxation will need to be adjusted to the new rates. Deferred income taxes are difference to what you report
for accounting and tax
 Canada will need to revisit its tax policies, especially R&D credits, payroll taxes, corporate taxes, etc
 Canada is moving to carbon taxation including more regulations. The USA is moving to low tax and low regulations

18. Ontario / Cost Competitiveness
 Premier Wynne can bitch at business for making cost adjustment to her increasing the minimum wage by 21%
on January 1, 2018.
 Here are things ignored by Wynne:
 Hydro Rates – Ontario has some of the highest hydro rates in North America -
http://www.cbc.ca/news/canada/kitchener-waterloo/kitchener-toronto-factory-industry-electricity-rates-1.4011519
 Carbon Taxation was introduced which is just cash grab that forces up costs to consumers -
https://www.atlasnetwork.org/news/article/canada-should-learn-from-australias-failed-carbon-tax-experiment
 Sousa eliminated EHT threshold - https://www.ggfl.ca/uploads/files/Changes_Employer_EHT.pdf
 Wynne has drag her feet on getting resource projects off the ground - http://www.cbc.ca/news/canada/thunder-
bay/thunder-bay-ring-of-fire-1.4442435
 Ontario debt is a big problem - https://www.thestar.com/news/queenspark/2017/12/11/ontarios-fiscal-watchdog-
doubts-books-are-balanced.html
 Other tax increases

19. Summary
 Hydro Costs
 Ontario and many of the Atlantic provinces are struggling with unsustainable residential and business rates for Hydro
 The Federal Government plans to introduce FIT at the federal level. FIT was a failure in Ontario - https://www.theglobeandmail.com/opinion/a-sunny-
ontario-experiment-gone-wrong/article19890164/
 Regulatory burden varies across Canada
 New taxation using leads to more regulatory filings
 New labor policies (Alberta and Ontario)
 Innovation funds to be effective need to be open to everyone.
 Tax policies need to be revised to encourage more innovation spending by business
 Wages have been stagnant for over 30+ years.
 Small Business Tax Proposal needs to be scrapped (http://www.canadianmanufacturing.com/manufacturing/tax-reform-devastating-
small-manufacturers-cme-says-202423/
 USA Tax reforms (http://fortune.com/2017/09/30/tax-reform-three-questions-for-business/)
 USA moving to reducing business taxes while Canada is hiking various business taxes
 Business will invest where they can get their return required by the business model.
 It is not one policy that drives cost competitiveness, but many policies
 Liberal are introducing carbon taxation, hikes to payroll taxes, no reduction in time to get projects approved.

20. Contact Information
Email:
Paul_Young_CGA@Hotmail.com