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Economic statement: Ottawa is on the wrong track

Montreal, November 19, 2018 – On Wednesday, with its economic statement, Ottawa is expected to announce targeted measures to attract investment to Canada and help businesses diversify their exports. The MEI points out again that this will not solve our fundamental competitiveness problem; the government should instead lower corporate taxes in order to restore the Canadian advantage.

“The recent tax cuts in the United States are exacerbating a problem that has hampered the Canadian economy for a long time: Investment is much lower here than in the rest of the industrialized world,” explains economist Mathieu Bédard. “The competitiveness of our companies has fallen considerably, and the United States is now much more welcoming to investors.”

Up until recently, the average combined corporate income tax rate was 39% in the United States, versus just 27% here. This clear advantage disappeared with the US tax cuts, which dropped the American rate to 26%, just below the Canadian rate.

A recent PwC study looking at all sectors of the Canadian economy estimated, among other things, that the US tax cuts could lead to the loss of 655,000 job in Canada, and over $20 billion in tax receipts, should Ottawa fail to respond.

“Whether we like it or not, the vast majority of our international trade is with the United States. Canada and its companies are competing as much to obtain market share as to attract investment. We have no choice about keeping tabs on what happens over there, and adjusting our public policies accordingly,” adds Mr. Bédard.

“Ottawa should restore the Canadian advantage and lower the corporate income tax rate in order to stimulate private investment, create jobs, and boost wages. We have to adjust course, because if nothing is done, the first to pay the price of inaction on taxes will be Canadian workers,” concludes Michel Kelly-Gagnon, President and CEO of the MEI.

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The MEI is an independent public policy think tank. Through its publications and media appearances, the MEI stimulates debate on public policies in Quebec and across Canada by proposing reforms based on market principles and entrepreneurship.


Interview requests: Pascale Déry, Vice President, Communications and Development, MEI. Tel.: 514-273-0969 ext. 2233 / Cell: 514-502-6757 / E-mail: pdery@iedm.org

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