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PRINT EDITION
Senate committee calls for corporate tax cuts to boost competitiveness
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By BILL CURRY
  
  

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Wednesday, October 17, 2018 – Page B1

OTTAWA -- The Senate banking committee is calling on Finance Minister Bill Morneau to announce immediate tax cuts for business and a longer-term royal commission on taxation to address concerns that Canada is now a less attractive place for investment in light of recent tax cuts in the United States.

In a report released Tuesday, senators also called for reducing delays caused by government regulations; improving Canada's trade infrastructure; and expanding trade with China and India.

The recommendations from the standing Senate committee on banking, trade and commerce come as Mr. Morneau is preparing a fall fiscal update that will focus on the theme of improving Canadian competitiveness. The minister's February budget said the Department of Finance Canada would conduct a thorough analysis of the package of U.S. tax changes that took effect this year.

Speaking with reporters after the report's release, Mr. Morneau said he spent the summer listening to business leaders about the impact of the U.S. tax cuts, but that it is too early to say what measures the government will announce.

"We're deliberating now on how we can ensure that for those organizations that are making investments into Canada, how we can maintain a positive environment for them to do that," he said.

"I'm not at the stage where I can discuss actual measures that we might or might not take, but that is our goal: We want to make sure that in Canada we continue to have people that are making significant investments so they can create good, well-paying jobs in our country and we're going to satisfy that goal."

To date, the minister has played down expectations that Ottawa will cut personal or corporate tax rates, although he has also said that no measure has been ruled out. The government has signalled, however, that it might support new tax breaks on business investment.

The Senate report recommends a corporate tax cut and a temporary policy of allowing the full and immediate deduction of capital expenditures.

"The recent tax changes in the United States have reduced the competitiveness of our corporate and personal income tax systems," the Senate report states.

Senators noted that Canada has not conducted a royal commission on taxation since 1962 - the Carter Commission - and that another detailed review would provide an opportunity to reduce the complexity of the current tax system.

"Canada needs to reassess the way that it taxes people, businesses and capital in order to make our economy more competitive and to increase productivity," the report states, before acknowledging that such a review could take several years and "urgent action" is required.

The report recommends a mix of "immediate relief for Canadian businesses as well as a road map for comprehensive reform."

The Senate banking committee is chaired by Independent Senator Doug Black, who was appointed as a Conservative in 2013 by then-prime minister Stephen Harper. The committee vice-chair is Conservative Senator Carolyn Stewart Olsen, who was also appointed by Mr. Harper.

The Senate committee recommendations are in line with widespread calls from Canadian business groups urging Mr.

Morneau to reduce business costs in light of the U.S. tax cuts.

Perrin Beatty, president of the Canadian Chamber of Commerce, said that it is critical that Canada launch a thorough review of its tax system to ensure it remains internationally competitive.

"The question is: Are we in fact open for business as nation? We may be open for business but the storefront sometimes is not very appealing," Mr. Beatty said. "We are continuing to lose ground as other nations move to improve their competitiveness."

However, the results of a recent business survey conducted by the Bank of Canada suggest firms are feeling positive about their prospects.

The survey of 100 businesses by the central bank was conducted between midAugust and mid-September, meaning it was before a tentative deal was announced between Canada, Mexico and the United States to resolve the uncertainty over the future trading relationship in North America.

The survey found businesses said sales are up over the past year and are expected to keep growing. It also found that expectations of better sales for domestic and foreign customers was widespread.

With a report from Shawn McCarthy


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