Canada Changing Taxes To Compete With USA Trump Tax Cuts

[Economy 52,839]

https://www.google.ca/amp/s/business.financialpost.com/news/economy/canada-to-respond-to-u-s-tax-reform-challenge-in-fiscal-update/amp

 

Canada is making plans for next budget to increase business competitiveness to even the playing field given Trump's tax cuts

 

Canada used to have a big Corporate tax advantage over the US. Now after Trump's tax cuts when State/Province taxes are also factored in, Canada's are higher on average by 1% (26% USA vs 27% Canada)

 

Trudeau has suggested that an over lower rate is unlikely but they are seriously considering copying the US change to accelerate expensing where Corporations can write off expenses for project expenses in earlier phases

 

Changes to energy sector reviews are also likely to be changed as Canada has failed to build every proposed pipeline the last decade as legal challages and loopholes protestors find end up shutting projects everytime now

[Economy 52,839]

@Luc @Woolfsmck @OBEY @Lord Temptation @PartySick @JustinTrudeau

 

I think accelerated write off of expenses is a good idea tbh. The government in the long run still gets its money just delayed, while companies are less reluctant to invest if they need to get in debt for expansion projects

[Cassidyfal 758]

oh wait am i allowed to say never mind? 

[Economy 52,839]

1 hour ago, Cassidyfal said:

oh wait am i allowed to say never mind? 

What does that mean? Nevermind what?

[Cassidyfal 758]

1 hour ago, Economy said:

What does that mean? Nevermind what?

I accidentally commented lol sorry 

[Economy 52,839]

8 hours ago, Cassidyfal said:

I accidentally commented lol sorry 

If ur refering to the tags it's people I've had economic discussions with it doesn't mean others can't comment too

 

[Woolfsmck 2,763]

17 hours ago, Economy said:

@Luc @Woolfsmck @OBEY @Lord Temptation @PartySick @JustinTrudeau

 

I think accelerated write off of expenses is a good idea tbh. The government in the long run still gets its money just delayed, while companies are less reluctant to invest if they need to get in debt for expansion projects

How does accellerated expenses write off compare to regular speed tax write-off?

[Economy 52,839]

2 hours ago, Woolfsmck said:

How does accellerated expenses write off compare to regular speed tax write-off?

I don't know the details tbh

 

I just know that now in the US you can front load future expenses on a new expansion or investment and get the tax benefits all in the begging instead of gradually each year

 

In Canada like in most Countries you can't bring it forward like that

 

So the idea was to emulate something similar.

[Woolfsmck 2,763]

This must be a special circumstance.... corporate level or similar ....

Small business, sole proprietor, like me, I pay quarterly estimated , at the end of the year I deduct operating costs from gross revenue.   What ever the total (taxable) revenue is determines the tax balance .. if I owe , or get a refund...no way to 'accelerate' expenses in to that formula that I can see.

[Lord Temptation 11,209]

7 hours ago, Economy said:

I don't know the details tbh

 

I just know that now in the US you can front load future expenses on a new expansion or investment and get the tax benefits all in the begging instead of gradually each year

 

In Canada like in most Countries you can't bring it forward like that

 

So the idea was to emulate something similar.

I believe the principle behind accelerated write offs is similar to quantitative easing (printing more money) i.e. it buys the government more time. A very unstable and possibly explosive strategy that should only be used intermittently rather than chronicly. It’s like the Government taking out a new loan...to pay off it’s overdue credit card.

[Economy 52,839]

29 minutes ago, Lord Temptation said:

I believe the principle behind accelerated write offs is similar to quantitative easing (printing more money) i.e. it buys the government more time. A very unstable and possibly explosive strategy that should only be used intermittently rather than chronicly. It’s like the Government taking out a new loan...to pay off it’s overdue credit card.

But I think international companies in particular could be swayed to make a few more plants or whatever in the US now vs else where if they can save money immediately and not have to take out as much Corporate debt

 

Ever since Trump's tax changes weve seen a reduction in Corporate investment here when we lost our tax rate advantage

 

So I don't think it's only bringing future investment forward, I think it also brings investment that perhaps wouldn't otherwise have occured

 

It's not something we never considered before but the US doing it now we might have to do it too

 

Canada (like Sweden, Finland, Australia as well) did not get a financial correction after the 2008 crisis because our banks kept lending

 

Consumer debt is extremely high (169% of income vs 134% peak in US in 2007 by comparison) and real estate after 17 years of boom has peaked. Our economy cannot grow or avoid collapse as rates rise without growth in exports and business investment to offset weakness in consumer and real-estate

 

The government knows that and I think they will fight tooth and nail to compete with the US even if it means having to increase the deficit again

 

[Lord Temptation 11,209]

21 minutes ago, Economy said:

But I think international companies in particular could be swayed to make a few more plants or whatever in the US now vs else where if they can save money immediately and not have to take out as much Corporate debt

 

Ever since Trump's tax changes weve seen a reduction in Corporate investment here when we lost our tax rate advantage

 

So I don't think it's only bringing future investment forward, I think it also brings investment that perhaps wouldn't otherwise have occured

 

It's not something we never considered before but the US doing it now we might have to do it too

 

Canada (like Sweden, Finland, Australia as well) did not get a financial correction after the 2008 crisis because our banks kept lending

 

Consumer debt is extremely high (169% of income vs 134% peak in US in 2007 by comparison) and real estate after 17 years of boom has peaked. Our economy cannot grow or avoid collapse as rates rise without growth in exports and business investment to offset weakness in consumer and real-estate

 

The government knows that and I think they will fight tooth and nail to compete with the US even if it means having to increase the deficit again

 

It could work. I don’t think that it’s the *only* or the *best* solution but it very well *could* have the desired effect - without too many unintended consequences. 

It’s just weird how so many countries feel they have to “compete” with America. Or leaders have to “compete” with Trump. Maybe that is just the media portrayal. All countries trade with the US directly or indirectly. America is not the bad guy. Sometimes its more cost-effective to improve your strengths rather than eliminating your weaknesses. It all depends on your timeline. 

Ultimately the philosopher in me sees economics as an internal struggle.

[Economy 52,839]

8 hours ago, Lord Temptation said:

It could work. I don’t think that it’s the *only* or the *best* solution but it very well *could* have the desired effect - without too many unintended consequences. 

It’s just weird how so many countries feel they have to “compete” with America. Or leaders have to “compete” with Trump. Maybe that is just the media portrayal. All countries trade with the US directly or indirectly. America is not the bad guy. Sometimes its more cost-effective to improve your strengths rather than eliminating your weaknesses. It all depends on your timeline. 

Ultimately the philosopher in me sees economics as an internal struggle.

Perhaps but Canada is in a unique situation here...

 

The US is the only Nation we border (and it's a huge economy on top of that) and 90% of our population is concentrated within 160 miles of US border. On top of that we have free trade with the US in most items

 

Our economy is extremely interlinked with the US. A lot of chains, retails, or even manufacturers have major operations on both sides of the border and it's very easy to make more investment on one side of the border that's also an investment for the other (say like a new plant)

 

Canada never matched the US GDP Per Capita fully until our business and Corporate taxes were actually lower than yours (in the last 2 or 3 years the US surpassed us again if you adjust for exchange rate tho) and I bet the reason is that since the US is a much larger Nation with 9 times the population, it's more efficient to make major cebtral operations there instead of here in most Cases... So our taxes have to be lower just to level competitive advantage

 

Now with Trump's tax cuts and changes we lost that tax advantage and were already seeing large corporations that operate on both sides of the border make more investment in the US than in Canada

 

Now we have other issues too.our biggest export (Oil) is selling at a $30/barrel discount due to severe pipeline shortages and only having access to 1 major customer (the US) and every attempt to build another is ending up in failure because British Columbia is the Province of Tree Huggers that always find a way to block everything. That big oil discount Costa many billions a year in lost National income

 

Canada although competitive in infrastructure and education and tax rates overall ranked 34/35 OECD Nations in competitiveness for permits and licenses for businesses. Our zoning laws or paper work required to start a business is extremely uncompetitive here. That's probably why despite 17 years of surging home prices we still have a supply shortage and never got the oversupply in construction the US did during their boom. It's just too hard here to get approval for anything

 

But back to taxes... I don't know what the EU, or Japan, or China think they have to compete so hard with the US but I think in Canada's case we're kinda forced to

 

Even our financial system due to extremely close connection we tend to follow your central banks rate decisions so we don't import too much inflation (or too high a currency if we raise and you don't). When the US started raising rates in 2015 I think it was, we started to follow suit right after.

 

Critics say we need to be less dependent on US and increase ties with others (which we've been trying with free trade deals with EU and now trying with China) but I think only bordering the US and most our population concentrated near the border, geographical location will always make us very dependant on the US. I don't think that will change, maybe reduce slightly but not change

[Economy 52,839]

9 hours ago, Lord Temptation said:

It could work. I don’t think that it’s the *only* or the *best* solution but it very well *could* have the desired effect - without too many unintended consequences. 

It’s just weird how so many countries feel they have to “compete” with America. Or leaders have to “compete” with Trump. Maybe that is just the media portrayal. All countries trade with the US directly or indirectly. America is not the bad guy. Sometimes its more cost-effective to improve your strengths rather than eliminating your weaknesses. It all depends on your timeline. 

Ultimately the philosopher in me sees economics as an internal struggle.

Perhaps but Canada is in a unique situation here...

 

The US is the only Nation we border (and it's a huge economy on top of that) and 90% of our population is concentrated within 160 miles of US border. On top of that we have free trade with the US in most items

 

Our economy is extremely interlinked with the US. A lot of chains, retails, or even manufacturers have major operations on both sides of the border and it's very easy to make more investment on one side of the border that's also an investment for the other (say like a new plant)

 

Canada never matched the US GDP Per Capita fully until our business and Corporate taxes were actually lower than yours (in the last 2 or 3 years the US surpassed us again if you adjust for exchange rate tho) and I bet the reason is that since the US is a much larger Nation with 9 times the population, it's more efficient to make major cebtral operations there instead of here in most Cases... So our taxes have to be lower just to level competitive advantage

 

Now with Trump's tax cuts and changes we lost that tax advantage and were already seeing large corporations that operate on both sides of the border make more investment in the US than in Canada

 

Now we have other issues too.our biggest export (Oil) is selling at a $30/barrel discount due to severe pipeline shortages and only having access to 1 major customer (the US) and every attempt to build another is ending up in failure because British Columbia is the Province of Tree Huggers that always find a way to block everything. That big oil discount Costa many billions a year in lost National income

 

Canada although competitive in infrastructure and education and tax rates overall ranked 34/35 OECD Nations in competitiveness for permits and licenses for businesses. Our zoning laws or paper work required to start a business is extremely uncompetitive here. That's probably why despite 17 years of surging home prices we still have a supply shortage and never got the oversupply in construction the US did during their boom. It's just too hard here to get approval for anything

 

But back to taxes... I don't know what the EU, or Japan, or China think they have to compete so hard with the US but I think in Canada's case we're kinda forced to

 

Even our financial system due to extremely close connection we tend to follow your central banks rate decisions so we don't import too much inflation (or too high a currency if we raise and you don't). When the US started raising rates in 2015 I think it was, we started to follow suit right after.

 

Critics say we need to be less dependent on US and increase ties with others (which we've been trying with free trade deals with EU and now trying with China) but I think only bordering the US and most our population concentrated near the border, geographical location will always make us very dependant on the US. I don't think that will change, maybe reduce slightly but not change

[Lord Temptation 11,209]

I imagine being so close to the US would be a double edged sword. On the one hand it creates savings in transportation of goods (a huge cost) and storage. On the other hand companies can jump from one side of the border to the other unless they have their way. Essentially multinational companies can hold governments to ransom. They can even sue governments. So this creates a lot of dependancy, which is a massive systemic weakness. Relying on a single customer for the majority of your trade is a very precarious situation to be in. They sneeze - you get sick.

In this sense I think all countries should follow Trump’s protectionist policies, simply because they have no choice. If the biggest economy in the world is incentivising multinational companies to close their offshore holdings and go home there’ll be a power vacuum in almost every single wealthy country. Only very low income countries - as well as American low-to-middle income workers - will benefit from Trumps policies. He’s definitely changed the game.

So I agree with your stance. Canada has to fight fire with fire and try to swoon Canadian companies to return home. Or increase domestic investment. Oil wont be the answer. People want new industries. Things that utilise the highest level of our minds. All countries need to start looking after their own citizens more. The whole mantra of “think globally” is kind of redundant now. Moving your business overseas will save you money in the short term but in the long term people get sick of seeing strangers, expats, tourists all the time. We need to be locavores. 

The whole world seems like its shrinking.

Btw I am not a Yank, I’m Aussie