Canada Must Be Bold to Attract Investment Amidst Turmoil

Strategic Insights -

As the United States retreats inward and Canada faces a crumbling international system, Ottawa must be bold in attracting investment and making the country an attractive place to launch a business and take a risk. The current state of affairs, fueled by Donald Trump's tariffs and authoritarian actors like China and Russia, requires more than just incremental domestic transformation or relying on access to the U.S. market. Canada needs to supercharge investment, drive innovation, and unleash a gusher of risk capital into startups, scale-ups, and infrastructure projects.

Key Takeaways:

  • Canada's productivity record is terrible, lagging behind its G7 allies for decades, with a widening gap continuing to this day.
  • The country's workers are less productive and, therefore, paid less than employees in other advanced economies, with the ultimate issue being too little investment.
  • Canadian companies invest fewer dollars per worker in technology, equipment, and research than their rivals, making it essential to attract more investment.
  • Eliminating the capital gains tax would supercharge Canadian investment, unleash risk capital, and create more jobs.
  • Critics argue that such a reform would benefit the wealthy, but this is a short-sighted view, as the true beneficiaries would be Canadian businesses and workers.
  • A surge of new capital would mean more startups, expansions, and jobs, ultimately benefiting the economy.
  • Ottawa must ensure that the benefits of a capital-gains-free Canada are directed toward like-minded partners and firms from rules-based economies, avoiding corrosive investment from authoritarian regimes.
  • Abolishing capital gains taxes would eventually make the tax base wider, generating more income and consumption tax revenues, and potentially paying for itself and then some.

Statistics:

  • Canada's productivity record lags behind its G7 allies, with the gap continuing to widen.
  • Canadian companies invest fewer dollars per worker in technology, equipment, and research than their rivals.
  • The capital gains tax contributes less than 5% of total federal revenues.
  • Personal income taxes, corporate taxes, and consumption taxes such as the GST contribute significantly more to federal revenues.
  • Ending wasteful spending and re-establishing fiscal discipline could complement bold reforms like rolling back capital gains taxes.

Sources:

  • Jonathan Berkshire Miller, "Canada must be bold to attract investment amidst turmoil" (The Globe and Mail)