Tipping Point: Public revenue but at what expense?
THE CANADIAN PRESS/Jacques Boissinot
Prime Minister Justin Trudeau, pictured in June, after meeting with Quebec Premier Francois Legault, in Quebec City.
Canada’s recent tax policies are sending a troubling signal to the business community: as the government increasingly turns to corporate taxation as a tool for raising revenue, it risks creating an environment of uncertainty that undermines our economic competitiveness.
This growing trend, if left unchecked, could have long-lasting implications for investment, job creation and Canada’s overall economic stability.
Means & Ways will hold a panel discussion on Aug. 28 to explore the risks associated with recent tax policies. Participating will be:
Jack Mintz, a tax expert and President’s Fellow at the University of Calgary’s School of Public Policy
Lisa Raitt, former Conservative cabinet minister, Vice Chair of Global Banking at CIBC and Co-Chair of the Coalition for a Better Future
Jon Lieber, Managing Director at Eurasia Group who will give us some global context
Nik Nanos, Founder of Nanos Research Group to discuss polling on the issue
We’ve seen a series of tax measures recently that, while intended to address fiscal challenges, have sparked concern among businesses. The retroactive capital gains tax, arbitrary taxation of financial services and new digital sales tax measures are just a few examples. These policies, some rolled out with little warning or consultation, create an unpredictable landscape for businesses, making it difficult for them to plan and invest with confidence.
One of the most concerning developments is the government’s push to implement the Global Minimum Tax (GMT). While it hasn’t received as much publicity as the capital gains tax, the GMT represents a significant shift in how Canada taxes its multinationals and could serve as a bellwether for future policy decisions.
The GMT aims to close loopholes that allow multinationals to shift profits to low-tax jurisdictions, ensuring that corporations pay their fair share no matter where they operate. While the principle of tax fairness is sound, the way Canada is implementing the GMT raises serious concerns. By moving ahead with the tax ahead of other countries — including key trading partners like the U.S. — Canada risks putting its companies at a significant disadvantage.
The U.S., for instance, has adopted a more measured approach, with a global minimum tax rate of 10.5 per cent, compared to Canada’s proposed 15 per cent. Moreover, the U.S. applies its tax on a blended basis — higher taxes in some countries can be blended with lower taxes in others — whereas Canada’s stricter country-by-country approach could lead to higher tax burdens for Canadian multinationals. This discrepancy not only creates an uneven playing field but also threatens to push Canadian businesses to relocate to more tax-friendly jurisdictions.
The data paints a stark picture: 83 per cent of Canada’s total trade is with countries that have no timeline to implement the GMT this decade. Additionally, 73 per cent of Canadian foreign direct investment (FDI) is in nations without GMT timelines. In absolute terms, Canadian companies have $1.58 trillion in FDI in these countries, out of a total of $2.2 trillion. This means a significant portion of Canadian economic activity abroad could be disproportionately impacted by the GMT, while competitors in these regions continue to operate under more favorable conditions.
But this isn’t about just one tax. It’s part of a broader pattern of policymaking that seems to prioritize short-term revenue generation over long-term economic health. The government’s focus on using corporate taxation as a quick fix for fiscal pressure — whether through the GMT, capital gains adjustments or digital sales taxes — creates a climate of uncertainty that’s detrimental to investment and growth.
Our country’s reputation as a stable and predictable place to do business is at risk. When tax policies are rolled out hastily or without sufficient consideration of their long-term impact, it sends the wrong message to the business community.
As we navigate this new fiscal landscape, it will be crucial to balance the need for tax fairness with the imperative of maintaining our competitiveness on the world stage. Only then can we ensure that our businesses continue to thrive, creating jobs and driving prosperity for all Canadians.
