E Canada’s Fall Economic Statement Sensibly Aims To Improve Canadian Competitiveness -

E Canada’s Fall Economic Statement Sensibly Aims To Improve Canadian Competitiveness

Nov 23, 2018Jeremy ParkinsonFinance, No picture0

“The Fall Economic Statement is proposing three important immediate changes to Canada’s tax system, in order to enhance business confidence in Canada:

Allowing businesses to immediately write off the cost of machinery and equipment used for the manufacturing or processing of goods.

Allowing businesses to immediately write off the full cost of specified clean energy equipment to spur new investments and the adoption of advanced clean technologies in the Canadian economy.

Introducing the Accelerated Investment Incentive, an accelerated capital cost allowance (i.e., larger deduction for depreciation) for businesses of all sizes, across all sectors of the economy, that are making capital investments.”

(Government of Canada, Economic Statement, Fall 2018)

It used to be the case that Canada’s fall Economic Statement was nothing more than an exercise in fine-tuning of the economic numbers from the previously released annual Budget.

In recent years, however, the Economic Statement has become more political and at the same time, more akin to a mini-Budget than an Economic Statement. This is certainly the case for Canada’s November 2018 Economic Statement.

It is not as if the Canadian economy and its government faced no real challenges. Here are three major challenges to the economy and its competitiveness.

The recent massive cut in the US corporate tax rate has placed future investing in Canada at risk;

The major decline in international oil prices and the record high negative spread between global oil prices and what Canadian producers receive has pummelled Canada’s oil industry, which accounts for at least 25% of Canadian investment spending;

And of course, there are the tariffs on Canadian steel and aluminum exports to the US which have hurt these industries and the confidence of investing in Canada.

In other words, the Canadian government felt it had little option but to respond to the competitiveness concerns in its latest mini-Budget. As well, despite the relatively strong economy, the Trudeau government rather cleverly decided to modestly boost the economy without incurring too heavy a revenue loss. However, the government also decided to postpone any plan for a balanced budget in the near-term future.