November 2018

Canadian Fall Economic Statement - More Business-Friendly?

RBC Senior Economist Josh Nye looks at the steps the Canadian government has taken to address the country’s competitiveness challenges and the concern around the budget’s persistent deficits. This report was originally published by RBC Economics.

Excerpt from the report:

“After receiving criticism for scant mention of competitiveness in Budget 2018, Finance Minister Morneau promised in March that the issue would be “Job 1” over the following six months. That culminated in the Fall Economic Statement that was billed as addressing some of Canada’s competitiveness challenges, including a relatively less attractive corporate tax regime following sizeable tax cuts in the United States. Few expected an across-the-board cut in Canada’s corporate rate—instead, expectations were for less costly tax incentives to encourage business investment. That’s exactly what was delivered with an accelerated capital cost allowance that permits immediate expensing of qualifying capital goods, letting businesses recover the cost of new investment more quickly. That measure provides an additional incentive for firms facing growing capacity pressures to invest. Unfortunately, the foregone revenue from that initiative was not offset by program spending efficiencies. Instead, it absorbed the additional fiscal room generated by Canada’s solid economic performance.”

For more on the Fall Economic Statement, read the full report which explores in more details the new corporate tax incentives, projection changes to the budget and the cause for concern of persistent deficits.

Read the full report