This reader response is presented to the article named “President-elect’s taxes threaten Canadian competitiveness”, Canada is reviewing the impacts of Donald Trump’s proposed tax cuts in the US. It surely will have some impact, but the right factors of influence especially of competitiveness are to be ascertained so as to avoid taking a wrong decision, a devastated one.
This response will give suitable options to Canada to adjust the decline in business, if it may arise, and to gear up for a new policy initiative and season to accommodate some tough but positive decisions.
Canada is an extremely business friendly country and must remain, with its dynamic federal tax rates of 15%, to which Trump is planning to come down to from its present tax rate of 35%. Canada fears losing its business from its own shore to the US below, as the US is expected to cut corporate tax rates to 15%, a very attractive scenario for businesses, even when they are not required to pay the carbon tax, which Canada is thinking to impose. There are implications of tax deductions and that is to gain higher government revenues, and if the US government is not able to gain its expected revenue, they will amend their decision. Canada’s plan of imposing carbon tax on businesses may be hit, a succinct observation, but there may be different permutations, as US will also impose some kind of environment tax to expedite its revenues. Canada need not be critical of its policy of imposing carbon tax, and must go ahead with it, as it is for the environment and must not be subject to the US tax rates. Besides, moving an entire functioning business from one country to another is not a simple task, involving exit approvals and leaving a ready market share in Canada. The anticipation seen in shifting businesses will not fructify soon, as the US congress will put multiple checks before cutting taxes to a significant low of 15%. The shifting of business can be handled with matching or offering may other tax advantages to currently operating businesses.
Canada has high amounts of double taxation, one is the federal tax rates common for all corporate and other is the provincial taxes applied to corporations operating in these provinces. With the lowest rate at 4% and the highest at 16%, it is difficult for corporations to justify their operations and anticipated profits. If Canada mulls a uniform tax system where a single tax code is applied to all corporations, it would be attractive for corporation. This will shoot up business investments in provincial regions, currently lacking consistent growth due to higher taxes. There is no need to reduce Canada’s federal tax rates to a low of 10%, but instead introduce new policies of offering tax exemptions under consistent manufacturing investments, job creations, etc. The best move Canada can make is to lessen, and it is over dependence on US trade, where even Trump is trying to renegotiate the NAFTA agreement. Tying up with other nations interested to make Canada their manufacturing home will be the right step in balancing its trade dependence so as to keep it and the citizens safer than they now are. Despite Trump’s disinterest in NAFTA and renegotiation request his scrapping, it completely is being played down by many economists, as it is important for the US to have geographical unity (Panetta, 2016). Trump’s repatriation tax rates of 10% is to lure back trillions of money stashed in international markets fearing higher taxes, which is to build tax revenues. Hence, it is not a big threat to Canada.
Canada is one of the most reliable oil suppliers to the US, considering this Canada cannot interpret Trump’s policy intents to be threatening (“Here is how the Trump presidency will impact Canada”, 2016). In fact, it may even be stronger after the negotiations when irrelevant and outdated clauses are done away with. Even with the 3rd ranking in OECD countries and US coming to the 12th position, it will not deprive Canada of its business friendly environment, where with some tax adjustments, and it can easily do away with the outgoing threat of businesses.