Ahead of the Nov. 4 federal budget, Canadian business leaders surveyed sought sectoral supports, expanded financing and loan options, and structural tax system adjustments to help them transition and be part of ‘Build Canada’ opportunities, KPMG in Canada reported.
KPMG LLP’s annual federal budget survey gathered insights from 501 leaders of Canadian companies. According to KPMG’s press release, the results revealed that:
- 84 percent of those trading directly with the US experienced increased business costs
- 80 percent overall believed that the US tariffs made their businesses less competitive, considering higher import and production costs, lower revenues, halted investments, or the loss of the $800 duty-free exemption on shipments to the US
- 96 percent called Canada’s dependence on the US the most significant risk to its economic future and acknowledged the necessity of diversifying trade with reliable and strategic partners
“Our survey pointed to the need for the Canadian government to invest in improving the business environment by delivering on wider access to low-cost financing and capital, tax relief that attracts investment, less red tape, and greater incentives to innovate,” said Lucy Iacovelli – KPMG’s Canadian managing partner, tax and legal – in the press release.
KPMG’s research determined that most business leaders polled thought that the Canadian government should alleviate their burden by offering more transitional support, which would enable them to participate in Canada’s ‘nation-building’ strategy amid the uncertainty arising from the Canada-United States-Mexico Agreement’s renewal next year.
Specifically, the survey showed that business leaders wanted the government to take the following steps when considering the federal budget:
- 96 percent: infrastructure and policies enabling Canada’s energy sector to access global markets
- 92 percent: improved access to Canadian markets, including through streamlined provincial regulations, better labour mobility, or lower transportation costs
- 92 percent: more plans to address government waste
- 90 percent: a new national industrial strategy to compete in global markets
- 90 percent: incentives and support to adapt and redesign products and services for overseas markets
- 90 percent: immediate expensing to recover some business costs
- 90 percent: a patent box regime and other effective research and development tax incentives to promote patenting and the commercialization of Canadian inventions
- 97 percent: expanded and reoriented programs to enable access to non-US markets and reliable trading partners
- 91 percent: broader financing and loan options to improve business liquidity for tariff-affected sectors
“While the focus of the upcoming federal budget is to make a generational investment in building the economy, the government also needs to make expenditures that provide immediate relief and sustain capital for businesses and sectors that are struggling right now,” Iacovelli said.
Need for tax reform
Regarding possible adjustments to the tax system, Brian Ernewein – KPMG in Canada’s senior advisor, national tax – pointed out the lack of room to raise personal or corporate income taxes.
“In fact, current top personal tax rates are likely impeding productivity and growth, and a lower combined federal-provincial corporate tax rate is required to restore Canada's competitive rate advantage,” Ernewein said in KPMG’s press release.
According to KPMG, business leaders polled wanted the federal government to work on tax relief and reform to help increase investments and entrepreneurial activities, boost competitiveness, meet transitional needs, and improve the economy’s prospects.
Specifically, the survey demonstrated that, among respondents:
- More than nine in 10 sought collaboration among the federal and provincial governments to reduce the overall Canadian corporate tax rate by two to four percent
- Nine in 10 asked for a committed timeline for tax reform to cut corporate taxes
“These realities point to the need for the government to reconsider the level of various consumption taxes,” Ernewein said. “All taxes – including consumption taxes – impose a cost on the economy. However, consumption taxes impose less damage than personal or corporate income tax, and represent a stable source of government revenue.”