Canada - the world’s 11th largest economy – is about
to enter a new era under liberal management. Our local expert
Joanna Prataviera and TMF Group USA Managing Director, Jason
Gerlis, discuss some of the top things investors need to know about
this upcoming change.
Canada’s new Prime Minister, Justin Trudeau, emphasized on
a few economy-related policies during his recent campaign. All of
these policies aimed at boosting the local economy and driving the
country into a new era of sound investment and growth.
Canada is a large exporter of oil and the seventh-largest stock
market by capitalization, but is suffering from a lack of
investment projects. Bearing this in mind, here are some of the
policies that investors should keep an eye on if they are already
operating in or pursuing business in Canada:
Income tax: reduction for middle-class Canadians and
raise for the wealthy – Canadian income tax bracket
would go down to 20.5%. Canadians with a taxable annual income
between $44,700 and $89,401 would see their income tax rate fall.
To pay for this tax cut, the wealthiest 1% of Canadians would need
to contribute a little more. A new tax bracket of 33% for
individuals earning more than $200,000 would be introduced.
Businesses could also enjoy a reduction, since Trudeau promised to
lower the small businesses tax rate to 9%.
3 years of deficits to pay for infrastructure
spending - Trudeau's infrastructure policy –
aimed at taking advantage of low interest rates - is projected to
cost $10 billion CAD in the first two years, equivalent to 0.5% of
Canada's GDP. This could boost the stocks of engineering,
construction and equipment companies, though it may take a toll on
government bond prices in the near-term.
Expand export opportunities that benefit
Canada - Trudeau promised to put in place a new
“export promotion strategy” that will help businesses
take advantage of new trade agreements. He would also consider all
trade opportunities currently open to Canada, and explore deeper
trade relationships with emerging and established markets,
including China and India.
New relationships with United States and
Mexico – Trudeau has willingly stated his openness
to working with the United States and Mexico in:
Developing a clean energy and environment agreement
Reducing the current barriers that limit trade
Creating new jobs
Re-focusing the Building Canada Fund to promote a steadier flow
of goods and business travellers by modernizing border
infrastructure and streamlining cargo inspections
Perrin Beatty, president and CEO of the Canadian Chamber of
Commerce, believes Trudeau will be able to promote Canada’s
competitiveness and increase the access to markets for Canadian
businesses of all sizes, if the right strategies are put in place.
The Canadian Federation of Independent Business has said it looks
forward to working with Trudeau’s government on taxation and
other economic issues.
Trudeau, a former high-school drama teacher and son of late
Prime Minister Pierre Trudeau, will have to find ways to balance
the pros and cons that Canada presents in order to achieve growth
instead of a decline. Canada has one of the soundest banking
systems and is the biggest importer of U.S. goods. However, it also
has of the world’s most expensive real-estate markets with
the economy being just a few steps away from a recession.
Taking advantage of the new
At the moment, 98.2% of the businesses in Canada are small or
medium companies of 100 or less employees, according to the
Business Development Bank of Canada. These companies contribute
more than 50% of the country’s GDP. Trudeau’s economic
policies will facilitate new and/or improved business opportunities
to those existent companies and also to new players looking to
operate in Canada.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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