Focus remains on attracting: world-class talent, innovation spending, and early-stage investment
Deloitte’s tax leaders commend the federal government for staying the course on planned corporate tax rate reductions. Nonetheless, Deloitte believes that the budget did not adequately address Canada’s competitiveness nor help to cultivate a stronger knowledge economy. Deloitte would like to see the following in the 2012-2013 federal budget:
- A more globally competitive personal tax system
- A focused immigration strategy
- Policies to attract world-class research and development
- Incentives to encourage investment in early stage, innovation-industry development
Commenting on the federal budget, Andrew W. Dunn, Deloitte’s Managing Partner of Tax, said:
“Today’s budget further cultivates Canada’s position as an attractive business destination for global enterprise. By choosing to proceed with planned corporate tax rate reductions, the government sends a signal that Canada is friendly to investment — both foreign and domestic.”
“More needs to be done, however, to position Canada as an attractive employment destination for highly skilled professionals and entrepreneurs,” Andrew added. “Put simply, our government must create a more globally competitive personal tax system. Globalization is driving international mobility and Canada must be sure to attract those who can contribute most to the economy. Attracting the best talent today will help us foster a stronger and more competitive workforce that can address the pressing market challenges of tomorrow.”
As part of its ongoing dialogue with the Finance Ministry, Deloitte believes the government’s personal tax policies should position Canada more competitively against those offered by the United States, Canada’ s main rival for talent.
“Over the next four years, we need to modify our personal tax and immigration policies so they at least match what’s offered by the United States,” said Dunn. “A more appealing tax and immigration strategy will draw highly skilled professionals and entrepreneurs to further diversify and fuel our knowledge-based economy.”
“With a majority Parliament, the government is able to plan with a longer-term horizon,” said Albert Baker, Deloitte’s tax policy leader. “Deloitte will continue to press for these tax policy measures with a view to improving Canada’s global competitiveness.”
More focus needed to close the gap in Canada’s innovation ecosystem
Deloitte believes that the federal government must create measures to close gaps in Canada’s innovation ecosystem, particularly in the area of financing early-stage research and development projects.
“Canada needs to look beyond its borders to attract start-up business leaders and entrepreneurs,” said Mark Noonan, a Deloitte Tax partner. “Our economy will fail to maintain its position in the global innovation race if Canada doesn’t offer the financial incentives and support needed to facilitate effective research and development.”
Noonan said Canada can exploit a position of leadership in the growing knowledge-based industries, especially in life sciences, alternative energy, clean technology and digital media sectors. As part of its ongoing discussion with the Finance Ministry, Deloitte continues to press for the launch of an “angel investor tax credit” that supports and finances early stages of innovation projects.
“There’s a strong appetite from entrepreneurs and business leaders who are looking for the most appealing innovation opportunities,” said Noonan. “If this appetite isn’t supported by adequate funding and support, entrepreneurs will look elsewhere and Canada’s innovation ecosystem will risk losing its appeal.”
Other measures championed by Deloitte to support Canada’s innovation drive are a later-stage credit for corporate venture investors and direct investment, including matching grants.
Budget does not do enough to promote retirement savings
Deloitte believes that the 2011 federal budget does not adequately encourage individuals to prioritize long-term savings strategies that are sufficient to prevent a future economic crisis:
“Against the backdrop of an aging workforce, the government really needs to do more to educate citizens about the significance of long-term, effective savings plans,” said Baker. “The government has many tools to help incentivize and encourage individuals to think more logically and long-term about their financial futures. Potential policies include enhanced up-front income deduction, higher savings plan thresholds, reduced tax when savings are withdrawn or even pension credit increases.”
Deloitte’s presentation to the Standing Senate Committee on Banking, Trade and Commerce in April 2010 proposed a flow-through of the tax benefit of certain forms of income (dividends and capital gains) when withdrawn from Canadian retirement vehicles.
Baker said, “We also recommend a once-per-lifetime option providing immigrants with an initial year’s RRSP contribution so they do not begin paying taxes with zero contribution room.”
The Future of Tax
“At a time of ongoing global economic turmoil, measured tax policies play a pivotal role in providing a stable framework that can underpin, shape and fuel a country’s long term prosperity. For this reason, Deloitte endorses tax measures that will reduce the budget deficit, and foster talent to protect and propel Canada’s position on the global business landscape,” added Baker.
- Deloitte’s summary of 2011 federal budget highlights on Deloitte.ca
- Deloitte tax leaders will offer additional views on the budget through videos to be posted to the future of tax website by June 7, 2011.
For more information, please contact:
Hill & Knowlton
Contact name: Miranda Gulland
Phone number (Direct line): 416-413-4730
About Deloitte Canada’s tax practice
Deloitte works with governments, industry, and clients around the world to contribute to well-functioning markets and economies. As Canada’s largest tax practice, we are focused on understanding the key drivers of economic prosperity, including productivity, competitiveness, and innovation. We believe that tax policy is a powerful policy instrument, and as such, we are committed to fostering a public policy discussion with Canadians concerned with improving our nation’s global competitiveness. Visit Deloitte.ca for further information on Deloitte’s tax practice and The future of tax for further information on the firm’s tax policy vision.
Deloitte provides a full suite of tax services to public and privately owned clients from 44 offices across Canada. Known for its industry-leadership, Deloitte’s Canadian tax practice was named a 2011 tier one tax practice by the International Tax Review for the second consecutive year. With an integrated global tax practice operating in more than 150 countries, Deloitte delivers the best of both worlds: World-class capability and deep local knowledge to assist clients wherever they operate.
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