Toronto’s tax advantage
TheStar.com – opinion/editorialopinion
Published On Tue Feb 08 2011. Janet Ecker
Late last month, China Investment Corp., one of the largest sovereign wealth funds in the world, opened its first representative office outside of China. Where? Not in New York, not in the U.K.’s financial heartland, but right here in Toronto, the financial capital of Canada. The decision is a powerful symbol of the city’s growing role as a financial services hub.
At the same time, our own homegrown financial services players are expanding their global footprint, steadily and prudently, and extending their international business reach from the U.S. to Europe, to Asia and to the Americas.
These two complementary movements — global players locating here and our own Canadian players expanding their global reach — are the result of many positive factors. Notable among them are Canada’s relatively strong economic fundamentals, the strength of our regulatory and business environment, the world-acknowledged safety and stability of our banking system, and the quality of our talent.
Taken together, these factors provide strong incentive for the world’s leading financial services operations to locate and expand their presence here — thus creating more jobs and investment.
An important part of that story is Canada’s growing tax competitiveness. There are many factors that contribute to a company’s decision to locate or expand its operations — but tax rates rank high among them.
Canada’s corporate tax rate is giving us a new marketing edge. It has been steadily ratcheted downward as a succession of governments — Liberal and Conservative — embraced the importance of global competitiveness and its crucial link to creating jobs. The combined federal-provincial rate was approximately 43 per cent in 2000 and, with next year’s planned federal reduction, will finally come in line with the OECD average of approximately 25 per cent.
According to a report prepared last year by tax expert Jack Mintz for the Ontario government, the benefit for Ontarians of recent tax changes — including the harmonization of consumption taxes through the introduction of the HST and the province’s steady reduction in the corporate income tax rate — is significant.
Mintz concluded that, within 10 years, the lower tax burden on business investment will lead to increased capital investment of $47 billion, almost 600,000 net new jobs and higher annual incomes of up to 8.8 per cent.
We are confident that a lot of that investment can flow into the financial services sector — and if it does, many of those jobs will be located here in Toronto region. That’s reason enough in our minds for our political leaders in Toronto to be encouraging the proposed tax cuts to go ahead as planned.
Instead, the corporate tax cuts have become a politically partisan issue — despite the fact that improving our tax competitiveness to create more jobs has been on the agenda of Liberal prime minister Jean Chrétien, Conservative Prime Minister Stephen Harper, Conservative premier Mike Harris and Liberal Premier Dalton McGuinty — not to mention the NDP government of former premier Lorne Calvert in Saskatchewan.
Why? Because all recognized that our economy will not flourish, will not create the jobs Canadians need unless we can attract more global investment and support increased growth by our own companies.
Growth means jobs — good jobs. Highly skilled and well-paying jobs. Jobs that, in this day and age of technology and globalization, can be located almost anywhere. Jobs that other jurisdictions are fighting hard to get. Right now, more than 300,000 people in the Toronto region owe their quality of life to their jobs in the financial sector and its supporting services. We need those jobs here.
It’s our goal to expand the impact of the industry’s presence in the Toronto region. Working in collaboration with our government and industry partners we want to attract more global players to locate their operations here and to support our own global champions as they extend their global reach.
Due to the success of our financial system and our strong economic fundamentals, we have the world’s attention in a way that we have not had in living memory. We have a good story to tell — and part of it is a competitive tax rate. Let’s not lose that advantage now, while the world is watching.
Janet Ecker, a former Ontario finance minister, is president of the Toronto Financial Services Alliance, which aims to enhance and promote this region as a global financial hub.
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