CEOs to Canada Election Contenders: Go Big or Go Home on Economyby
TPP great but U.S., China, Mexico trade relations need finesse
Lower small business tax? How about no small business tax?
For an election that’s supposed to be focused on the economy, Canadian business leaders say one thing’s missing: big ideas about the economy.
Prime Minister Stephen Harper and his rivals should be offering bolder policies to spur lackluster growth -- corporate tax reform, ways to improve relations with the country’s trading partners, coding for kids and even moving toward digital money -- executives said.
“I’m looking to be inspired," Mark Barrenechea, chief executive officer of Open Text Corp., one of Canada’s biggest technology companies, said in a phone interview. "I don’t accept that Canada or the U.S. have to live with a GDP rate of 1 to 2 percent.”
Canadians vote on Oct. 19 with the economy center stage. The collapse in commodity prices is forcing a wrenching transformation as activity shifts toward the manufacturing provinces of Quebec and Ontario from oil-rich Alberta. While the economy has perked up after a first-half contraction, gross domestic product is projected to grow just 1.1 percent this year, the slowest pace since 2009, forecasts compiled by Bloomberg show.
An Ipsos poll released Tuesday found the Conservatives at 33 percent nationally, the Liberals at 32 percent and the NDP at 26 percent. Those results are in line with national averages compiled by polling aggregator ThreeHundredEight.com.
Harper’s Conservative Party is pitching a stay-the course platform of balanced budgets and tax reductions, along with a cut in unemployment insurance contributions and participation in the Trans-Pacific Partnership trade pact to spur growth. The New Democratic Party, led by Thomas Mulcair, is proposing a jobs plan for the aerospace and auto sectors, a national daycare system to allow more people to work and plans to boost the corporate income tax rate by two percentage points to keep budgets balanced. Justin Trudeau and the Liberal Party would run three annual deficits to fund infrastructure spending and raise taxes on high income earners while cutting them for the middle class.
All three parties have also proposed cutting small business taxes.
They should be aiming much higher, said John Manley, head of the Canadian Council of Chief Executives. Instead of cutting small business taxes, the government should create a common tax rate for all corporations.
"There needs to be a strategy around how do we grow companies, not how to we encourage them to stay small," he said, in a phone interview from Calgary last week.
Harper won support from business groups this week when Canada signed on to the TPP. The government now needs to "maximize the benefits of new market opportunities," Manley, a former Liberal finance minister, said. Relations with Canada’s three major trading partners have been strained by irritants including the Keystone XL pipeline debate in the U.S., a clampdown on foreign takeovers which has helped cool Chinese investment, and visa requirements for Mexican visitors.
Improving trading relations are all important to "how Canadian business functions," Manley said.
The government needs to put more money toward boosting technology education, said Ryan Holmes, chief executive officer of Hootsuite Media Inc., a Vancouver-based company that develops software to help businesses manage social media.
"Students need to be better exposed to formal computer education early and they need to understand the kinds of fulfilling career opportunities that technology offers, " Holmes said by e-mail. “This training gap isn’t just a handicap for Canada’s tech industry. Without workers with the right skills, Canada as a whole can’t remain competitive.”
That could lead future Canadian entrepreneurs to import talent from elsewhere or pack up for Silicon Valley to find employees, Holmes said.
Canadian companies have been reluctant to invest in recent years with spending largely flat since the beginning of 2012 and tumbling with oil since the beginning of the year. Investment fell 7.9 percent in the second quarter after an 11 percent drop in the prior three months. Spending on research and development is forecast to drop 0.7 percent this year, the third consecutive year of decline, according to figures last month from Statistics Canada.
Another bold suggestion emerged from one of the country’s top bankers: eliminate checks, reduce the use of cash and digitize the financial system.
"It reduces cost of friction of moving money around," National Bank of Canada CEO Louis Vachon, 53, said in a telephone interview from Montreal. Such a move would boost GDP while "reducing significantly the role of cash, paper money in transactions, which also makes it more difficult for tax evasion and the black economy," said Vachon, who oversees Canada’s sixth-largest lender.
It’s not all about the economy for CEOs.
Louis Audet, head of Montreal-based Cogeco Cable Inc., took aim at Canada’s foreign aid, which stands at 0.24 percent of gross national income, below the United Nations target of 0.7 percent, Organisation for Economic Co-operation and Development (OECD) data show. Instead of doling out boutique tax credits for such things as fitness as Harper has done, the government should boost foreign aid.
"We have become an egoistic nation," Audet said in an interview last month at Bloomberg’s Toronto office. "We are obsessed with saving $200 in taxes and we are forgetting that we live in a world where other people need to be helped and this to me is a huge disappointment. Huge, huge disappointment.”
For all the criticism that debate on the economy has been myopic or small scale, Canada’s leaders have at least shone in comparison to Republican presidential candidates south of the border, Manley said.
"My gosh, we’re lucky," Manley at the Council of Chief Executives, said. "I may not have agreed with some of the things that were said, but at least they were said in structured sentences that made sense."