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Canada’s competitive lustre starts to dim as businesses cross borders

Canada is failing to keep up with the United States as businesses and investments are already crossing the border towards greener pastures.

In a recent interview with The Canadian Press, RBC president and CEO Dave McKay pointed out concerns about Canadian competitiveness, particularly involving the US tax reforms that could see a lot of investment opportunities, especially in the energy and clean-tech sectors, leaving Canada.

McKay warned that the investment exodus will be likely followed by a loss of talent.

“We would certainly encourage the federal government to look at these issues because, in real time, we’re seeing capital flow out of the country,” McKay told The Canadian Press.

He added: “We see our government going around the world saying what a great place Canada is to invest – yes, it is a great country, it’s an inclusive country, it’s a diverse country, it’s got great people assets. But if we don’t keep the capital here, we can’t keep the people here – and these changes are important to bring human capital and financial capital together in one place.”

McKay also pointed to another challenge involving the change that enables US firms to immediately write off the full cost of new machinery and equipment.

“The acceleration of that in the US completely changes the investment returns that you see on major investments. I think that alone may shrink competitiveness,” McKay said.

While the US allows firms in all sectors to expense the full cost of new equipment, Canada only has a two-year write-off for just the manufacturing and the processing sectors.

The business community urged Finance Minister Bill Morneau to take action in his February Budget to no avail. The Canadian Press quoted a spokesperson for Morneau saying, “There will be no knee-jerk reactions from this minister, and we are doing our homework.”

Business Council Canada president John Manley said the issue of addressing Canada’s shrinking competitiveness was indeed a no-mention in the federal budget.

“We’re always in this difficult competition to attract investment and to retain investment – and it’s not to be taken lightly because investment can move quickly,” he said.