MNI INTERVIEW: Canada New Tax Message Will 'Punish' Business

Canada's new government may introduce more unwelcome and punishing business taxes as it seeks to get deficits under control, Perrin Beatty, Chamber of Commerce president and a former Treasury Board and revenue minister in the 1980's, told MNI.

Monday's election returned the Liberal Party to power, although again with a minority of seats and reliant on the NDP and Bloc Quebecois, two parties who have sought new levies on major corporations. Liberal leader and Prime Minister Justin Trudeau campaigned on a new tax on large banks and insurers, having come to power in 2015 raising taxes on richer households, before later introducing a carbon tax.

"Much of the rhetoric we heard during the campaign was how do you punish businesses that have been successful, or increase the tax burden on individuals," Beatty said in an interview. "The message it has to send at home and abroad is that investment is wanted, and that government wants to partner with business as opposed to punishing."

NOT ADDRESSING LONG-TERM DECLINE

The campaign spent little time on reversing Canada's longer-term decline in economic growth, retooling a workforce for the digital world that arose during the pandemic, or even how to bring the economy back online after the fourth wave of Covid-19, Beatty said. That leaves governments with limited options including inflating away debt, hoping interest rates remain low or just ignoring the problems, leaving tax hikes as another background danger to entrepreneurs facing their own struggles.

"Small businesses in particular have assumed an enormous amount of debt in the pandemic and are going to need some assistance to manage that," said Beatty, who last served in Brian Mulroney's Progressive Conservative government.

That last full review of the tax system was done before any of the current party leaders were born, Beatty said. "We have a tax system that is very inefficient, very outdated" and "discourages investment in Canada," he said.

WRONG MESSAGE

With deficits providing a short term boost to growth, governments may also seek faster inflation as a way out of debt, sources have told MNI. Sources have also told MNI that a new Parliament with a minority of Liberals backed by the NDP and Bloc are more likely to run chronic deficits rather than make any difficult economic decisions.

"If the message that we send to investors is they are not wanted in Canada, we will not be able to achieve the sort of growth that we need and create the jobs and opportunities for Canadians," Beatty said.

"The government has to decide whether it's serious about promoting economic growth and jobs in this country. If it is serious, then it has to hold the line on the tax burden, and it has to send a clear message that investors are welcome in Canada," he added.