Canada's Liberal Agenda To Seed Change In Economy

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Canada - the world’s 11th largest economy – is about to enter a new era under liberal management. Our local expert Joanna Prataviera and TMF Group USA Managing Director, Jason Gerlis, discuss some of the top things investors need to know about this upcoming change.

Canada’s new Prime Minister, Justin Trudeau, emphasized on a few economy-related policies during his recent campaign. All of these policies aimed at boosting the local economy and driving the country into a new era of sound investment and growth.

Canada is a large exporter of oil and the seventh-largest stock market by capitalization, but is suffering from a lack of investment projects. Bearing this in mind, here are some of the policies that investors should keep an eye on if they are already operating in or pursuing business in Canada:

• Income tax: reduction for middle-class Canadians and raise for the wealthy– Canadian income tax bracket would go down to 20.5%. Canadians with a taxable annual income between $44,700 and $89,401 would see their income tax rate fall. To pay for this tax cut, the wealthiest 1% of Canadians would need to contribute a little more. A new tax bracket of 33% for individuals earning more than $200,000 would be introduced. Businesses could also enjoy a reduction, since Trudeau promised to lower the small businesses tax rate to 9%.

• 3 years of deficits to pay for infrastructure spending- Trudeau's infrastructure policy – aimed at taking advantage of low interest rates - is projected to cost $10 billion CAD in the first two years, equivalent to 0.5% of Canada's GDP. This could boost the stocks of engineering, construction and equipment companies, though it may take a toll on government bond prices in the near-term.

• Expand export opportunities that benefit Canada- Trudeau promised to put in place a new “export promotion strategy” that will help businesses take advantage of new trade agreements. He would also consider all trade opportunities currently open to Canada, and explore deeper trade relationships with emerging and established markets, including China and India.

• New relationships with United States and Mexico– Trudeau has willingly stated his openness to working with the United States and Mexico in:
  • Developing a clean energy and environment agreement
  • Reducing the current barriers that limit trade
  • Creating new jobs
  • Re-focusing the Building Canada Fund to promote a steadier flow of goods and business travellers by modernizing border infrastructure and streamlining cargo inspections

Perrin Beatty, president and CEO of the Canadian Chamber of Commerce, believes Trudeau will be able to promote Canada’s competitiveness and increase the access to markets for Canadian businesses of all sizes, if the right strategies are put in place. The Canadian Federation of Independent Business has said it looks forward to working with Trudeau’s government on taxation and other economic issues.

Trudeau, a former high-school drama teacher and son of late Prime Minister Pierre Trudeau, will have to find ways to balance the pros and cons that Canada presents in order to achieve growth instead of a decline. Canada has one of the soundest banking systems and is the biggest importer of U.S. goods. However, it also has of the world’s most expensive real-estate markets with the economy being just a few steps away from a recession.

Taking advantage of the new opportunities

At the moment, 98.2% of the businesses in Canada are small or medium companies of 100 or less employees, according to the Business Development Bank of Canada. These companies contribute more than 50% of the country’s GDP. Trudeau’s economic policies will facilitate new and/or improved business opportunities to those existent companies and also to new players looking to operate in Canada.

TMF Group in Canada can help large and small companies, and set up in Canada with speed, safety and efficiency. We have local experts providing financial, accounting, corporate secretarial, international structuring, legal, and HR and payroll services. We understand the local law, regulations, processes and requirements. From whatever country you are in, our wholly owned and independent offices across the globe can help launch your entry into the Canadian market, ensuring you control costs, reduce risk, and simplify multi-jurisdiction operations.

Contact our team for more information