A warning for Canada

WATS_SteensmaNovotny_-1821-1080x675Accountants are often seen as boring people … working, quietly, at desks with thick ledgers and calculators, making ‘front line’ people keep track of this penny and that dime at the expense of getting the job done. But accountants are not just bean counters with fancy titles, they are, also, strategic thinkers who help small businesses, giant corporations and governments to make smart decisions.

Logo_of_CPA_French.EnglishNow, the professional association that represents accountants in Canada and has, as part of its mandate, to improve the financial literacy of the citizens of Canada and to contribute its expertise on many issues relating to tax and fiscal policy, financial literacy, skills development, climate adaptation, immigration, trade, ethics, good governance and accountability, weighed in with an article, by Sophie Nicholls Jones, that says that “A push for tax reform in Canada is spanning industries and crossing borders, as concerns deepen over our country’s competitiveness from a business, investment and overall economic standpoint.”

International organizations — Paris-based Organisation for Economic Cooperation and Development (OECD) and Washington-based International Monetary Fund (IMF) — have,” the article says “piped up in recent months warning Canada that reassessing its tax system is a necessity to remain competitive and keep up with shifting global tax systems particularly in the wake of corporate tax cuts introduced in the United States by U.S. President Donald Trump … [saying] … “It is time for a careful rethink of corporate taxation to improve efficiency and preserve Canada’s position in a rapidly changing international tax environment,” the IMF said in a recent statement … [and] … Predicting a slowdown in economic growth to img_2524-32.1 per cent in 2018 and 2.2 per cent in 2019 (down from 3 per cent in 2017), OECD and IMF recommendations include corporate tax reform to increase efficiencies, raising revenues for public spending, curbing budget deficits, and deregulating some specific industries to attract foreign investment. An unstable trade environment—given the ongoing NAFTA negotiations between the U.S., Mexico and Canada, as well as the tariff disputes between Canada and the U.S.— is also projected to negatively impact, though minimally, our GDP … [and, further] … “The government should review the tax system to ensure that it remains efficient—raising sufficient revenues to fund public spending without imposing excessive costs on the economy—equitable and supports the competitiveness of the Canadian economy,” said the OECD in its July report.

Those are pretty harsh words for a government that promised “sunny ways,” aren’t they? In fact the world’s bankers and accountants are telling us that we are on the wrong track, one will do real, measurable harm to Canada and to hard working Canadian families from Tofino to Tuktoyaktuk to Torbay.

In fact our current Liberal government seems to have forgotten almost 50ish years of lyndon-johnson-and-lester-pearsonhard lessons starting back circa 1970 when President Richard Nixon – who thought that Lester Pearson’s Canadian team had hoodwinked Lyndon Johnson’s negotiators into signing an unfair (to the USA) auto pact in 1965. It became quite clear in 1972 when President Nixon explained the Nixon Doctrine to our Parliament, face-to-face. We were told that in order to “go along” with the USA, towards greater prosperity, we had to “get along” with the USA, to harmonize our interests and policies. Pierre Trudeau and the Laurentian Elites hated Nixon, and not without some reasons … he put “America First!” when Donald Trump was just beginning his career as a real estate mogul. But while the Laurentian Elites may have dreamed about separating Canada from the USA and bringing it much closer to Europe, the mandarins in Ottawa preached TINA² ~ a phrase that is not mine (but I cannot remember who coined it) but which says that we are Trapped In North America and, to make matters worse, There Is No Alternative. The Ottawa mandarins, our most senior civil servants and central bankers, prevailed and we harmonized standards and policies with the USA.

Now, under a president who is more radical than Nixon and less willing (perhaps less able) to use diplomacy, Canada seems to have decided to “go it alone,” and ignore th very real fiscal policy shifts coming out of Washington.

The CPA association worries about that and reminds us that “In its pre-budget submission, CPA Canada outlines recommendations—in line with those mentioned above—highlighting key areas including a world-class tax system, regulatory competitiveness and efficiency, innovative skills for work, sustainable economic growth and responsible fiscal management. For taxation, the national organization is calling on the federal government to take a two-pronged approach: first, consider certain measures in response to the immediate concerns around U.S. tax reform; and second, commit to a comprehensive review of Canada’s tax system.

CPA Canada is not alone, as the article says, ““These are exciting times in tax policy around the world…[but] our tax system has lost relative competitiveness recently, over the past few years,” said Trevin Stratton, chief economist with the Canadian Chamber of Commerce … [and] … “We would like to see a comprehensive review of our entire tax system…and how tax policy levels can be used to improve the competitiveness of our Canadian businesses.”” I’m not sure most of get excited by tax policy changes but accountants do and they get worried, too, when their country’s tax policies are out of step with those of its dominant trading partner.

I am sure that Finance Minister Bill Morneau and his Deputy Minister Paul Rochon and Clerk of the Privy Council Michael Wernick all understand that Canada’s tax system and 559590cee0272b685ecc7b7c34334752government spending are problematical, and may be, most likely are putting Canada at serious risk; but I am about 99% sure that Prime Minister Justin Trudeau does not really grasp that fact and I suspect that while the PM’s puppet master, Gerald Butts, may understand it he simply doesn’t care because it doesn’t fit with his ideology.  But it will, sooner or later, start costing Canadians jobs. Will we really insist, for example, that, in the name of fighting global warming, that cars sold in Canada must have different emission standards than those sold in the USA? Will Canadians be able to afford that? What will we do when, citing tax systems, manufacturing plants close in Ontario and reopen in Ohio and Michigan? Those are the very real, very possible, even very probable outcomes of not reforming both our taxation and spending regimes. It’s not ideology, it is jobs and food on the table and tuition fees and so on for “ordinary Canadians.”

Our accountants have spoken: Justin Trudeau is failing Canada.

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