Canadian Productivity and Regulation: A Delicate Balance
In the picturesque setting of Niagara-on-the-Lake, business leaders gathered at the OG100 CEO Summit to dissect the challenges and opportunities facing Canadian enterprises. While the specifics of the conversations remain confidential, the overarching sentiment was one of concern regarding Canada’s productivity gap with its southern neighbor.
According to a Bank of Canada report, Canadian workers’ productivity has seen a decline from 88% of the GDP per hour produced by U.S. workers in 1984 to just 71% in 2022. This shortfall is often attributed to a lack of investment in research and development and technology by Canadian businesses, which places their workforce at a competitive disadvantage.
Regulatory hurdles also contribute to the issue. One CEO recounted a 16-year saga to gain approval for vital infrastructure changes—a process that would have been expedited in the United States. Similar tales of bureaucratic red tape were shared, alongside concerns about Quebec’s stringent French-language laws, which add layers of complexity for businesses aiming to excel.
The backdrop to these discussions is the recent announcement by Prime Minister Justin Trudeau’s government to increase capital gains taxes, potentially raising the taxable portion for corporations, trusts, and individuals on gains over $250,000 a year. TMX Group CEO John McKenzie highlighted the potential impact on investment activity, suggesting that the focus should instead be on attracting talent and competing for global investment.
While Canada boasts numerous advantages such as skilled labor, immigration policies, natural resources, and quality of life, the urgency for digital transformation and a rapidly growing U.S. economy raises questions about the timing of increased business costs. The delicate task of tax and policy setting must balance these factors to ensure that Canadian businesses are not only surviving but thriving.
As these leaders look ahead, they are reminded of the importance of nurturing success rather than hindering it—echoing the sentiment that sometimes it’s best to let the poppies grow.
