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November 26, 2018

Canada Cuts Taxes For Manufacturers

Last year, the United States enacted tax reductions for the majority of U.S. corporations and small businesses. After calls from Canadian business leaders to improve the competitiveness of its own system, Canadian Prime Minister responded last week by offering a package of C$14 billion in tax cuts.

The plan will take effect over six years and, as Bloomberg explained, will allow businesses to write-off capital investments more quickly. Specifically, spending on manufacturing and processing machinery and certain clean energy products could be written off entirely in the first year. In a separate story, Bloomberg BNA estimated this measure, along with others, would reduce the marginal tax rate on new investment to 13.8 percent from 17 percent. In the United States, the average is 18.7 percent.

Canadian Finance Minister Bill Morneau said, “This incentive will encourage more businesses to invest in assets that will help drive business growth over the long term … Because our economy is doing well, we also have the fiscal room to follow through on the commitments we made.”

As a reminder, in October, the Metals Service Center Institute and the Canadian Manufacturing Coalition (CMC) submitted a letter to Minister Morneau asking that the Canadian government reduce the headline corporate tax rate and work with the provinces to bring the combined corporate tax rate down to 20 percent.Click here to read more about MSCI’s efforts.

In his plan, Prime Minister Trudeau also outlined efforts to reduce regulatory barriers. Click here and here to read the full summary.