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United States of America (U.S.) President Donald Trump’s plan for cutting tax for U.S. businesses could pose a serious threat to Canadian competitiveness, media reports said.
A proposal included in the tax-reform package was announced yesterday by White House to slash the top U.S. corporate rate from 35 percent to 15 percent, BusinessFinancialPost News reports said.
In the event of implementation of this proposal, the sudden reduction in U.S. effective corporate rate would result in the reduction of its seven percent points below Canada’s effective rate, said tax expert Jack Mintz.
Canada could lose its current tax advantage of four percentage points over U.S., once federal and provincial rates were taken into account, said Mintz and warned that businesses from Canada would start investing in the U.S. market, which would drain up to $6 billion per year in revenues.
Trump’s imposition of duty on softwood lumber earlier this week, had already negatively affected the imports from Canada.
And on Wednesday, U.S. media outlets learnt from White House sources that it planned to pull out of North American Free Trade Agreement (NAFTA).
But late Wednesday, according to White House sources, Trump had come to a mutual agreement with leaders of Canada and Mexico that he will not pull out of NAFTA and the leaders would proceed to renegotiate NAFTA to the benefit of all three countries.
Taken together, the uncertainty surrounding U.S. had already had a negative impact on Canada’s economy.
John Manley, a former Liberal finance minister said that although it was unlikely that Trumps’ tax proposals could become a law as this could mean trillions of dollars of lost revenue to the U.S. government.
But Manley said that under these uncertainties created by U.S. plans, Prime Minister of Canada, Justin Trudeau’s government should have a contingency plan of its own for back up.
In the mean time Mathew Wilson, senior vice president of Canadian Manufacturers and Exporters, had been urging Ottawa to ensure Canada’s effective corporate rate remains competitive with the U.S.
Canadian Manufacturers and Exporters represents more than 10,000 companies, and Wilson said, if companies stop investing in Canada, its economy would just collapse.
Wilson stressed that it is of utmost importance for Canada to be keep right its current economic conditions to be competitive in investments.
(Reporting by Asha Bajaj)
Image of Jack Mintz: twitter