Canadian Response to U.S. Tax Reform in the Works

 In Alerts, News

On July 23, 2018, the OECD published its Economic Survey of Canada. Although the OECD projects strong economic growth for Canada, one of the risks it identified is the effects of US tax reform and the NAFTA renegotiation. The Department of Finance estimates that the US marginal tax rate is 19.2%, compared to Canada’s 17.6%. The Bank of Canada estimates that the US tax changes will reduce business investment in Canada by 0.9% by the end of 2020. As such, the OECD recommended that the Canadian government review the tax system to ensure it is efficient, equitable, and competitive while continuing to raise revenues to support public spending.

On the same day, Bloomberg published an interview with Minister of Finance Bill Morneau. Morneau said that Canada will address competitiveness issues created by US tax reform in his fall fiscal update. Key themes will include: business taxation, oil pipelines, and the NAFTA renegotiation. He is focused on lowering the cost of new investment rather than a broad-based cut to tax rates. A consultation on these issues and more will take place prior to the fiscal update.

Last year’s fiscal update was on October 27, 2017, and we’ll be eagerly awaiting this year’s announcements.

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