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Manufacturing needs improved business environment to grow: CME

Published by CME Manitoba on January 30, 2017

This article appeared in the Plant on January 30, 2017

First of five Industrie 2030 reports focuses on improving competitive factors.

TORONTO — The business environment in Canada is in need of some dramatic improvement if manufacturing and the economy are to grow, according to a report from Canadian Manufacturers & Exporters (CME).

The national association representing Canadian manufacturers has released the first of five reports as part of its Industrie 2030 initiative www.industrie2030.ca (which targets that date for a doubling of manufacturing output).

Manufacturing a Competitive Business Environment in Canada warns the sector and the economy have been struggling. Companies are under-investing in their domestic operations and foreign direct investment has been low.

How important is manufacturing to the economy? It directly employs 1.7 million Canadians (10% of the workforce), directly and indirectly accounts for 30% of economic output and 27% of employment, and is responsible for more than two-thirds of all exports.

But CME research notes rising business taxes, regulatory demands, energy costs and reductions in government support programs were among the top challenges that make it more difficult and costly for companies to do business in Canada.

Nearly half of all respondents to a CME survey stated the federal government doesn’t support company growth; and the share rises to 60% for provincial governments. CME sees this reflected in the numbers: for every $1 invested by a manufacturer in Canada, an equivalent US manufacturer invests $8.65.

The report offers four key recommendations for creating a more competitive business environment:

• Create a globally competitive business tax structure that supports growth. This would involve reforming the current corporate tax structure so only distributed profits are subject to tax; tax exemption for business income retained and re-invested in growth; when applying business tax, reward companies for growing and adding value rather than for being small; and establishing a national manufacturing and processing tax credit to reduce the federal corporate tax rate from 15% to 12%.

• Create a single point of contact for navigating government support programs, regulations and tax incentive programs with government investment concierge services.

• Establish a regulatory Bill of Rights for businesses that increases transparency and predictability while focusing regulations on achieving desired policy outcomes rather than attempting to prescribe business processes.

• Increase investment in economic and trade-related physical, energy and electronic infrastructure.

“Canada is not an island, and competition for investment in manufacturing is fierce globally,” said Mathew Wilson, senior vice-president at CME. “Right now, Canada is not a competitive location for investment.”

Competitive warning signs from the US include rising protectionism, a promised 20% reduction in corporate taxes, massive reductions in red tape and regulations, and no additional business taxes.

“That’s why it’s urgent that governments work aggressively with the business community now on these recommendations and priorities,” he said.

Download the report here.

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