National Bank CEO Laurent Ferreira in Montreal in 2022. Mr. Ferreira is proposing that Ottawa set up a team of tax experts to write new code within a year to help attract investment.Christinne Muschi/The Globe and Mail
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National Bank of Canada chief executive officer Laurent Ferreira is urging Ottawa to overhaul the federal tax system, saying it needs to be “scrapped” and rewritten to attract capital and talent.
The country’s tax code is overly complex, burdening companies and especially small businesses, which do not have the resources required to sort through all the rules, Mr. Ferreira said at an event held on Wednesday by the Canadian Club Toronto.
The CEO of Canada’s sixth-largest bank has long advocated for tax reform aimed at boosting investment, and Ottawa now seeks to attract foreign capital for critical projects and to diversify away from the United States.
Mr. Ferreira called on the federal government to set up a small team of tax experts to write a new tax code. The goal should be to create the “simplest, most efficient and most competitive tax jurisdiction of all developed countries,” he said.
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In an interview with The Globe and Mail after the event, he said the government should give the team one year to complete its mandate because decisions on capital allocation move fast, and Canada needs to move faster to attract investment and take advantage of demand for defence and critical minerals.
“Having a goal to simplify it and make it competitive would be something that our government and provinces should work on together,” Mr. Ferreira said.
“Our goals should be well-aligned on this because it’s all about making our environment much more friendlier for capital.”
Decades have passed since Canada significantly reformed its tax system. In that time, layers of new policies have been added – including subsidies and special provisions – that have made the rules very complex, Mr. Ferreira said.
As an example, he pointed to rules regarding research and development, an area in where many of the bank’s clients have said the process to obtain certain subsidies is too complicated to navigate. In some cases, those clients opt out of applying for the subsidies altogether.
“The intention is to incentivize innovation, but the process to get the incentive is so complex that we sometimes don’t bother,” Mr. Ferreira said.
“We would send a very strong signal if we would review our code completely, get rid of it, and rewrite something that we believe will have a significant impact on growth, and make it simple.”
Mr. Ferreira is part of a chorus of experts who have called for tax reform. He has said the federal government should consider adjusting tax regulations to support growth and help “recycle” capital gains into businesses.
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He said Ottawa has already introduced new regulatory measures that are rebuilding Canada’s reputation as “a serious country” and a profitable place to invest, including Prime Minister Mark Carney’s proposal to accelerate project-approval timelines. However, the greatest threat to Ottawa’s ambitions is a lack of skilled labour and slower immigration, he added.
In a presentation at the Canadian Club event, National Bank chief economist and strategist Stéfane Marion said labour shortages in construction could compromise the federal government’s plans to build infrastructure quickly.
Though many believe Canada-U.S. relations is the most important issue, “access to skilled labour is the biggest problem right now,” Mr. Ferreira said during the event.
As companies adopt artificial intelligence to boost productivity, concerns have mounted over the technology’s potential impact on jobs. Mr. Ferreira said roles will likely change, but he expects National Bank to have more employees in 10 years as compared to today, and that AI will not replace key roles.
“Now one thing is certain. We won’t replace the bank’s advisory role with a script generated by artificial intelligence,” he said. “AI won’t replace the bank’s pricing decisions, capital allocation or judgment.”
National Bank has been conducting a strategic review of its business, focused on improving its performance.
In advance of unveiling the strategy in December, Mr. Ferreira said the bank plans to expand its capital markets unit internationally, gain market share in commercial banking across Canada, and evolve its personal banking model to address growing competition, among other measures.