{"id":246152,"date":"2025-10-28T18:22:09","date_gmt":"2025-10-28T18:22:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/246152\/"},"modified":"2025-10-28T18:22:09","modified_gmt":"2025-10-28T18:22:09","slug":"taxes-red-tape-are-silent-killer-of-canadas-competitiveness-td-warns","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/246152\/","title":{"rendered":"Taxes, red tape are ‘silent killer’ of Canada’s competitiveness, TD warns"},"content":{"rendered":"

\"KANANASKIS, Canada risks trailing its peers in productivity and growth, in spite of recently announced \u201cbold initiatives\u201d in housing, infrastructure and energy<\/a>, TD Bank economists argue. (Photo by Chip Somodevilla\/Getty Images) \u00b7 Chip Somodevilla via Getty Images <\/p>\n

Excessive taxes and red tape are \u201cthe silent killer of competitiveness\u201d in Canada but have been overlooked in Prime Minister Mark Carney\u2019s economic agenda, TD Bank\u2019s economists argue in a new report.<\/p>\n

Without a serious overhaul of its tax and regulatory system, chief economist Beata Caranci and managing director Francis Fong write, Canada will continue to trail its peers in productivity and growth, in spite of recently announced \u201cbold initiatives\u201d in housing, infrastructure and energy<\/a>.<\/p>\n

The economists write that global competitiveness must be the \u201cnorth star\u201d of any reform, urging Ottawa to treat business investment \u201cwith the same urgency it treats other crises.\u201d<\/p>\n

Investment per worker in Canada ranks near the bottom of OECD countries, the TD report notes, and the gap on that metric with the U.S. \u201chas widened out significantly since 2010.\u201d This, Caranci and Fong say, is the main contributor to the productivity \u201cemergency\u201d declared last year<\/a> by Bank of Canada senior deputy governor Carolyn Rogers. On another OECD measure of regulatory stringency, Canada ranks 26th out of 38 countries \u2014 the economists point to a Transport Canada\/KPMG study that found the number of industrial regulations has risen 36.6 per cent since 2006 and now tops 305,000.<\/p>\n

TD argues the root of the problem is decades of ineffectual tax reform. The last major overhaul was the Carter Commission \u2014 which took place in the 1960s and \u201cwas not done with the lens of enhancing Canada\u2019s competitiveness.\u201d Minor efforts in the late 1990s also \u201cdid not move the needle on competitiveness and investment,\u201d the report says.<\/p>\n

The competitiveness problem isn\u2019t only corporate. TD warns that Canada\u2019s high personal tax rates make it harder to attract and retain skilled workers. While inequality has eased, the share of taxes paid by top earners has grown \u2014 raising the question of how Canada can lure talent when the financial return is higher abroad. A major issue, the economists argue, is that tax reform is \u201cinherently a politically divisive process,\u201d with taxes going up for some and down for others. \u201cNo government wants to pull on that thread,\u201d they observed.<\/p>\n

This is a turning point in Canada\u2019s history.TD economists Beata Caranci and Francis Fong<\/p>\n

But TD says reversing the slide in productivity will mean a fundamental shift in how Canada approaches both taxation and regulation. The report calls for broadening the tax base while lowering statutory rates and cutting back on the tangle of credits and carve-outs that have made compliance expensive and opaque.<\/p>\n

On regulation, TD urges governments to focus reviews only on rules that \u201care shown to be binding constraints on costs,\u201d and to eliminate exemptions that let departments avoid scrutiny. The federal one-for-one rule, introduced a decade ago, has achieved \u201cmiddling-to-no success,\u201d the report says, because it counts the removal of obsolete rules as progress, even when those regulations no longer cost firms time or money.<\/p>\n

Caranci and Fong argue that policy should help firms grow, not freeze them in place. Current key incentives \u201cresult in a clustering of businesses around asset thresholds,\u201d rewarding companies \u2014 many of which were not founded recently \u2014 for staying small rather than scaling up.<\/p>\n

The report also warns that competitiveness depends on talent as much as capital. Aligning Canada\u2019s personal tax competitiveness with peer economies, TD adds, is essential to driving long-term growth.<\/p>\n

The authors frame the moment as one of urgency. \u201cThis is a turning point in Canada\u2019s history \u2014 let\u2019s not waste that opportunity by sidestepping real barriers just because gaining broad support is difficult.\u201d<\/p>\n

Without bold changes, they warn, Canada risks \u201cdeath by a thousand cuts\u201d to its competitiveness.<\/p>\n

John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf<\/a>.<\/p>\n

Download the Yahoo Finance app, available for Apple<\/a> and Android<\/a>.<\/p>\n