Canada's response to US tax reform

EY Policy brief

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EY Policy Brief is a new thought leadership series by EY Canada on public policy issues of economic and strategic significance to Canadian business and government, and accordingly, of general interest to the public. The Brief is designed to inform and stimulate public interest and debate. Canada’s response to US tax reform is the first in the series.

Two recent events in the United States have combined to provide a strong stimulus to the US economy: the tax reform measures that came into effect in 2018 as part of the 2017 Tax Cuts and Jobs Act and ongoing selective deregulation.

These developments have also moved Canadian competitiveness to the front burner as a pressing public policy issue in this country. Why does competitiveness matter? Has Canadian competitiveness fallen behind? If so, what are the economic and fiscal implications? What should Canadian policymakers be doing about it?

Here we focus on these four questions in the context of Canada’s tax competitiveness. We recognize that taxation is but one important element of the overall competitiveness agenda. The skill level of our workforce, the quality of our education and health systems, the availability of public and private infrastructure, as well as a host of other factors also impact our ability to compete and attract new business investment. However, we argue that with the Tax Cuts and Jobs Act now in place in the US, tax competitiveness needs to be addressed through both immediate and longer-term policy measures.

 

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