Governments now compete fiercely for foreign investment, and the reforming of tax codes is arguably the most effective way to achieve results, at least in the short-term. Indeed, the general consensus is now that the TCJA, for all its flaws and quirks, has tilted the competitive landscape towards the US. And away from Canada? There is a large body of taxpayers, tax advisers, businesses, think tanks and other commentators there who seem to think so, given the increasing frequency of the warnings they are sounding about a growing competitiveness gap either side of the 49th parallel. They are unlikely, then, to have been very inspired by the Canadian Government’s 2019 Budget, announced on March 19, which, with anti-avoidance as its central theme, concentrated on tax claw-backs rather than tax giveaways.

Is the Canadian Government therefore unconcerned? Or merely just complacent? It would, naturally, argue neither. It would respond to such accusations by pointing to the generous accelerated expensing measures announced in the Fall Economic Statement in November 2018. It would argue – and has argued – that this is a far more effective reply to the TCJA than a big corporate tax rate cut, because it should influence new investment decisions rather than provide tax relief for past ones.

For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look

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