Tax changes and NAFTA renegotiations expected to have negative impact on Canadian economy

By The IJ Staff | May 29 2018 01:30PM

Nearly two thirds of Canadian C-suite executives say they believe that recent US tax reform as well as uncertainty regarding the North American Free Trade Agreement (NAFTA) renegotiations will have a negative impact on the Canadian economy, says the EY Capital allocation and Canadian competitiveness report released May 28.

Sixty-one per cent of respondents say they agree the US tax reform will have a negative impact on the Canadian economy. However, 52 per cent of respondents think it is unlikely it will have a significant impact on their business and capital allocation decisions.

US competitors at an advantage

Fifty-one per cent of respondents say their US competitors may now be at an advantage when it comes to competing for new business due to the US tax reform.

In addition, approximately six in ten respondents say recent changes to Canadian tax, regulatory and fiscal policies will negatively impact Canadian companies and the overall economy, says the report.

"Canadian executives are clearly already feeling the impact of the significant policy shifts we have seen from the Trump Administration, as well as other geopolitical events," said Fred O'Riordan, national tax policy leader for EY. "The response of the federal government to these concerns, and the speed of that response, will dictate how competitive Canada will remain in the short term, and could have a significant impact on business leaders' decisions to recruit and retain, or even remain in Canada for the long term."

NAFTA renegotiation

Nearly four in ten respondents say they believe NAFTA renegotiation will negatively impact their company’s overall competitiveness, and 62 per cent say they believe it will negatively impact the Canadian economy.