The boss of one of Canada’s largest banks is urging the federal government to take action to stem the flow of investment capital into the United States because he believes the funds are already coming out in “real time.”
Royal Bank of Canada (RBC) President and Chief Executive Officer Dave McKay shared in a recent interview with The Canadian Press his biggest concerns about Canada’s competitiveness.
Ottawa is facing pressure from the Canadian business community to respond to the recent revision of the US tax rate. A measure that should attract investment south of the border.
McKay says a “significant” investment outflow is already under way in the US, particularly in the energy and clean tech sectors.
Capital flight, says McKay, is likely to result in a brain drain, which means the next generation of engineers, problem solvers and IP creators could thrive south of the border rather only north.
“We see our government roaming around the world, touting Canada as a great place to invest. Yes, it’s a beautiful country, an inclusive country, a diverse country with excellent human capital, but if you do not retain capital here, you can not keep people here, “says the RBC boss.
Changes are needed to bring human and financial capital together in one place.
Dave McKay
Since the election of President Donald Trump in the United States, the investment community in Canada has been grappling with serious uncertainties related to the renegotiation of the North American Free Trade Agreement (NAFTA).
Several people also point to the significant corporate tax cuts in the United States, something that could hurt Canada even more.
However, according to McKay, the competitiveness problem goes beyond the simple tax rate. For example, US companies have the option of amortizing the total value of their investments in machinery and new equipment.
“It completely changes the return on investment. Just that could reduce the competition, “believes the banker.
In comparison, Canada offers only a two-year amortization option and only in the manufacturing and processing sectors.
