The recent UK coalition agreement is just another reason why this June’s G8/ G20 meeting is shaping up to be a marvelous opportunity for Canada. As part of the coalition agreement, the government will be introducing a bank tax levy, and will be following the US lead to investigate the possibility of separating retail and investment banking. Other members of the G8 have publicly advocated similar action, with Canada being the lone hold-out. While here in Canada the main stream media are focused on the PM’s signature initiative on women and children, the real political opportunity is to shine the light on Canada as a safe haven for business and, in particular, financial services.
Politically, there is one part of the country that offers the conservative government a real opportunity to finally get its majority. The G8 for Canada is really all about Toronto. With so much of the mining sector ‘hollowed out’, the only industry that Toronto really owns in Canada is financial services. Both the Ontario and Federal Government have invested a lot of political capital in corporate tax reductions and, in the case of the Federal Government, a continued commitment to personal tax reductions once the deficit has been slayed. Without further tax reductions, Toronto is an attractive place to do business. In addition to having the lowest corporate taxes amongst developed countries, the cost of living is very affordable, the economic forecast is strong, skilled labour is plentiful, and business can be transacted on the same time zone as New York. Much has already been made of the few businesses like Tim Horton’s who shifted their headquarters (HQ) operations to Canada. Less well-known is consulting giant KPMG’s recent relocation of its head office from London to Toronto. Now no one really believes that global HQ’s will flock to Toronto. But, there is a real opportunity for the city to become a strong regional centre for financial services.
As countries of the G8 continue to turn the screws on the financial service industry, the Harper government has campaigned against bank taxes by pointing out that the most straightforward approach to ensuring that the world does not go through another financial service meltdown – is to simply limit the amount that banks can leverage. The simplicity of the Canadian approach has shown the G8 ‘reforms’ as punishment for ‘causing’ the recession and a tax grab. The truth of it is that the banks performed to the regulatory standards of their local markets.
Expect Canada to break the consensus on the bank tax that emerges at the G8 and G20. Instead the government will attempt to capitalize further on Canada’s reputation as a low cost and stable financial service sector of excellence. The economic objectives are investment, jobs and growth. But the real objective is to demonstrate to voters that the Federal Government has a plan for Toronto in its economic vision.