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Former prime minister Pierre Trudeau once famously quipped that living next to the United States "is in some ways like sleeping with an elephant." By this he meant that developments in the U.S. often have an outsized effect on Canada. Canadians, like it or not, must always be mindful of what's happening south of the border and be flexible enough to respond.

This is particularly true with our comparative standing on taxes. Unfortunately, Pierre Trudeau's observation seems completely lost on his son, Prime Minister Justin Trudeau, and various provincial leaders.

With the U.S. Senate passing its tax reform bill, it's increasingly likely that the U.S. will - for the first time in almost two decades - soon have a business tax regime that's significantly more competitive than Canada's. Crucially, this will divert investment, which drives long-term economic growth and prosperity, away from Canada to the U.S.

It's not like our governments can say they didn't see this coming. For more than a year, there have been clear warning signs that the U.S. was serious about tax reform. And Ottawa and many of the provinces have done nothing to respond.

This is unfortunate because successive federal governments (starting with Jean Chretien's Liberals and then Stephen Harper's Conservatives) - along with provincial governments of various political stripes - undertook enormous reforms to improve Canada's business tax regime. Major reductions to the statutory corporate income tax rate, elimination of the corporate capital tax, and a switch to value-added sales taxes at the provincial level helped give Canada a marked advantage over the U.S.

For instance, in 2000 Canada's combined federal-provincial corporate income tax rate was 42.4 per cent, the second highest among industrialized countries and higher than the U.S. federal-state rate of 39.3 per cent. By 2017, Canada's combined corporate income tax rate dropped to 26.7 per cent, below the U.S. rate of 38.9 per cent.

This advantage will soon be spun on its head. While final details of the U.S. reform package are not yet set in stone, the U.S. will likely move from depreciating capital investment towards full expensing, create incentives to move overseas profits to the U.S. And it's expected to reduce the federal corporate tax rate from 35 per cent to 20 per cent, bringing its combined federal-state rate lower than Canada's combined rate.

More broadly, the U.S. will gain an advantage when it comes to the overall tax rate on new investment, which includes more than just the corporate income tax. According to University of Calgary economist Jack Mintz, the overall tax rate on new investment in the U.S. will fall from 34.6 per cent to 18.6 per cent (Canada's current rate is 21.6 per cent). Indeed, Canada will go from having a big advantage over the U.S. on the taxation of new investment to a disadvantage, as the U.S. rate is cut by almost half.

In the wake of this challenge, neither the federal government nor any of the provinces have presented a plan to maintain Canada's competitive position on business taxes. To the contrary, some provinces in the past two years have actually raised their corporate tax rates, making us less competitive vis-à-vis the U.S.

Making matters worse, federal finances, and the finances of key provinces such as Ontario and Alberta, make it very difficult for our governments to do anything in the short term without having to either run even larger deficits or enact significant spending reforms (none of these governments seem interested in reducing spending).

Given the widespread economic benefits, improving Canada's business tax regime is good policy regardless of what the U.S. does. But reform south of the border makes it even more critical for our governments to take action.

When you sleep with an elephant, doing nothing is not a good choice.

 
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December 15, 2017

Flair Airlines (Kelowna, British Columbia) today will begin service as the first ULCC carrier in Canada to fly from Vancouver International Airport, Toronto Pearson Airport, and Kelowna International airport. The airline announced plans to expand their route network in September to add the three additional airports.  Service will includes direct flights between Toronto to Edmonton and Vancouver to Kelowna, Edmonton with one-stop flights to Toronto (and returns). 

“Flair is making significant strides, operating as the only ULCC in Canada.  Over the last six months we have expanded our route network, we have increased our aircraft fleet by purchasing two more Boeing 737-400s, we have entered onto the Global Distribution System making it easier for customers to purchase air tickets, and so we are now excited to bring our low fares to these new markets,” stated Chris Lapointe, Vice President Commercial Operations, Flair Airlines

“We are pleased to welcome Flair Airlines to YVR, providing more connections to Canadian cities while giving travelers more options to visit family and friends over this holiday season and throughout the year,” said Anne Murray, Vice President, Marketing and Communications, Vancouver Airport Authority.

Flair Airlines plans to be operating 12 aircraft by the spring of 2019. 

Schedule Highlights:

Toronto to:

Edmonton, Direct 7 times weekly

Vancouver, One-Stop 4 times weekly

Kelowna, One-Stop 3 times weekly                    

Vancouver to:

Kelowna Direct, 4 times weekly

Edmonton, Direct 4 times weekly

Toronto,One-Stop 4 times weekly    

Kelowna to:

Edmonton, Direct 3 times weekly

Toronto, One-Stop 3 times weekly

Vancouver, 4 times weekly    

Flair Airlines’ route network also includes Hamilton, Winnipeg, Edmonton and Abbotsford.  

 
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One of the central planks of globalisation - offshoring - has been found to have no effect on unemployment and on the whole boosts jobs in the home country.

A study of nearly 6,000 European service multi-nationals by Nigel Driffield, of Warwick Business School, Vijay Pereira, of the University of Wollongong, and Yama Temourib, of Aston University, found no evidence that offshoring - the relocation of part of the business to another country - led to an increase in unemployment at home.

In fact, since the global financial crisis in 2007-08 the researchers found offshoring led to an uplift in employment for the company on its home soil.

Professor Driffield said: “Unsubstantiated claims of loss of employment due to offshoring have played a part to the UK voting for Brexit and the rise of right wing protectionist governments across the world, so it is imperative that we have some proper evidence on the issue.

“Most research has been on manufacturing companies, but with the service sector making up around 80 per cent of UK employment we have focused on services.

“Thus, we have looked at thousands of multi-national firms across Europe over a near 20-year period and calculated the impact of their offshoring activities.

“Not only is there no evidence of a reduction in employment at home, but on the whole offshoring in these sectors led to an increase in employment at home, particularly after the financial crisis.”

The study, Does offshore outsourcing impact home employment? Evidence from service multinationals, due to be published in the Journal of Business Research, investigated the impact of offshoring by 5,746 European multi-nationals from 1997 to 2016, so taking in the pre-crisis and post-crisis periods.

These companies - ranging from retailers and hoteliers to financial services and telecommunications - offshored to 9,416 subsidiaries in 87 countries around the world, with Germany, Spain, France and Sweden hosting the majority of parent firms (66 per cent) followed by Belgium, Denmark, Finland and the UK.

They found the vast majority of the subsidiaries - 7,635 - were located not in developing countries, but in high income economies in Western Europe, North America or Japan and Australia.

Professor Driffield and his colleagues also found companies offshoring to move into a new market, such as Walmart opening branches in another country, actually saw employment grow in their home country. These ‘location intensive’ firms make up 62 per cent of the multi-nationals studied.

Interestingly, offshoring by ‘information intensive’ companies - those with high levels of technology and knowledge like a UK advertising agency opening an office in Frankfurt - saw a drop in employment when offshoring before the financial crisis, but since then it has not impacted on unemployment.

“Since the financial crisis these ‘information intensive’ companies have engaged in labour hoarding to avoid the impact of skill shortages,” said Professor Driffield. “The study also shows that is worthwhile policymakers encouraging ‘location intensive’ service firms to invest abroad, particularly in high income countries as that will generate more employment back home.

“It is possible that the effects of offshoring on jobs are being felt on the companies’ supply chain and this needs investigating.

“But our results suggest something of a breakdown of the traditional models of ‘job exporting’. In the short term, this is perhaps driven in the West by skill shortages, and the reluctance of firms to shed scarce labour.

“In the longer term, however, we may see a return to the pre-crisis norm, especially if higher levels of protectionism force firms to move nearer to their customers.”

 
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DOVER, N.H., Dec. 12, 2017 /PRNewswire/ -- ElectroCraft, Inc., the global fractional horsepower motor, and motion solutions provider, has expanded their CompletePower™ Plus family of BLDC motor drives offering with the CompletePower™ Plus Universal Drive. The Universal Drive takes performance, efficiency and flexibility to the next level, utilizing state-of-the-art digital drive technology combined with an intuitive and highly configurable user interface. The CompletePower™ Plus comes in three standard capacities with customized options available for OEMs.

"ElectroCraft has added a key new offering to their digital drive family with the Universal Drive," notes Scott Rohlfs, Director of Product Marketing. "This exciting new platform provides the flexibility, ease of use, performance and customization capability that our OEM customers require, and it is an important component of a complete motion solution from ElectroCraft."

Universal Drive Highlights:

  • Driven by design to be one of the most space efficient, low voltage, digital servo drives available. 
  • Utilizing the latest in digital drive architecture to provide software selectable velocity or torque control modes.
  • Compatible with Brushless motors from 12 to 80 VDC and up to 24A continuous, 60A peak current.
  • Sine-wave commutation using either hall sensor or encoder feedback provides smooth torque for demanding motion control requirements. 
  • Advanced Field Oriented Control provides high dynamic response resulting in a robust motor controller with low torque ripple that produces smoother, more efficient motion!
  • Easy setup and configuration via USB interface with the ElectroCraft CompleteArchitect™ Windows-based software.
 
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Toronto, December 12, 2017 – The combination of a growing economy and a dearth of skilled workers has created a labour shortage of approximately 361,700 jobs—the highest number of unfilled private sector jobs ever recorded in Canada—according to the Q3 2017 Help Wanted report, released today by the Canadian Federation of Independent Business (CFIB). 

The corresponding vacancy rate—the proportion of unfilled jobs relative to all jobs available in the private sector—jumped up to 2.8 per cent, its highest point since before the 2008 recession.

“Labour shortages are again becoming a major hindrance to businesses across the country, especially small firms,” said Ted Mallett, Chief Economist at CFIB. “We need government to take action, to find solutions for chronic shortages that inhibit a small business’ ability to take on new contracts, expand and innovate.”

Regional vacancy rates

Businesses in Canada’s three most populous provinces have the most difficult time finding suitable employees. British Columbia has the highest vacancy rate (3.4 per cent) followed by Quebec (3.1 per cent) and Ontario (3.0 per cent). All three provinces experienced rising vacancy rates in Q3 2017, as did Alberta and Saskatchewan.

  Vacancy rate Unfilled jobs
British Columbia 3.4% 60,000
Quebec 3.1% 85,000
Ontario 3.0% 149,600
New Brunswick 2.5% 5,700
Saskatchewan 2.4% 8,200
Alberta 2.2% 33,900
Manitoba 2.1% 9,400
Nova Scotia 2.1% 6,100
Newfoundland and Labrador 1.9% 2,800
Prince Edward Island 1.9% 900

Industry groupings

Among broad industry groupings, eight of 12 sectors experienced rising vacancy rates in Q3. In terms of unfilled positions, the retail (50,000 jobs), hospitality (45,900 jobs) and construction (38,000 jobs) industries are experiencing the biggest labour shortages. 

For detailed tables on vacancy rates by province and by industry see the Q3 2017 job vacancy report.

 

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