Losing our business edge

Canada faces challenges in maintaining its status as one of the most business-friendly countries in the world, according to a new Economist Intelligence Unit research paper sponsored by Accenture, titled Not left behind: How Canada can compete.

According to the research findings, the nation’s business environment will improve only slightly in the years ahead, providing other countries with the opportunity to catch up. Only two years ago Canada’s business environment was rated the best in the world; now it is in third place, behind Denmark and Singapore, but ahead of fifth-place United States). Canada’s ranking is unlikely to change much over the next five years, according to the research, as competing countries are expected to undertake only modest reforms.

The report finds that Canada faces challenges in three key areas: political effectiveness, taxation and the labour market.

* Canada slipped to 15th among the 60 countries surveyed in terms of political effectiveness – better only than Japan and Italy among the G7 nations. Noteworthy is the finding that Canada is hampered by barriers to internal trade between the provinces.

* Companies in Canada face a significant tax burden, shouldering a higher share of government tax revenue than in most other countries. They also pay the highest marginal effective tax rate on capital in the developed world. Hampering reform of the tax system is the complex fiscal relationship between the federal government and the provinces.

* The labour environment is expected to deteriorate over the next five years, owing to short-term shortages of highly educated and skilled labour. Canada also scores less well than other developed countries in terms of labour laws, flexibility and costs.

The report is available free of charge at www.accenture.ca/economistresearch

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