Saturday , January 23 2021

Reduce the culture of rights, Canada, and learn to be more competitive

A lot of debate has recently arisen as to whether Canada has a competitiveness problem, as industry uses it as a means of arguing for tax cuts while our federal government is focusing on issues that are considered more important, such as the introduction of national carbon tax.

Unfortunately, one thing many people often forget is that the capital is very mobile and will tell you a lot about the health of the economic prospects of one country. While the PMO will selectively choose its own statistics for the economy – such as low unemployment rates (beyond Alberta, of course) – the fact that the corporate environment of the country has just become unattractive to investors.

For example, according to Brenda LaCerda of Moody & apos; s Analytics, net foreign flows of Canadian securities this year reach a decade low, even lower than the financial crisis in 2008. From 2007 to 2017, foreign direct investment in Canada fell nearly 75%, as reported in Canada's statistics. The OECD's Restriction Restriction Index shows that Canada's foreign investment policies are almost two and a half times more restrictive than the average for OECD countries.

I think the root of the problem is not just that we are uncompetitive, but that our governments, both past and present, have created a culture of law. This is a culture in which everyone requires a "fair share" instead of one that promotes innovation and motivates those who make the most of the rules that apply equally to all Canadians.

A good example of this is the recent changes in federal government tax on small businesses. While the government has lowered the tax rate faced by small businesses – something that does not allow the incentives to increase the minimum income threshold – they also impose a criminal rule on who can get dividends that completely neglect the capital risk . As a result, small businesses are encouraged to remain stationary, whereas on the basis of my talks with tax experts, we now look the only country in the world that has such rules on the eligibility of dividends.

The problem is that a culture of powers can not compete on the world stage and will continue to seek support if it will take the form of major corporate tax cuts, a low Canadian dollar, government rescue measures based on the location of a company or rules, such as our bank, wireless and airline. Pipelines are also not built because oil is not "socially acceptable" in some provinces, although these provinces are happy to receive oil revenues to finance hospitals, schools and day care programs.

As a result, we have become an oligopoly country, happy with the status quo. As John Chambers says in his book, "Linking Points," "You can not have a revolution while maintaining the status quo, and you can not achieve bold results with rising changes." You can not turn a country, a company, a career or anything else, by messing with a few things while you are on the way you are.

You can not transform a country, a company, a career or anything else, by doing a few things while sticking to the road you are on the road.

John Chambers, author of "Dot Connect"

As a result, we miss the global innovation revolution that is headed south of the border with highly competitive companies that break the status quo. Just see how successful FAANG shares are and ask why Canada does not have such own companies.

The same applies to other sectors. Take our banking sector, for example, and ask why the five banks have ruled 90% of the wealth management market for decades, while the five largest US banks currently control only 30% of the relevant market south of the border. Instead of introducing innovation and increasing market share, our banks have acquired their competitors and / or have lobbied to change regulatory rules simply to protect their positions.

A major first step towards change is to become anti-rights – and that means focusing on areas that need improvement rather than denying that they even exist. This is an important lesson that our government and industries need to learn if we want to attract investment capital again in order to become world leaders, and not just defend our fair share.

• Martin Pelletier, CFA, is a portfolio manager and OCIO at TriVest Wealth Counsel Ltd., a Calgary-based private client and institutional investment firm specializing in discretionary risk-managed portfolios and investment audit and supervision services.

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