With the U.S. Senate approving the latest version of the most sweeping overhaul of the U.S. tax code in decades, Canada has some worrying to do President Trump’s signing of the bill will become law and represent a major revamp of the U.S. taxation system, with most of the key provisions becoming effective from January 1, 2018.
The new Corporate Tax Reform bill in particular has implications for Canada and other countries that do business with the U.S. Canadian businesses are major stakeholders in U.S. And the Canadian economy is deeply integrated with the U.S. economy.
The primary economic goal of the Trump administration is to increase U.S. economic growth, and the bill proposes amongst many other things to cuts the U.S. corporate tax rate from 35 percent to 21 percent, a globally competitive level. Canada and other countries fear foreign investors will now flock to United States as it becomes a more attractive country for investment as U.S. assets such as: stocks, and real estate and other securities become more affordable for foreign buyers again. Before the tax changes, the Organization for Economic Cooperation and Development (OECD), says the United States currently has the highest corporate tax rate at 35 percent rate, far exceeding the rates of Canada, and other European countries. The Trump administration is aiming a lower corporate tax rate will restore the nation’s competitive edge and level the playing field for U.S. companies. However as America’s largest trading partner, Canada’s economy will feel the effect. An improving U.S. economy will see higher interest rates and put pressure on a depreciating Canadian dollar. There is huge potential that Canadian investment, jobs and profits will increasingly go to the U.S.