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Canada's Capital Investment
Canada’s capital investment has fallen far behind other developed countries. As a result, our businesses are less competitive and our workers are less productive. In a dynamic global economy we need more capital investment to keep our economy growing.
Capital investments boost the economy over the short-term while laying the foundation for long-term growth. Investments in facilities, equipment, machinery and tools including IT infrastructure are vital to support Canadian workers. These investments raise output, increase wages over time, and increase tax revenues for government.
Per-worker capital investment in Canada is 29% less than the OECD average and 42% less than U.S.
Did you know that...
For every dollar of capital invested in U.S. workers, just 58 cents are invested in Canadian worker.
58 cents on the dollar.
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We need to make it easier for businesses to invest in structures, equipment and tools that will make our sectors and our workers more productive.
How has Canada's Capital Investment changed?
2017
U.S. tax changes in 2018 have further eroded Canada’s position - corporate tax rates and accelerated write-offs bringing the US Marginal Efficient Tax Rate down to 18.8% per cent from 34.6%
1.4 %
Canadian Real GDP is expected to decelerate from 1.6% in 2018 down to 1.4% by the end of 2019
2018
In 2017, the asset finance growth rate was 7.4%—In 2018 it was just 1.1%
The Problem
Weak capital spending jeopardizes Canada’s long-term prosperity, and limits the potential of our economy in high-value added sectors. The problem not only hurts manufacturing and service businesses, but also the natural resources industries on which many regions of the country rely for jobs and opportunity. The anticipated decline in GDP is projected based on lower real residential and non-residential business investment spending, which is an important source of capital investment.
UNCERTAINTY
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UNCERTAINTY
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When natural resources prices are high, it’s easier for businesses to invest, when they are low, challenges persist. Overall, difficulty getting products to market limits the incentive to invest in businesses in the natural resources sector, which in turn reduces their capital investment. In Saskatchewan, the per-worker capital investment has recently declined by almost 1/3, while Alberta has seen a reduction of more than 40%. Uncertainty for businesses, and delays in pipeline development projects have been major contributors to the decline. Further, questions remain abundant about what to expect from the Canada-U.S.-Mexico Agreement on Trade (CUSMA) and global uncertainty has risen due to the trade war between China and the United States. While these issues may seem beyond our control, measures could be put in place to mitigate the negative effects while making it easier to invest in capital in Canada over the long-term.
TAXATION
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TAXATION
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Canada has lagged behind the U.S. in attracting business investment. Cuts to Canada’s corporate income tax rates have been beneficial, but some provinces have raised sales taxes which cancel out the anticipated benefits for businesses. The U.S. has done a far better job of reducing its corporate tax rates which has spurred short-term investment south of the border
INTELLECTUAL PROPERTY
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INTELLECTUAL PROPERTY
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Companies that are currently spending on Intellectual Property are focusing on research and development (R&D). While R&D was once driven by the business community, it has become the purview of governments and academic institutions, where partnerships between the business community and institutions have developed strong networks for commercialization. IP budgets supported by innovation policy funds would be better off allocating funds for firm growth, which would stem from capital investments in IP.
Who We Are
The Canadian Finance & Leasing Association (CFLA) represents the asset-based financing, equipment and vehicle leasing industry in Canada. This industry is the largest provider of debt financing in this country after the traditional lenders (banks and credit unions).
CFLA’s more than 200 company members range from large multinationals to national and smaller regional domestic companies, crossing the financial services spectrum from manufacturers’ finance companies and independent leasing companies, to banks, insurance companies, and suppliers to the industry. The industry’s customers include Canadian small, medium and large businesses as well as consumers.
Facilitating business investment in new machinery, equipment and vehicles enhances national productivity and lifts the living standards of all Canadians. The asset-based financing industry was directly responsible for raising living standards by 2.3% between 1992 and 2002 (or about 8% of the total increase in living standards over that decade).
CFLA members are key partners with Canadian businesses and consumers. Asset-based financing touches virtually every business and consumer in Canada.
