Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 3112 INFORMATION TECHNOLOGY ASSOCIATION OF CANADA ASSOCIATION CANADIENNE DE LA TECHNOLOGIE DE L’INFORMATION ITAC on Trade and Competitiveness | Page 1 THE VOICE OF THE INFORMATION AND COMMUNICATIONS TECHNOLOGY (ICT) SECTOR IN CANADA | www.itac.ca Introduction: Trade and Competitiveness Helping Canadian ICT businesses scale and expand globally builds a digital Canada. As access to new markets becomes increasingly important, so too does ensuring governments provide targeted programs that help ICT companies scale globally and build on innovation. While R&D and export programs exist in Canada, there remain areas for improvement. These areas represent opportunities for the Government of Canada to strengthen how it supports growth across all Canadian businesses— including ICT. Therefore, as part of the Government’s Innovation Agenda consultations, ITAC recommends the following policy changes. Foster Competitiveness on a Global Scale Canadian businesses struggle every day to retain staff, grow, and secure new mandates. One of the most critical factors influencing their competiveness is our domestic tax system. Meanwhile, Canadian businesses continue to innovate and invest in R&D, in part due to the tax credits available to them. It has been several years since Government and industry have holistically reviewed the incentives available to R&D developers. The current Innovation Agenda consultations provide a prime opportunity to identify new ways to foster growth and R&D investments. Maintain Canada’s competitive corporate tax environment In many tax-based measures of competitiveness, Canada ranks very highly. Canada’s combined corporate tax rates are among the best in the G7 and in the 2014 and 2016 editions of KPMG’s Competitive Alternatives, Canada was identified as the second-most cost-competitive jurisdiction (after Mexico).1 A key strategy for ensuring that Canadian ICT companies are strong and competitive is ensuring that the tax regime in Canada supports innovation and growth. However, for the ICT industry, corporate tax rates are often a secondary factor in determining investment decisions. The Lazaridis Institute has noted that while Canadians are highly entrepreneurial, Canada has a significant shortage of experienced technology executives and managers who know how to build and grow leading companies.2 Moreover, while Canada’s universities and colleges train some of the best professionals in the world, local firms often find it challenging to keep that top talent at home, especially when jobs in the United States offer a 20% wage premium due to the low Canadian dollar.3 TO COMPETE TO WIN in the next phase of the global digital revolution, Canada must take bold steps now to lay the right foundation. The Innovation Agenda presents an incredible opportunity for the current government to make substantive policy changes—thereby benefiting all Canadians by growing our economy and ensuring continued prosperity for our country. The Information Technology Association of Canada (ITAC) has identified four fundamental priorities that must be addressed by government in order for the Innovation Agenda to succeed: Modern Digital Economy, Trade and Competitiveness, Modern Digital Government, and Talent and Skills Development. This is the second of ITAC’s Innovation Papers, a four-part series that: • provides insight into the state of Canada’s digital economy, and • offers recommendations to enable Canada’s Information and Communications Technology (ICT) sector to reach its world-class potential. Together with industry, ISED and all government stakeholders can build an Innovation Agenda that works for Canada. 1 Toronto and Vancouver also rank as the numbers 1 and 2 tax-competitive cities according to KPMG. KPMG, Competitive Alternatives 2016 – Focus on Tax. https://www.competitivealternatives.com/reports/compalt2016_report_tax_en.pdf 2 Lazaridis Institute, Scaling Success: Tackling the Management Gap in Canada’s Technology Sector. March 2016. http://deepcentre.com/wordpress/wp-content/ uploads/2016/05/Scaling-Success-Lazaridis-Institute-Whitepaper-March-2016.pdf