Jerry Cook Editor, MPP jcook@clbmedia.ca

Canada embraces low tax cost for business

Despite challenges including a high Canadian dollar, soaring oil prices, and inexpensive Asian imports, Canada still offers positive inducements for foreign investment including the third lowest tax cost for businesses when compared to 10 countries, according to a recent study by KPMG.

The KPMG report entitled, Competitive Alternatives 2008-Focus on Tax, assesses the general tax competitiveness of 102 cities in 10 countries, focusing on 35 major cities with populations greater than two million, comparing the tax burden faced by companies, including income tax, capital tax, sales tax, property tax, miscellaneous local business taxes and statutory labour costs.

The report compares the total tax cost between countries and cities using a Total Tax Index score for each location expressed as a percentage of total taxes paid by corporations in the United States. As a result, a lower score means lower tax costs for businesses.

According to the study, only Mexico and the Netherlands have lower tax costs for business. “Canada has done well in reducing its federal corporate tax rates,” Greg Wiebe, KPMG’s Canadian Managing Partner, Tax, said in releasing the results of the study. “But tax policy choices by all levels of government can significantly affect our competitiveness. For example, if the provinces follow the federal lead and reduce their rates as well, Canada’s advantage will be enhanced.” In the report’s 35 major city rankings, Vancouver was fourth, Montreal sixth and Toronto seventh.

The report also compares tax costs between industries, which vary widely. “In a breakdown by business sectors, Canada comes third in manufacturing, scoring well at 87.1 compared to 100 for the US, with Vancouver, Toronto and Montreal placing in the top 10 cities. For the services business sector, Canada ranks second behind Mexico and, again, the three major Canadian cities studied place in the top 10,” the report states.

Looking at research and development, Montreal achieves a top rank for research and development among international cities, according to the study. Montreal’s first-place finish reflects Quebec’s commitment to developing its research and development sector, noted Bruno Desautels, Tax Partner in KPMG’s Montreal office.

“The greatest variations in industry tax costs between countries are in the research and development industries, due to intense competition between countries to attract more research and development business by offering more generous incentives. In this industry, Canada comes second after the Netherlands, and Montreal, Vancouver and Toronto rank first, second and third among the large international cities,” the study indicates.

Adds Wiebe, “These rankings reflect Canada’s tax policy in this area and its efforts to enhance its research and development incentives,” says Greg Wiebe. “Despite these good results, there’s still room for improvement. A recent KPMG survey found that the research and development program needs to be administered more effectively to ensure that companies can benefit from it.”

However, a favourable tax rate is only one element in influencing a firm’s decision to invest and set up operations in a specific location, the study cautions. Other components that represent larger proportions of overall costs include labor, facilities, and transportation. “However, even though taxes do not comprise the largest proportion of overall costs, there is much greater variation in tax costs among locations. Since tax costs are likely to range more widely than other costs, they can take on greater importance than other costs in business location decisions,” the study says.

Bystronic opens Canadian office

Christoph Schüpbach, president, Bystronic Market Division NEA; Peter Kyc, general manager, Bystronic Canada Ltd.; Ferdi Töngi, chief executive officer, Bystronic Group; Michael J. Zakrzewski, head of market region NAFTA and president, Bystronic Canada Ltd. officially open the new Canadian office.

Reflecting its continuing commitment to the Canadian market, Bystronic Inc., Hauppauge, NY recently opened a new Canadian office in Mississauga, ON.

Initially, Bystronic Canada Ltd. will handle parts and service for Bystronic customers in the Canadian market but that role will grow over time, says Peter Kyc, vice president, customer service with Bystronic Inc. and the new general manager of the Canadian office. “We will be expanding on that (parts and service role) in the near future.”

According to Kyc, establishing the new Canadian office is a result of the Bystronic Group’s overall strategy for the NAFTA market region. Bystronic’s global strategy is to be close to their customers in local markets. “Bystronic is committed to providing the best customer service-that’s why we are now in Canada.”

The new Canadian office will provide a variety of benefits for Bystronic’s customers in the Canadian market, he adds. “Bystronic Canada will improve customer service for all of our Canadian customers.

“For example, it will speed up the delivery of spare parts, consumables, and any other parts that are needed. We will now have a spare parts inventory here in Canada. This will be the biggest improvement that we will see (from establishing) the Canadian subsidiary,” says Kyc.

The official opening of Bystronic’s new Canadian facility included a ribbon cutting ceremony. The event attracted approximately 60 attendees including a number of Bystronic executives including Ferdi Töngi, chief executive officer of the Bystronic Group, several Canadian customers, and other guests.

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