Business survival today is about controlling costs. Too often, the global market determines the price of your products or services, leaving you with an ongoing quest to identify your comparative advantages. This may involve looking over your shoulder at the local competition and even across the borders to learn what is happening elsewhere. One big cost on business is its tax burden. Many have relocated to other “tax friendly” jurisdictions, namely in the United States to escape what is seen a Canada’s uncompetitive government overburden. Is it still the case that the United States in more business friendly than us?
This is where KPMG comes in. As part of a series of annual reports in the field, they released their 2012 edition looking at business costs and other competitiveness factors for more than 110 cities in 14 countries (including for the first time BRIC countries, the fast growing economies of Brazil, Russia, India, China and Mexico).
The study, entitled Competitive Alternatives 2012, is KPMG’s guide to International Business Location Costs, and is meant to address the curious among us who think the grass is always greener elsewhere.
Remarkably, in the Toronto areas are managing quite well, especially when considering our true competitors.
Some background, Canada is considered to be one of 9 mature markets studied, including the United States, the U.K., Germany, Japan, France, Italy, Australia and the Netherlands.
The countries are ranked in various categories, sectors and markets using the United States as the Baseline. Results are also given by cities, including 3 Canadian cities Toronto, Vancouver and Montreal as part of 55 major cities looked at. The United States. cities that form the base line index (100) are the four largest US metro areas- New York City, Los Angeles, Chicago, and Dallas-Fort Worth.
The results have the United Kingdom, Netherlands and Canada as the low cost leaders among the mature markets.
Toronto comes ahead of Vancouver and below Montreal in cost ranking. Factored into the results for the diversity of taxes levied including capital taxes, sales and transactional taxes. Some are refundable value added taxes such as GST, while others non-refundable. Property based taxes- which apply in all countries and cities studied vary how these are determined. Finally, payroll and other major costs to businesses are factored in to produce cost indices and effective tax rates.
Now the good news!
Toronto’s ranking of 55 major cities in the following sectors:
Digital Sector (#1), Research & Development (#3), Corporate Services (#9), Manufacturing (#8).
Overall, Canada’s Total Tax Index (TTI) ranks 3rd at 59.1 (U.S. TTI is 100). Australia’s TTI is at 125.1 (the highest, France sits at 179.along with Italy, Germany and Japan).
The comparison of rates and indices are welcome news to our businesses, especially our manufacturers, who may feel compelled to relocate to the south for competitive advantages that in fact do not exist.
This is also good news to customers, who may fear that Canadian products and services have built in cost disadvantages reflected in the price.
Business taxes are a bane to all businesses. As your Business Improvement Area, Emery Village work towards optimizing those costs to bring value added services and improvements to the payer as well as the community they operate in.
In so far as Toronto being a mature market, history also shows us that infrastructure improvements, capital equipment and transportation are areas where taxes revenues and inputs are essential. Without these investments, our competitive advantage weakens in comparison to the lure of so-called ‘low tax’ regimes.