country profile, canada.pdf
The country’s low business tax rates attract foreign investors, but high marginal effective tax rates may
prove a deterrent
Canada provides one of the most conducive legal climates for investment, with its investment regime having been ranked
seventh in terms of business freedom by the Wall Street Journal. It has one of the most flexible labor markets in the world,
operating flexible employment regulations that enhance employment opportunities and productivity growth. The country
also has the lowest payroll taxes among the G8 countries, and is expected to push ahead with plans to cut its corporate tax
rate to 15% by 2012. By that year, Canada will have the lowest statutory corporate income tax rate among the G 8.
However, businesses in the country have to bear one of the world's highest marginal effective tax rates on investment. This
could be a major deterrent for companies thinking of investing capital in the country.
Canada has comprehensive environmental policies, but is an inefficient user of energy
The Canadian government has taken many steps to establish mechanisms to meet the environmental challenges that
come with economic development. The focus of environmental policies has broadened from local and regional issues to
challenges of a global nature. Climate change, global biodiversity, ozone layer depletion, and the transportation of
chemicals and hazardous waste are some of the areas that have appeared at the top of the country’s environmental
agenda. The country has made some progress in meeting its domestic environmental objectives and international
commitments. Some advances have also been made in cutting air pollution, and policies have been created to reduce
emissions of greenhouse gases (GHGs).
However, Canada has a questionable record of using energy efficiently, and generates much more pollution to produce a
given amount of goods and services than its industrialized competitors. For instance, it uses 33% more energy than the US
per unit of GDP. Between 1980 and 1997, Canada’s energy consumption grew by 20.3%. Energy efficiency grew by 21%
during the same period, which was clearly offset by Canada’s rising population and economic growth. At the same time,
Canada is over-dependent on non-renewable energy resources, which is an important factor for the economic growth of the
country. Its inability to use alternative sources of energy will deplete its available natural resources and hinder the growth
Canada’s proactive attitude towards foreign relations has resulted in the development of significant trade and
investment links. The country is in FTA negotiations with several countries.
The country’s loose federal structure and independent legislative powers for provincial governments have led to
conflict between the state and the provinces. In May 2011, the federal government and British Columbia were
involved in a row over the closure of Vancouver's medically supervised injection site, Insite.
Country Analysis Report: Canada
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