7 big ideas to help Canada win: Tax reform and more

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At a crossroads, in crisis and facing consequences are just a few of the phrases being used to describe the current state of Canada’s economy.

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It’s not just the current political moment, although tariffs and the trade war with the United States have exposed Canada’s need to boost interprovincial trade, diversify its export markets and invest in energy infrastructure, including pipelines.

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Recent economic headwinds have exposed many of Canada’s core weaknesses that have smouldered for years: a shortage of affordable housing, expensive groceries and rent, high inflation, declining gross domestic product (GDP), lagging capital investment and low productivity levels.

But as the saying goes, every crisis brings opportunities. With shifting global relations, a new prime minister-designate and a federal election likely coming soon, momentum is building to reform Canada’s policies to promote innovation, growth and a secure economic future.

There are many opinions on which direction to take at this critical moment, but most Canadians agree it’s time to do something.

But how to secure a prosperous future is a complex issue that requires diverse ideas. We asked seven prominent Canadians who are experts in their fields to answer the question: If you could prescribe one thing to fix Canada’s economy, what would it be? Here’s what they said.

Make it easier to build: John Ruffolo

At this turbulent moment, if there was one single economic prescription I could suggest for Canada, it would be this: Now is the time to build. Let’s focus on what we can control, which is to build a truly resilient and independent domestic Canadian economy.

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Building means unleashing our entrepreneurs, particularly those in the digital economy. To compete and succeed here and abroad, they need access to capital, talent and markets. The tariff shock has exposed the biggest impediment to success for our entrepreneurs in Canada: access to not only the U.S. markets, but also access to our domestic markets.

Building also means overcoming some long-standing impediments around the commercialization of innovative, made-in-Canada digital economy ideas and breakthroughs. These obstacles hinder the translation of cutting-edge Canadian-made ideas into valuable intellectual property and wealth-generating, data-based enterprises.

We need to build stronger linkages such that publicly funded research, particularly in our universities and colleges, ultimately blossoms into intellectual property firmly held in Canadian hands.

Building includes protecting Canada’s interests through a more strategic approach to trade; that is, a coherent global trade strategy that makes the most of vital tools at our disposal such as standard setting, intellectual property rights enforcement, national security reviews and the like. And we must develop and execute this strategy in partnership with the private sector.

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Finally, building includes fully tapping into the strategic potential of government procurement. Used correctly, government procurement can help drive our economic growth, especially for the digital economy. We are not talking about subsidies or handouts. We are talking revenues as a customer that act as a force multiplier in attracting additional domestic and foreign customers.

We need to consider, for example, a minimum percentage spend by each government department for Canadian-based products or services — a legislated “Buy Canadian” program.

Canada wins when we pull together. Let’s help position our digital innovators to make their maximum contribution to a growing, thriving, resilient and independent Canada.

John Ruffolo is the founder and managing partner of Maverix Private Equity, a private-equity firm focused on technology-enabled growth and disruption investment strategies.

Play to our strengths: Carolyn Wilkins

What’s the one thing I would do to make Canada stronger and to keep it free? Attract major investments where they matter most: agriculture, mining and energy. They play to our strengths, build supply chain security at home and open the door to grow and diversify Canada’s trade.

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The proverbial wolf is at our door and we can’t afford to wait. We need to make Canada the best place to invest, especially relative to the U.S., so we stop losing our best talent and capital.

That means reforming uncompetitive corporate taxes to make investment, entrepreneurialism and innovation irresistible; start with reducing the effective tax rate on new investments and capital gains.

It means removing onerous regulatory roadblocks, streamlining permitting and cutting red tape in general so that businesses can operate across Canada with certainty and cost-effectiveness.

It means finally removing interprovincial roadblocks to build the infrastructure we need to move our resources and other goods to market safely and efficiently, including energy corridors for oil, gas and electricity. And it means engaging Indigenous leadership who know and steward the land.

Investing in our land and in our productive capacity now will yield high returns, giving Canadians the health, wealth and security needed for the future.

Carolyn Wilkins is senior research scholar at Princeton University’s Griswold Center, a board member at Intact Financial Corp. and a former senior deputy governor at the Bank of Canada. 

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Fast-track energy infrastructure: Mike Rose

It has never been clearer that Canada needs to look after itself. In this more insular and competitive world, we absolutely need to take advantage of the resource wealth we have been blessed with. Our best near-term opportunity is to grow our oil and gas production volumes and diversify our export markets.

Our federal and provincial governments need to support, approve and fast-track these new infrastructure projects to permanently grow and diversify our revenue base. The majority of Canadians across the country now support the building of new pipelines to make this happen. Our oil and gas industry is already amongst the most environmentally responsible producer groups in the world and we are continually working to improve that performance.

On the natural gas side, Canada possesses some of the largest, lowest-cost, and lowest-emission gas reserves in the world and our supply is much earlier in development life than the principal gas supply basins in the U.S. Getting lower-emission Canadian natural gas to our allies around the world via liquefied natural gas (LNG) to displace higher-emission energy sources will benefit both the global atmosphere and our national economy.

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The decline profile of the U.S. supply basins also suggests that the growing Gulf Coast LNG complex will require significantly more Canadian natural gas as soon as the end of this decade. With the startup of LNG Canada Phase 1, plus an expedited LNG Canada Phase 2 and Ksi Lisms LNG projects, Canada will be in a position to grow natural gas production by 50 per cent from current levels.

There are myriad growth opportunities beyond that. The material revenues emanating from this increased gas production can be used in part to improve our border security and increase our defence spending.

Canada is in a tremendous position to supply this growing continental and international demand. It’s time to “drop the leash” on our Canadian gas industry.

Mike Rose is chief executive of Tourmaline Oil Corp. 

Encourage private-sector investment: John Risley

The idea is to create a government-owned entity (GOE) that, with the guarantee of Ottawa, would issue bonds, the proceeds of which would be co-invested alongside private capital in Canadian companies.

The basis of the co-investment would have its origins in pre-qualifying eligible investors, those with the appropriate experience, governance, etc. This would be the limit of the government’s input.

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Once qualified, the private sector investor (PSI) would be able to call on the GOE for up to a maximum of 50 per cent of the raise on exactly the same terms as the PSI receives. The PSI has to lead the rounds. The GOE is otherwise passive.

This would be extremely attractive to both investors and companies looking to raise money. It might make sense to reduce the extent of the GOE participation once the raise is in excess of, say, $100 million. Otherwise, no limits on the downside or upside.

The GOE would replace all existing government-to-business support programs.

Canada’s entrepreneurial ecosystem would be transformed overnight. Investors would flock to Canada and with them would come their expertise in scaling companies, commercializing R&D and the hugely valuable specialty mentor role resident in their focus on very specific segments of the economy — a capacity we sorely lack in Canada.

The GOE being completely dependent on the decision-making and support role of sophisticated private capital could actually generate a positive return.

John Risley is an Atlantic Canadian businessperson with deep interest in public policy and community issues. 

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Create an economic council: Jim Balsillie

Behind the Liberal government’s dismal economic record lies an even more alarming predicament: our bureaucracy’s profound limitations for governing the contemporary economy. Canada’s policymakers and public-sector departmental structures have proven incapable of dealing with the opportunities and challenges brought forward by the contemporary knowledge-based and data-driven economy.

Whether it’s their inability to design and implement strategies that improve Canada’s productivity and terms of trade or analyze economic spillovers from massive taxpayer investments into artificial intelligence research and electric vehicle battery plants, the institutions and leadership responsible for Canada’s economic development are floundering.

One idea that can help is to create an Economic Council. This institution would provide politicians and the public sector with expert research and analysis for short- and long-term policy agendas with the sole aim of advancing Canada’s prosperity.

The Economic Council should draw from the expertise that exists in Canadian universities, think tanks, research centres and the private sector. It should bring together experts who understand the paradigm shift from the traditional, production-based economy to the contemporary digital economy, where economic rent capture is the key to competitiveness that drives productivity outcomes and better paycheques.

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Keeping the status quo — applying 1970s’ production economy strategies to the 21st-century economy, throwing more money at various programs, incentives and subsidies — will keep eroding our prosperity and positioning Canada to compete only on cost with low-wage jurisdictions.

It is long past time to acknowledge that we no longer have a critical mass of economic expertise and analytical muscle inside our bureaucracy.

Whoever wins the next federal election should kick-start an intellectual renaissance inside our public service. Without a new institution that can bring updated knowledge and analytical capacity into our bureaucracy, Canada will remain on its current path of erosion.

Jim Balsillie is an entrepreneur, philanthropist and co-founder and chair of the Council of Canadian Innovators and the Canadian Shield Institute.