Is Canadian Immigration too high? A Labour Market and Productivity Perspective

This paper presents some of the economic considerations that should underlie Canadian immigration policy from the point of view of an economist. It then reviews the available data on the performance of recent immigrants against this backdrop. It also offers some observations on the changes in the Immigration and Refugee Protection Act contained in Bill C-50, the Budget Implementation Act, 2008. Finally, it concludes with some suggestions for the conduct of an immigration policy that would be based more on Canada’s economic interests and that would establish a lower annual target for immigration more consistent with Canada’s absorptive capacity

A More Open and Secure Border for Trade, Investment and People

Canadian prosperity critically depends on the maintenance of an open and secure border between Canada and the United States. Even though the border was reopened quickly following the September 11th attacks, it was not the same as it had been. The new mantra became "security trumps trade" because of US concerns to prevent another terrorist attack. And Canadian exports to the United States have stagnated since September 11. The Canadian Government definitely needs to tackle the problems created by the thickening of the border head on by preparing an ambitious and far-sighted proposal for an open and secure border that addresses legitimate US security concerns, but eliminates all the unnecessary red tape that has been bottlenecking the border. This paper offers concrete suggestions for improving the flow of goods,services, people and investment without sacrificing security.Canada-U.S. border, Canada-U.S. trade, border security,

Ontario NDP Tax Increases

This paper uses Statistics Canada's Social Policy Simulation Database and Model to provide estimates of the cumulative magnitude and distributional impact in 1993 of the tax increases introduced by the NDP government in Ontario in their three budgets after coming to office in 1990. It finds that the Ontario NDP tax changes have increased the tax burden on the Ontario household sector by almost $3 billion and have raised the average taxes paid by an Ontario family by$663. The tax increases are progressive up the income scale. Upper income families earning over $150,000 bear the heaviest tax increases of$6,811 per family. The vast majority of Ontarions,including even low and particularly middle income earners,face substantial tax increases. The only group sheltered is the low-income group who benefit from the greater targeting of property and sales tax assistance for seniors.distributional analysis, tax increases, Ontario

The Challenges of Complying with the Kyoto Protocol

This paper examines the evidence on the economic impact on Canada of complying with its commitment to reduce Greenhouse Gases by 6 per cent from 1990 levels under the Kyoto Protocol. It concludes that this would be extremely burdensome given the diverging trends of GHG emissions and the targets. And it notes that Canada may have no option other than to give the required notice under the UN Framework Convention on Climate Change that it is withdrawing from the Kyoto Protocol.Kyoto Protocol, Greenhouse Gas Emissions, Economic Impact, UN Framework Convention on Climate Change

The Economic Consequences of Quebec Sovereignty

This paper reviews the issues that would arise if Quebec were to separate from Canada. It also presents quantitative estimates of the likely orders of magnitude of their economic impact both on Quebec and the Rest of Canada. Its overall conclusion is that Quebec would be much harder hit than the rest of Canada if Quebec separates. Real output in Quebec could easily be depressed in the short run by as much as 10 percent and in the long run by 5 percent. In the short run, the output loss would be triggered by a crisis of confidence resulting from separation. In the long run, output loss would be caused by the required transfer of resources to the foreign sector (necessitated by the elimination of the existing fiscal gain in transactions with the federal government), by the emigration of anglophones, and by higher public debt charges resulting from the increased debt burden. The transfer would be made more difficult by the need to ad just in the soft and dairy sectors and by the probable loss of Churchill Falls's power, but it could be facilitated by increased taxes. For the rest of Canada, the economic costs, which can be quantified, would be substantially lower than for Quebec. And for Canada there also would be some offsetting economic gains. The net short-run costs would only be about one to two percent of GDP and would result mainly from the short-run loss of confidence caused by the separation of Quebec. The long-run quantifiable costs would be small – probably less than the quantifiable benefits.economic impact, Quebec separation, break-up of Canada, Sovereignty-Association

Tax Incentives for R&D in Canada: A Review of the Recent Experience

This paper discusses the Canadian experience in the early 1980s with tax incentives for R&D.It presents some issues concerning the efficiency and cost effectiveness of the various government tax incentives in stimulating R&D.Tax Incentives for R&D, Tax Policy, Innovation policy

Peering Under the Inflationary Veil: Synopsis

This paper provides an interpretive synopsis of the results of a conference on inflation-induced distortions in financial reporting and taxation held in October 1981 at the height of the post-war inflation. It provides analysis of the magnitudes of the likely distortions in reporting and taxation in Canada and other countries and discusses proposals for improving reporting and taxation.inflation accounting, inflation-induced distortions in financial reporting and taxation

Real Effective Corporate Tax Rates in Canada and the United States. After Tax Reform

Both Canada and the United States have recently undertaken comprehensive reforms of their tax systems. In the case of the corporate tax, the main thrust of the reforms has been to lower tax rates,broaden the tax base, and curtail or eliminate incentives such as investment tax credits. This article examines the significance for Canada of the corporate tax reforms in both countries. It uses the concept of the marginal real effectivetax rate on new investment to analyze the impact of the corporatetax changes on the size and distribution of the corporate tax burdenin each country, given various assumptions about the rate of inflation and the extent to which investment is debt financed. It is in the manufacturing sector that competition between Canada andthe United States is most intense and that real effective corporate tax rates probably have their greatest potential impact on the location of investment and employment. Before tax reform, the real effective tax rateon manufacturing investment in machinery and equipment in Canada was considerably lower than the rate in the United States. Under the post-reform regime, however, Canada's advantage is significantly smaller and decreases as the degree of debt financing increases.Indeed, in the absence of the investment incentives introduced by Ontario and Quebec in 1988, Canada's favourable tax position in the critical area of manufacturing investment in machinery andequipment would be lost altogether. In contrast, tax reform has significantly increased the real effective taxrate on equity-financed investment in non-residential construction in the United States, but not the rate in Canada. In this case, tax reform has transformed what was a tax advantage for the United States into an advantage for Canada. The overall effect of tax reform in the two countries, given the real effective tax rates, appropriately weighted, for both investment in machinery and equipment and investment in non-residential construction, has been to slightly reduce Canada's tax advantage in the manufacturing sector. This advantage is still a substantial one, however. Two important questions emerge from the analysis. First, what are the implications of the factthat federal efforts to reduce tax incentives for manufacturing investment in machinery and equipment have been offset by subsequent provincial efforts to restore the preferential position of their manufacturing sectors? Second, given that one of the main rationales for the Canadian tax reform package was that it would reduce tax-induced distortion of resource allocation by reducing or eliminating special tax incentives, why has reform actually increased the relative value of the tax credit for investment in the Atlantic region?corporate income; Canada; United States; marginal effective tax rates;

The Burden of Federal Tax Increases Under the Conservatives

An important economic trend in Canada in recent years is the increasing share of personal income going to both direct and indirect taxes. This article provides a analysis of the distributional impact of federal tax and transfer policies over the period that the Conservatives were in power between 1984 and 1992. It finds that the policy changes (primarily increased commodity taxes and income surtaxes) have raised the tax burden on the household sector by $22 billion between 1984 and 1992. Net taxes paid by the average Canadian family have increased by almost$1,900. The tax changes have been very progressive on average for families earning less than $35,000 per year, roughly prooortional in the$35,000 to $75,000 range, modestly regressive in the$75,000 to $150,000 range, and very regressive above$150,000.Tax increases in Canada, distributional analysis

The National Debt and New Constitutional Arrangements

This paper, which draws on the author's book "The Economic Consequences of Quebec Sovereignty," examines the thorny issue of how the existing Canadian federal debt might be redistributed in the event that Quebec were to become a sovereign nation. Debt division would be at best a "zero sum" game with any gains experienced by one party coming at the expense oflosses experienced by others. Redistribution of the debt means dividing up both assets and liabilities. The paper explores the wide variety of possible approaches, such as population, GDP, tax base, to determining what an "appropriate" share might be. It emphasizes that choosing among them would require painful choices that are bound to generate some degree of acrimony, since many of these would result in significant changes in the burden of debt servicing costs borne by residents of each province. Moreover, it also notes that any dividing-up of assets or liabilities would need to be preceded by an assessment of the value of particular assets and liabilities. This would be one of the largest valuation exercises ever undertaken and the costs involved would probably be substantial. Furthermore, any redistribution of the debt would make it more difficult to service because indi vidual provinces could not expect to borrow at rates of interest that are as favourable as those currently paid by the federal government. The paper also points to additional transition costs in the form of the likely negative reaction of financial markets to the increased uncertainty surrounding major constitutional changes and the implication of debt redistribution for the credit-worthiness of each province. While there exist various ways to minimize such costs, the paper stresses that this would be possible only if excessive acrimony is avoided.division of debt among successor states after break-up of country