Ontario, Alberta
Prove Most Appealing Ontario and Alberta were ranked as the top two investment climates in Canada by U.S. and Canadian investment managers, according to the 2000 Survey of Senior Investment Managers, released by the Fraser Institute, a Canada-based economic research organization. The two provinces tied with a score of 7.7 out of 10.
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here should you put your investment dollar? Canada would certainly be a good place to start, according to World Trade magazine’s “Top 30 Countries for Trade and Expansion.” Although Canada dropped from last year’s No. 1 spot to No. 3, the Northern Neighbor still provides a good location for foreign investment. In fact, the flow of U.S. direct investment into Canada has increased from an annual $3.2 billion during 1988 through 1993 to $16.5 billion during 1994 through 1999.
But what’s the attraction? “This country offers many compelling competitive advantages to potential foreign investors, including a highly skilled work force, low production and R&D costs, and a high standard of living,” notes Canada Prime Minister Jean Chretien. And for non-U.S. investors, he adds, “Our proximity to the United States and its marketplace makes Canada a prime location for foreign investors. More and more, foreign companies wishing to access the American markets establish themselves here in Canada.”
Canada is, in fact, pushing to open up to more international markets to increase trade and investment from outside the U.S. Canada is committed to the Free Trade Area of the Americas (FTAA). Chretien says that the FTAA is the best way of forging connections throughout the hemisphere. Such trade agreements are expected to help lessen the impact of U.S. downturns in the future.
“While [Canada] remains a very attractive choice for international traders and investors, Canada’s significant bilateral trade with the U.S. will dampen the country’s overall economic growth in 2001,” reports World Trade magazine. “But efforts to liberalize other international markets for Canada’s services exports could help to offset declines in trade with the U.S.”
Business Climate Takes a Step Up
As Canada moves forward in its efforts to develop new trader partners, it is also moving ahead in terms of its business climate. According to the Economist Intelligence Unit (EIU), an arm of The Economist, Canada is expected to be the fourth-best place in the world to do business over the next five years — moving up one spot from the last five-year forecast in 1996. EIU’s survey ranks the world’s 60 largest countries based on 70 factors such as regulation, trade laws and the availability of finance.
In order to maintain, if not improve, that spot on the best places to do business list, Canada has made significant tax cuts to benefit corporate investors. As part of the federal government’s CA$100-billion, five-year tax reduction plan (the largest tax cut in the country’s history), general income tax rates will be reduced to 21 percent by 2004. At year-end 2000, the corporate tax rate stood at 28 percent, but on Jan. 1, 2001, the government made a one-point cut, bringing the rate down to 27 percent. Further two-point cuts will take effect in each of the following three years.
In addition, the capital gains inclusion rate was again reduced to one-half as of Oct. 18, 2000. To help businesses expand and prosper through greater access to capital, the government also announced the tax-free rollover of capital gains on qualified small-business investments (where they are reinvested in another small business) was expanded as of Oct. 18, 2000.
“These tax changes,” says Chretien, “will give investors, business and all Canadians a competitive edge in the new economy.”
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