October 3, 2023

FDI Forum

Earn the right Invest

Businesses want tax relief and investments to compete in the new green economy

Economic headwinds, the green transition and supply chain risks prompting calls for more government support to improve competitiveness

KPMG spokespersons available for commentary on federal budget

TORONTO, March 23, 2023 /CNW/ – Ahead of the federal budget, most medium-sized Canadian businesses are concerned about their tax burden and want the government to move in lockstep with the U.S. by investing in tax relief so they can compete in the green economy, finds a new KPMG in Canada survey.

KPMG Logo (CNW Group/KPMG Management Services LP)

The survey of 505 medium-sized companies reveals that nearly eight in 10 (79 per cent) believe the overall level of taxation that small and medium-sized enterprises (SMEs) currently pay is too high and hurts their competitiveness with the U.S. Given economic headwinds, 84 per cent of respondents worry they would not be able to manage a hike in taxes, and are calling on the federal government to match the investment tax credits and supports offered to U.S. businesses via the U.S. Inflation Reduction Act.

“There is a clear connection between effective tax polices and business activity and investment in Canada,” says Lucy Iacovelli, Canadian Managing Partner, Tax, KPMG in Canada. “These business leaders face pressures not only to re-invest in their business but also to achieve their net-zero goals. They worry that new taxes will hinder economic growth and their global competitiveness, particularly with the U.S.

“These leaders want the government to respond to emerging business needs and effectively use the tax system to boost productivity as well as support decarbonization and clean technologies. Previously announced business tax incentives should move ahead without further delay and new supports be provided, otherwise Canadian businesses risk falling behind, adds Ms. Iacovelli.”

Key poll findings:

  • 79 per cent believe that the overall level of taxation that small and medium-sized enterprises (SMEs) currently pay is too high and hurts their competitiveness with the U.S.

  • 83 per cent say further tax relief is necessary to encourage businesses to re-invest in their operations and hire more workers.

  • 83 per cent say to scale-up, SMEs need more tax incentives/credits than large corporations to encourage investments in innovation, digital transformation and research and development.

  • 91 per cent agree their company needs new tax credits to encourage investment and support Canadian start-ups, enabling them to scale up and stay in Canada once they commercialize.

  • 78 per cent believe imposing special taxes on profitable industry sectors is punitive, will inhibit growth and discourage foreign investment.

  • 81 per cent expect more economic uncertainty over the next decade due to the transition to net-zero carbon emissions.

‘Top 5’ budget wish list

Business needs are not limited to tax relief and greater government investments. When asked to rank the most important business priorities in the upcoming budget, respondents indicated:

Top business priorities for Budget 2023

1.  Strengthen Canada’s supply chains / improve the flow of goods

2.  Relief for SMEs hurt by higher interest rates / borrowing costs

3.  More support to SMEs for carbon reduction/to achieve ESG goals

4.  Funding to develop made-in-Canada, affordable climate technologies (e.g. renewable energy, carbon capture etc.)

5.  Job training/upskilling for the skills employers and our economy needs

“As many businesses re-evaluate the design of their existing supply chain networks, they see government as a partner in responding to structural problems and building more secure and resilient supply chains,” says Alain Sawaya, National Leader, Supply Chain and Procurement, KPMG in Canada. “A collaborative approach can help to deliver more innovative solutions and facilitate the movement of goods within domestic and global supply chains. It can also strengthen Canada’s position in the supply chain for electric vehicles as well as critical and sustainable goods.”

Business perspectives on outstanding tax measures

The federal government has announced numerous tax measures in recent budgets that are currently outstanding. Among these are incentives for clean technology, carbon capture, utilization and storage (CCUS) and clean hydrogen energy, as well as additional limits to interest deductibility and amendments to the tax rules for intergenerational transfers of family businesses.

Details on the proposed two per cent tax on share buybacks for public companies are also anticipated in this budget. The survey reveals that 79 per cent of respondents believe this tax will ultimately curb investment in business and the Canadian economy. However, respondents were very supportive of government’s proposal to create an employee ownership trust regime. A strong majority (80 per cent) also want the government to follow the U.K. example of eliminating the capital gains taxes for business owners who sell the majority of their company to an employee ownership trust.

Nearly nine in 10 (89 per cent) of respondents support a review of the Scientific Research & Experimental Development tax credit to further strengthen business innovation and research and development in Canada.

“These and other supportive tax measures can help to keep our most innovative companies in Canada and unlock new business opportunities by moving the digital and knowledge economy forward,” says Dino Infanti, National Leader, Enterprise Tax, KPMG in Canada.

KPMG spokespersons are available to provide commentary on the 2023 federal budget.



Budget Overview

Dino Infanti, Partner, National Leader, Enterprise Tax
Mathieu Laberge,
Partner, Advisory Services & Economic and Policy Leader (Regions East)

Tax Measures

(Green, business, international and personal tax)

Brian Ernewein, Senior Advisor, Tax

Aaron Gillespie, Partner, Enterprise Tax

Sabrina Wong, Partner, Tax Law

Torran Jolly, Partner, Tax (Calgary)

Sarah Tkachuk, Regions West Tax Business Unit Leader, KPMG Enterprise

Environmental, Social and Governance (ESG)

Doron Telem, National Leader, ESG

Electric Vehicles, Automotive

and Industrial Markets

Damian Peluso, National Sector Leader, Automotive
Tammy  Brown, National Industry Leader, Industrial Markets 

Emerging Technologies, Cyber security, Crypto assets

Imraan Bashir, Partner & National Public Sector Cyber Leader

Kareem Sadek, Partner, Advisory, Crypto Assets & Blockchain Co-Lead

Infrastructure, Cities and Future Mobility

Garry Webster, National Leader, Infrastructure, and Head of Capital Projects Leadership

Jamie Cameron, National Infrastructure Lead for Future Mobility

Stephen Beatty, Global Head, Infrastructure, and Head, Global Cities Center of Excellence, KPMG International

Quebec business

Mathieu Laberge, Partner, Advisory Services & Economic and Policy Leader (Regions East)

Pascal Martel, Partner in charge, Tax, Quebec Region

Consumer, Retail

Kostya Polyakov, Partner, National Industry Leader, Consumer & Retail

Read more in KPMG’s TaxNewsFlash-Canada: 2023 Federal Budget – Sneak peak of possible tax changes. See also: Federal Budget: Businesses need more support to reach their climate goals.

About the KPMG Business Survey – Federal Budget 2023 Edition

KPMG in Canada surveyed 505 Canadian companies between February 3 and February 16, 2023, using Sago’s Methodify online research platform. All respondents are business owners or executive-level decision makers. Forty-four per cent helm companies with more than $500 million in annual gross revenue; 20 per cent, between $300 million to $499 million; 16 per cent, between $200 million and $299 million; 16 per cent, between $100 million and $199 million; and, the remaining 4 per cent, between $50 million and $99.9 million. Seventy-seven per cent of the companies are privately held and 23 per cent are publicly traded. Forty-four per cent are family-owned businesses.

About KPMG in Canada

KPMG LLP, a limited liability partnership, is a full-service Audit, Tax and Advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, auditing, and tax services to Canadians, inspiring confidence, empowering change, and driving innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs more than 10,000 people in over 40 locations across Canada, serving private- and public-sector clients. KPMG is consistently ranked one of Canada’s top employers and one of the best places to work in the country.

The firm is established under the laws of Ontario and is a member of KPMG’s global organization of independent member firms affiliated with KPMG International, a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, see kpmg.com/ca

SOURCE KPMG Management Services LP



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