High personal taxes a blemish on Canada’s appeal for Global talent

Posted by on November 24, 2017

If Canada will attract and retain the very best and brightest from around the world to help drive its 21st-century market, it may want to think about its priorities with its comparatively high personal taxes, a new global report on talent-competitiveness suggests. If the country will demand more out of its elite earners, it needs to up its game on public educational investments to justify the price tag.

The new report, from Swiss-based business school the International Institute for Management Development (IMD), suggests that Canada is really looking pretty attractive to international high-skilled workers. IMD ranks Canada 11th from 63 nations in developing, attracting and retaining talent — well ahead of its important English-speaking peers the United States (16th), Britain (21st) and Australia (19th). Indeed, Canada is the highest-ranking non-Western-European nation in the study. (Topping the positions is Switzerland, followed by Denmark, Belgium, Austria and Finland.)

There are a few important characteristics common to the states on peak of the ranks — and it is not their long, snowy winters, which almost certainly is not a huge draw to elite-skilled worldwide workers (unless we are talking about the small subset of world-class skiers and/or snowplow mechanisms).

“The leaders at our ranking provide an outstanding educational system from primary to tertiary levels. Additionally, they invest considerably in education. Second, they provide substantial opportunities for career advancement through the whole professional life span. And third, they offer you a superior quality of life,” IMD stated in its report.

The research rates Canada highly in a number of these essential qualities. It ranks Canada’s university system fourth in the world, and in the top ten in mathematics instruction. Canada is also in the top ten in the OECD’s PISA test scores of high-school pupils. IMD also believes Canada in the top ten in personal security and property rights, and in general quality of life.

This pretty much confirms the sorts of things that Canadians, and their authorities, frequently boast: a highly educated workforce, a solid base of institutional stability and rule of law, and a pleasant, good place to live and raise your loved ones. It’s a fairly appealing package to potential immigrants seeking to bring their abilities to our nation. Given that the present government in Ottawa is dedicated to accelerating immigration levels as part of its strategy to invigorate the country’s economic potential, with a specific premium on attracting highly educated and skilled employees, it is especially important for Canada to become competitive as a destination for such gift.

But a few flaws leap from IMD’s evaluation of Canada’s appeal to these sorts of enviable financial contributors. One is the nation’s high personal taxes.

IMD ranks Canada a diminished 35th in personal tax rates. And this is an area where Canada has actually been becoming less aggressive, not more. In the past five decades, Canada’s average top marginal private income-tax rate (national and provincial rates combined) has crept up from about 45 percent to almost 52 percent. Much of this increase reflects Ottawa’s debut in 2016 of a new, higher tax rate of 33 percent for earners of over $200,000 annually, up from 29 percent in the past top bracket.

That move was aimed at addressing income inequality, making a small proportion of high-income Canadians pay a larger share while at the same time delivering a tax cut for the lower-middle-income bracket. It is a laudable goal, and one which many innovative economic policy makers in the world support, including such prominent voices as the International Monetary Fund.

Regardless, it makes Canada a more expensive place to work for high-skilled, highly paid gift — precisely the type of individuals Canada’s immigration program would dearly like to attract in larger numbers. In a time when the unpredictable and insular Trump government is providing elite talent considerable reason to check outside the USA for chances, Canada’s offer to take over fifty percent of their income in taxes is hardly an ideal way to market our country alternatively. Just seven of the OECD’s 35 advanced-economy member nations have a higher top marginal rate than Canada’s.

But are comparatively high personal taxes always a significant barrier to attracting talent? IMD clearly does not think so. Of the 10 countries IMD rankings above Canada in its report, just one — top-rated Switzerland — speeds better than Canada on personal taxes. It would seem, somewhat counterintuitively, that high personal taxes are a part of those countries which are best at attracting and keeping talent. Perhaps it is because those taxes cover top-notch services, especially in education, that elite employees value more than a small tax bill.

Perhaps more about, then, may be Canada’s similarly moderate scores in steps of investment in children’s public education. Canada ranks 39th in spending per pupil. Its pupil-to-teacher ratio ranks 36th in the primary-school degree, and a miserable 40th in the secondary level.

If elite education is one of those vital components to building, attracting and retaining a highly skilled workforce — that is exactly what Canada believes it has to do in order to flourish in the coming decades — then this under-investment in public schools must be reversed. A re-direction of tax dollars toward primary and secondary schooling would pay the dividends later on, and sustain the powerful standing in postsecondary education that the nation has already attained.

Courtesy: The Globe And Mail

Posted in: Business Insight


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