Productivity growth in Canada is falling behind that
of other industrialized nations and our relative standard of
living is also falling as a result. Worse still, the policies
enacted to increase productivity over the last number of years
have been misguided or have simply not gone far enough. The
purpose of this study is to highlight the impending productivity
crisis in Canada and to offer recommendations that will place
Canada on the path to greater productivity.
The first section of this paper shows the importance of
productivity growth with particular emphasis on improving
Canada's standard of living. Canada's productivity is reviewed in
both a North American and a broader international context. The
first section concludes with a discussion of the main
determinants of productivity and prosperity.
Section 2 examines the impact that business taxes have on capital
formation and gives a review of independent research into the
impact of business taxes on capital formation and the effects of
taxes on business activity, business location, and foreign direct
investment. Finally, this section summarizes studies
investigating the economic costs of different types of taxes.
Section 3 discusses the international competitiveness of Canada's
business tax system. Section 4 presents a proposal for reducing
business taxes that is aimed at improving productivity growth by
altering the incentives for investment in Canada.