It can be easy for Canadians who appreciate the qualities of their country to overestimate the power that it also has to lure investment in a world where so many other destinations are competing for capital. Canadians can take pride in our political stability and our highly educated workforce, and we do have good communication and transportation infrastructure, but a great number of other countries offer those things, too, at roughly the same level. Meanwhile, Canada suffers in the eyes of investors for being a relatively small market, distant from large export destinations, with a cold climate and geographic vastness that only raise the cost of doing business here. Canada has been able to overcome its disadvantages in recent years largely by being highly competitive on business taxes. Unfortunately, the tendency of Canadian provincial and federal governments lately to raise taxes on business has been rapidly erasing that slight advantage. Dangerously, Canada is beginning to lose its competitive edge. It is difficult enough in a world of slower global growth to attract investment, but some major economies with whom Canada directly competes for investment have recognized the need in this challenging environment to make themselves even more attractive to investors. It is true that some countries, such as Belgium, Chile, Brazil, Greece and India have, like Canada, enacted certain policies — primarily higher business taxes — that have increased their marginal effective tax rate (METR). Still, other important peer countries have been working to lower theirs; notably Denmark, Japan, France, Portugal, Switzerland and the U.K. As a result of their cuts, and because of changes to policies in Canada that have increased METRs here, Canada has sunk from having the 16 th-highest burden on capital in the OECD (which was at least in the middle of the pack) to having the 13th highest. We now have the sixth-highest rather than lowest METR in the G7
