One report titledCapital Gains: How can Canada unlock the $1.8 trillion it needs for growth?” RBC He shares a depressing figure: Nearly $1 trillion in capital outflows from 2015 to 2024. The report states that for every dollar of foreign direct investment entering the country, two dollars escape.
RBC reports that Canada has experienced a 10-year capital recession as business investment slows, productivity stagnates and standards of living decline.
Business investment per worker and real GDP growth per capita in Canada have reached historic lows.
RBC says the reasons for the economic malaise are over-regulation, permitting challenges, policy uncertainty, low risk tolerance and more. Although capital exists within the country, it is not employed.
On a more positive note, RBC claims Canada is emerging from a capital recession. As the headline suggests, Canada has an opportunity to lead the G7 in growth: a $1.8 trillion investment opportunity. The report states that “foreign direct investment in Canada reached nearly $100 billion, the highest figure since 2015.”
While describing the opportunity as immense, the authors note that Canada must unlock a new capital formation framework. They recommend the following:
- Asset recycling program from brownfield to greenfield
- Purchasing that scales
- Reforms to corporate tax and foreign investment regimes
- Benefiting from state capital
RBC says entrepreneurship and risk-taking should be rewarded, but avoids tough questions about high personal taxes and expensive government entitlement programs that attract capital from the private sector.
Personal income taxes account for approximately 37% of total government revenues; This is more than any other G7 country. Top rates can exceed 50%. Half of all government spending goes to healthcare and retirement/income support. These are very difficult things to change.
