The Hollowing Out Of Corporate Canada

Posted on Wednesday, December 17 at 13:08 by N Say
This is what any city, any country cherishes-big, thriving head offices anchoring vast empires. Head offices provide challenging, high-paying jobs, which in turn create other jobs, from accountants and lawyers to ad designers and chefs. They support the arts and pay taxes that buy social services. They keep talented university grads from fleeing. It is no exaggeration to say that Royal and the other Big Five banks keep downtown Toronto from looking like Buffalo, N.Y., on a bad night.

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The hollowing out trend will go in fits and starts-the bear market has substantially reduced the takeover pace-but the long-range outlook doesn't look favourable for Canada. What can be down to slow it down, even reverse it? There is no easy answer. Federal governments, no matter what their political stripe, will likely keep some sort of ownership restrictions on "strategic" industries, with financial services at the top of the list. Making Canada more competitive, Nixon's solution, is probably the best idea. Among other things, it means keeping tax rates competitive, ditching the onerous capital tax, eliminating inter-provincial trade barriers and ramping up research and development expenditures (Canada's R&D spending is among the lowest in the world). It also means convincing Ottawa not to act simply as a money-transfer point, sucking tax dollars out of Toronto and Calgary and pumping them into loser industries and have-not provinces. If the world discovers that Canada is a superb place to invest, it will attract and keep head offices. This process could take decades. In the meantime, watch Canada's cities get more hollow before they fill up again.

Eric Reguly writes a business column for The Globe and Mail and co-hosts "The Close" on Report on Business Television.

The Hollowing Out of Corporate Canada

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