Scraping Foreign Ownership Limits, OECD Study Urges
Date: Wednesday, February 14 2007
Globe and Mail Update
Foreign ownership restrictions should be scrapped in the Canadian telecommunications and transport sectors, the OECD said yesterday, the same day an economic think tank said tax rules are restricting investment from abroad.
The Organization for Economic Co-operation and Development said in its annual Going for Growth report that Canada's limits on foreign investors are among the most stringent in the 30-member organization. They hurt the economy, not only by curbing investments but also by limiting the introduction of new management and technology systems.
Despite high levels of employment in recent years, the gross domestic product gap with the United States remains substantial, the report said, “reflecting to a large extent lower productivity levels.” The trade group has made similar recommendations about foreign ownership rules in the past.
A separate study issued by the C.D. Howe Institute found there are also tax-related obstacles when it comes to foreign investment in Canada's private equity sector
Those tax rules, which include double taxation when U.S. firms sell shares in private Canadian companies, are keeping hundreds of millions of dollars in investment capital from flowing into Canada, according to the report, which was written by two partners with Boston-based law firm Choate Hall & Stewart LLP.
“Without change, capital-starved Canadian companies will fail to commercialize much of the nation's [research and development] investment, raising the risk of Canada squandering a significant share of its intellectual capital and needlessly imperilling its future economy growth,” the think tank said.