'Many companies are looking for a bridge to help them sustain and transition their businesses beyond the U.S. market'
Business leaders across the country are calling for increased government support, improved access to capital, and meaningful tax reform as Canada prepares for its upcoming federal budget, according to a recent report from KPMG.
More than nine in ten respondents want the government to provide broader supports and expanded financing options for companies affected by tariffs, with 80% of business leaders saying their companies are struggling due to U.S. tariffs, which have resulted in higher costs and reduced competitiveness.
Among those trading directly with the United States, 84% report increased business costs. Nearly all (96%) business leaders believe Canada’s greatest economic risk is its dependence on the U.S. market. Nearly all respondents also recognise the need to diversify trade with reliable, strategic partners.
“As U.S. tariffs cast a shadow over the Canadian economy, the vast majority of business leaders are supportive of the government’s plans to confront Canada’s economic challenges and make capital investments that accrue long-term benefits,” says Lucy Iacovelli, KPMG’s Canadian managing partner for Tax and Legal.
“More urgently, however, many companies are looking for a bridge to help them sustain and transition their businesses beyond the U.S. market, so they can participate in ‘Build Canada’ opportunities and compete on the global stage. Our survey pointed to the need for the Canadian government to invest in improving the business environment by delivering on wider access to low-cost financing and capital, tax relief that attracts investment, less red tape, and greater incentives to innovate.”
Last month, the federal government announced an $80-million tariff-relief fund to support more businesses feeling the impact of tariffs imposed on Canada by United States President Donald Trump.
Earlier, Ottawa also announced it is investing $450 million over the next three years through the Regional Tariff Response Initiative (RTRI), which is intended to help businesses improve productivity, expand and diversify markets, and strengthen domestic supply chains and trade resilience.
‘Hard fiscal choices in the upcoming budget’
The KPMG survey of 501 respondents also found that 91% of Canadian employers want the government to expand financing and loan options to improve business liquidity for any sector impacted by tariffs.
In addition, 92% want improved access to domestic markets through streamlined provincial regulations, better labour mobility, and reduced transportation costs. Nearly all (98%) business leaders want incentives and support to help Canadian companies adapt, retool, and develop new products and services for overseas markets. And 97% believe the government needs to reorient and expand programmes to help businesses access non-U.S. markets and reliable trading partners.
Tax reform is a key priority for Canadian business leaders, according to KPMG. More than nine in ten respondents want the federal government to work with provinces to cut the overall Canadian corporate tax rate by 2–4% to attract more investment and restore a competitive advantage over the U.S. Nine in ten also want a clear timeline for tax reform that will reduce corporate taxes and boost competitiveness.
“Clearly, the government faces some hard fiscal choices in the upcoming budget, since spending seems certain to materially exceed revenues, and additional borrowing increases already-high debt-servicing costs,” says Brian Ernewein, senior advisor for national tax, KPMG in Canada. “In fact, current top personal tax rates are likely impeding productivity and growth, and a lower combined federal-provincial corporate tax rate is required to restore Canada’s competitive rate advantage.”
Other findings from the KPMG survey include:
- 90% say Canada must improve the effectiveness of R&D tax incentives, including a patent box regime, to increase patenting and commercialisation of Canadian inventions.
- 90% agree that Canada should institute immediate expensing for businesses to recover certain costs.
- 92% want the government to increase its own austerity efforts and reduce government waste.
Nearly one in five (19%) Canadian small businesses facing tariff-related costs say they will not survive more than six months if current conditions persist, according to a previous Canadian Federation of Independent Business (CFIB) report.
