Three Policies to Improve Productivity Growth in Canada



33

Among OECD countries Canada’s METR was third highest, after that of Germany and
the United States21 (Chart 10).

Chart 10: Effective Tax Rate on Capital in Selected OECD

Source: Mintz, Jack M.(2006) The 2006 Tax Competitiveness Report: Proposals for Pro-Growth Tax Reform, C.D. Howe Institute
Commentary 239, P. 12.

A key reason why our METR is so high is because five provinces (Ontario,
British Columbia, Prince Edward Island, Saskatchewan, and Manitoba) apply their retail
or provincial sales tax (PST) to the purchase of capital goods such as machinery and
equipment, including ICT goods. Because of this tax policy, these five provinces have
much higher METRs than the other provinces (Chart 11).22 The highest METR in Canada
is in Saskatchewan at 38.9 per cent (in 2010), followed by Ontario (37.1 per cent), British
Columbia (34.4 per cent), Manitoba (33.5 per cent), and Prince Edward Island (30.9 per
cent).

21 It is important to note that the METR has been falling in Canada in recent years, in contrast to an increase
in the United States. Consequently, our past poor M&E investment performance relative to the United
States likely reflected the METR gap. But the higher US METR in 2006 means that this variable is not a
factor that dampens investment in Canada relative to the United States, although it may dampen investment
relative to countries with a lower METR.

22 Finance Canada estimates that in 2010 for all sectors excluding resources, financial services and R&D
assets, sales tax net of provincial tax credits will account for 12.4 percentage points of the provincial
METR in Prince Edward Island, Ontario 8.8 points, Saskatchewan 8.6 points, British Columbia 7.7 points,
Manitoba 7.1 points and Quebec 0.2 points. At the national level, sales tax net of provincial sales tax
credits accounted for 5.4 per cent of the estimated METR of 32.5 points, that is one sixth. The sales tax rate
is projected to be 7 per cent in Saskatchewan, British Columbia and Manitoba, 8 per cent in Ontario, and
10.0 per cent in Prince Edward Island.



More intriguing information

1. CAN CREDIT DEFAULT SWAPS PREDICT FINANCIAL CRISES? EMPIRICAL STUDY ON EMERGING MARKETS
2. Opciones de política económica en el Perú 2011-2015
3. Conservation Payments, Liquidity Constraints and Off-Farm Labor: Impact of the Grain for Green Program on Rural Households in China
4. Cyber-pharmacies and emerging concerns on marketing drugs Online
5. The name is absent
6. THE AUTONOMOUS SYSTEMS LABORATORY
7. EFFICIENCY LOSS AND TRADABLE PERMITS
8. The name is absent
9. The InnoRegio-program: a new way to promote regional innovation networks - empirical results of the complementary research -
10. The name is absent
11. Altruism and fairness in a public pension system
12. Publication of Foreign Exchange Statistics by the Central Bank of Chile
13. The name is absent
14. The name is absent
15. Wage mobility, Job mobility and Spatial mobility in the Portuguese economy
16. A Unified Model For Developmental Robotics
17. The name is absent
18. Deprivation Analysis in Declining Inner City Residential Areas: A Case Study From Izmir, Turkey.
19. LOCAL PROGRAMS AND ACTIVITIES TO HELP FARM PEOPLE ADJUST
20. Geography, Health, and Demo-Economic Development