A report from the Fraser Institute has found that the western provinces have the best investment climates, while the investment climates in the country’s largest provinces are mediocre.
The Canadian Provincial Investment Climate 2010 Report measures six components identified by Canadian investment managers and academic research as the most important contributors to investment climates: corporate income tax, fiscal prudence, personal income tax, transportation infrastructure, labour market regulation and overall burden of regulation.
Alberta topped the rankings with an overall score of 8.1 out of 10. Saskatchewan was second, with a rank of 6.4, and British Columbia was third, with a rank of 5.6.
Ontario, Canada’s largest province and once considered the country’s economic engine, ranked fifth, with a score of 5.2. Quebec scored 4.8 and ranked seventh. Newfoundland and Labrador (4.4) ranked eighth, Nova Scotia (4.3) ranked ninth, and Prince Edward Island came in last, with a score of 2.7.
“With Canada’s lowest corporate and personal income taxes, most flexible labour market, smallest government and relatively low level of red tape, Alberta continues to offer an investment climate that is the most attractive nationwide,” said Charles Lammam, Fraser Institute senior policy analyst and co-author of the report. He added, “It’s highly troubling that Ontario remains relatively unattractive for capital investment. Although the provincial government has made a renewed commitment to lowering taxes on capital, it still has a long way to go to regain the top overall ranking it held in the early part of this decade. Quebec, Canada’s second-largest province, has done little to improve its attractiveness for investment, and its low overall score reflects that,” Lammam said.
Indicator break down
Alberta ranks first on corporate income taxes, personal income taxes, fiscal prudence and labour market regulation and second on the overall burden of government regulations or “red tape.” This province’s weak spot is transportation infrastructure, where it ranked seventh.
The report cites that Ontario’s mediocre ranking is largely the result of poor performance on two components: corporate income taxes and fiscal prudence. The report indicates specifically that the lack of fiscal prudence, driven by runaway government spending and massive deficits, continues to be a risk to Ontario’s investment climate.
In Quebec, major areas that weaken the investment climate are inflexible labour laws, excessive red tape and high personal income taxes. The Fraser Institute says, “The government has not taken steps to address these shortcomings. The ultimate penalty is borne by Quebecers through reduced prosperity.”
