2013 Ontario Pre-Budget Submission Toronto Financial Services Alliance February 2013

Transcription

1 2013 Ontari Pre-Budget Submissin Trnt Financial Services Alliance February 2013

2 TABLE OF CONTENTS Deficit/Debt Reductin 3 Maintaining a Cmpetitive Tax Advantage 4 Cmmn Securities Regulatr 5 Retirement/Pensin System 6 Attracting Prfessinal Talent 7 Psitining Trnt as the Nrth American Centre fr Islamic Finance 8 Financial Services as a Pririty Area 9 1

3 Abut the Trnt Financial Services Alliance (TFSA) The Trnt Financial Services Alliance (TFSA) is a unique, public-private partnership dedicated t grwing the financial services cluster and cntinuing t strengthen Trnt s prfile as a tp ten glbal financial hub. Established in 2001 by the City f Trnt in partnership with the financial industry, TFSA wrks n behalf f the entire financial cluster, including its business and educatinal supprt sectrs. With bth federal and prvincial gvernments supprt, the TFSA has established the Glbal Risk Institute in Financial Services t leverage the sectr s glbal reputatin fr stability, as well as the Center f Excellence in Financial Services Educatin t capitalize n Trnt regin s human capital advantages. The financial services sectr is ne f the largest ecnmic cntributrs t the cuntry, prvince, and city, cntributing apprximately 20% t the city s grss dmestic prduct (GDP) and emplying ver 650,000 peple in direct and indirect jbs in Ontari. 1 Trnt is the secnd largest financial sectr in Nrth America by direct emplyment and the financial services sectr is the secnd largest emplyer fr the Trnt regin. Trnt is quickly becming a prminent glbal financial services centre. The city has managed t mve int the tp ten f bth indices respnsible fr reprting n glbal financial services centers as nted by bth The Banker and the Glbal Financial Center s Index. The financial services sectr in Trnt currently basts several strengths: Canada s banks have been ranked as the sundest banking system in the wrld by the Wrld Ecnmic Frum fr the 5th year in a rw; Trnt is hme t tw f the largest glbal life insurers; The Trnt Stck Exchange is ranked #1 in glbal metals & mining, energy and clean technlgy listings; and Three f the tp 50 glbal pensin funds are based in Trnt. The TFSA is a catalyst fr cllabratin between the public and private sectrs. Our mandate and reach prvides us with a valuable perspective n the rle the financial sectr plays in prmting ecnmic grwth and prsperity and a deep understanding f the critical success factrs fr the industry. We appreciate Ontari s attentin t the issues that drive sectr grwth and we lk frward t cntinuing t wrk with the gvernment n many f the issues utlined in this submissin. 1 Talent Prfile Chart Bk, June 2012, Centre fr Excellence in Financial Services Educatin, 2

4 Deficit/Debt Reductin Sustainable public finances are an imprtant cmpnent in fstering an ecnmic climate that creates jbs, attracts investment, and maintains a strng internatinal brand. While we d nt underestimate the current challenges psed by Ontari s fiscal situatin, it is imprtant fr the Prvince t remain vigilant in meeting its current expenditure targets and schedule fr a balanced budget. It is imprtant that the prvincial gvernment adhere t recent cmmitments n spending restraint as recent expenditure patterns pint t sme wrrying trends. The 2012 Cmmissin n the Refrm f Ontari s Public Services made several imprtant bservatins in this respect. The Cmmissin nted that Ontari s debt recrd ver the past quarter century was similar t that f ther Canadian prvinces the past decade has brken the histrical pattern. 2 Fr example, the Cmmissin nted that Ontari s annual deficit, relative t GDP, has been the largest in Canada since The Cmmissin als nted that the prvince s interest payments have been treading at arund their lwest levels in the past 20 years, bth in relatin t GDP and t the prvince s ttal spending. In , interest amunted t 7.9 per cent f ttal spending (well belw the 20-year average f 11.3 per cent) and 1.5 per cent f GDP (cmpared with the 20-year average f 2.0 per cent). 4 Thus, when interest rates rise t mre histrical levels, this will pse significant challenges t the prvincial gvernment if debt levels are nt reduced as grwing debt servicing csts will divert funding frm ther key pririties. Recmmendatins: At a minimum, the prvincial gvernment shuld adhere t its current target f a balanced budget by and cmmit t lwering the debt-t-gdp rati in the medium term Cmmissin n the Refrm f Ontari s Public Services. P Cmmissin n the Refrm f Ontari s Public Services. P Cmmissin n the Refrm f Ontari s Public Services. P. 78 3

5 Maintaining a Cmpetitive Tax Advantage A key element in marketing the Trnt regin as a glbal financial hub, in additin t its sund regulatry envirnment and talented wrkfrce, is a stable, cmpetitive tax advantage. In recent years, gvernments have taken imprtant measures t imprve the cmpetitiveness f the Canadian tax system, including lwering crprate tax rates, harmnizing federal and prvincial taxes, and adpting a single tax administratr. Harmnized sales and incme tax systems prmte cmpliance efficiencies and savings fr Canadian businesses that therwise wuld nt be pssible an effective way t enhance efficiency and cmpetitiveness. It is imprtant that gvernments wrk tward a system that taxpayers can cmply with better and revenue agencies can administer mre effectively. Minimizing cmpliance csts and cmplexity increases investment and is a principle f sund tax plicy. A recent reprt ranked Trnt as the fifth mst cmpetitive tax jurisdictin amng many internatinal cities. 5 T maintain this advantage and ensure that investment and capital are allcated efficiently, gvernments and stakehlders must wrk tgether n several tax issues as the TFSA believes that mre can be dne t enhance cmpliance and administrative efficiencies in the Canadian tax system. A TFSA paper titled Trnt as a Glbal Financial Centre- Strengthening Our Tax Advantage utlines sme key tax issues impacting the grwth and cmpetitiveness f the financial services sectr in Trnt. Recmmendatins: Ontari shuld wrk with and encurage the federal gvernment t implement the fllwing recmmendatins: Gds and Services Tax (GST)/Harmnized Sales Tax (HST): The TFSA supprts the decisin by the Canadian and Ontari gvernments t harmnize the GST/HST. Hwever, the current GST/HST treatment f financial services creates issues ranging frm administrative and definitinal cmplexity t ecnmic distrtins. The federal gvernment shuld cntinue t undertake a cmprehensive examinatin f the applicatin f GST/HST t financial services t ensure greater tax neutrality, simpler administratin, reduced definitinal cmplexity, and increased prductivity and cmpetitiveness. Taxatin f Crprate Grups: The federal and Ontari gvernments shuld give increased pririty t seeking cnsensus with all prvinces and t engage ther stakehlders in the next steps in mving twards a mre frmal system fr the taxatin f crprate grups. Advisry Panel n Canada's System f Internatinal Taxatin: The federal gvernment shuld accelerate prgress tward implementing the key recmmendatins f the Advisry Panel. 5 KPMG s Cmpetitive Alternatives 2012 Special Editin: Fcus n Tax. The study did nt include sme majr financial centres, such as Singapre, Hng Kng and Dubai. 4

6 Freign Affiliate Dumping: The current freign affiliate dumping measures shuld be revised t exclude all Canadian public crpratins frm the applicatin f the prpsed measures r at a minimum t exclude Canadian public crpratins that meet cnditins that are designed t prtect the Canadian tax base. Attracting Multinatinal Crprate Treasury Operatins: The federal gvernment culd review and revise Canadian incme tax rules t make Canadian financial institutins mre attractive t Canadian and glbal multinatinals as peratrs and managers f glbal treasury peratins. Federal Designatin f Trnt as an Internatinal Financial Centre: Currently, federal tax legislatin recgnizes Mntreal and Vancuver as internatinal financial centres. Federal tax legislatin shuld als recgnize Trnt s status as an internatinal financial centre and thus cntribute t Trnt s already strng glbal brand. Overall Reprting and Cmpliance System: The federal gvernment, including the Canada Revenue Agency, shuld cnsult with varius stakehlders t develp prpsals t simplify the verall tax cde, reprting, and cmpliance system. Cmmn Securities Regulatr The financial services sectr cntinues t be a strng prpnent f the need fr a cmmn securities regulatr. As internatinal develpments in securities regulatin cntinue t evlve, the establishment f a cmmn regulatr will greatly assist Canada and Ontari in addressing regulatry challenges, building a cmpetitive advantage, attracting investment, and laying the fundatin fr strng ecnmic grwth. The specific benefits f a cmmn securities regulatr are numerus and include a mre effective regulatry structure fr issuers and investrs, lwering the cst f capital, strnger enfrcement, a unified vice that enhances ur glbal reputatin, and a mre crdinated and effective structure fr plicy making. The establishment f a cmmn securities regulatr cntinues t be an imprtant pririty fr the financial services sectr as it will enhance ur ability t build Trnt and Canada as a mre prminent glbal financial hub. Recmmendatins: The federal gvernment and prvinces shuld cntinue t wrk tgether t establish a cperative, cmmn securities regulatry framewrk. Prvinces and the federal gvernment shuld develp a c-perative structure that reflects prvincial strengths and includes an imprtant rle fr the federal gvernment. 5

7 Retirement/Pensin System The TFSA encurages Ontari and all prvinces and territries t enact enabling legislatin fr Pled Registered Pensin Plans (PRPPs) and t cntinue t wrk with stakehlders n pursuing imprvements t ther frms f retirement savings. Canada s pensin system is amng the strngest in the wrld and the intrductin f PRPPs will help t ensure that this advantage des nt erde. If implemented apprpriately, PRPPs will ffer new retirement savings ptins fr grups such as self-emplyed Canadians and individuals wh wrk fr smaller cmpanies. Emplyees f small and medium-sized businesses and self-emplyed individuals have traditinally faced barriers t traditinal emplyer-based pensin plans which are ften viewed as t cstly, administratively cmplex, and cntaining sme risks that smaller emplyers are simply nt prepared t take. It is imprtant that stakehlders and all levels f gvernment wrk tgether t ensure high participatin rates in PRPPs and ther registered retirement savings vehicles. The TFSA als encurages Ontari t wrk with the federal gvernment, ther prvinces and stakehlders n issues such as imprvements t the tax rules gverning Grup Registered Retirement Saving Plans (GRRSPs), the transferability between PRPPs and Registered Retirement Saving Plans (RRSPs), incrprating advice/financial literacy in retirement savings ptins, and the simplificatin f federal/prvincial pensin-related administratin. Trnt s wrld-leading private-sectr financial expertise can cntribute significantly t meeting the need identified by gvernment t prvide affrdable retirement ptins fr all Canadians. Canadian financial institutins, the largest f which are headquartered in Trnt, and the Trnt financial sectr s recgnized strength in asset management, have been identified amng the tp reasns that Trnt stands ut as a glbal financial services hub. Recmmendatins: Ontari shuld enact enabling legislatin fr Pled Registered Pensin Plans (PRPPs). Ontari shuld als wrk with the federal gvernment, ther prvinces and stakehlders n issues such as imprvements t the tax rules gverning Grup Registered Retirement Saving Plans (GRRSPs), the transferability between PRPPs and Registered Retirement Saving Plans (RRSPs), incrprating advice/financial literacy in retirement savings ptins, and the simplificatin f federal/prvincial pensin-related administratin. 6

8 Attracting Prfessinal Talent Ontari s diverse and highly educated talent base is a key cmpnent f business/jbs attractin t the sectr. Hwever, research cntinues t pint t skills shrtages in key parts f the financial services sectr in the cming years. Emplyers have identified a brad range f technical and sft skills that are needed fr in-demand rles identified by the sectr. Grwing the talent base dmestically and attracting skilled freign wrkers t Ontari therefre remains a pririty fr the sectr. As part f its mandate t build and strengthen the talent base fr the sectr, the TFSA established the Centre f Excellence in Financial Services Educatin (CE) as a result f a 2008 Ontari Budget cmmitment. Funding was flwed frm the Ministry f Training, Clleges and Universities and the private sectr is als nw cntributing. The CE cntinues t wrk t strengthen the talent pipeline fr the sectr by cllabrating with key stakehlders such as emplyers, educatinal institutins, prfessinal assciatins and settlement agencies t: Enhance the readiness f internatinally-trained individuals and career shifters t wrk in the financial services sectr, by prviding pprtunities t build wrkplace knwledge and access t prfessinal netwrks. The CE has cnvened a crss-sectral grup f settlement agencies and emplyers t deliver rientatin training and netwrking fr jb seekers. Prepare cllege and university students t wrk in the sectr by cllabrating with student rganizatins, such as AIESEC Canada, t ffer pprtunities t build wrkplace knwledge and access t prfessinal netwrks. Wrk in a curriculum advisry capacity with clleges and universities t ensure the develpment f new curricula t meet the skills and knwledge needs f financial sectr emplyers. T date, 12 new prgrams/curses have been intrduced by clleges and universities in the Trnt regin based n the CE s research. Recmmendatins: Ontari shuld wrk with the federal gvernment t: Implement the recmmendatins frm: the Ontari reprt, A New Directin, Ontari s Immigratin Strategy, including raising the prprtin f ecnmic immigrants t 70 per cent and dubling the limit f the Prvincial Nminee Prgram; and the Federal reprt, Internatinal Educatin: a Key Driver f Canada s Future Prsperity. Reduce the prcessing time fr individuals wh may be eligible under the Canadian Experience Class. Additinally, internatinal students shuld be permitted t take up part-time wrk pprtunities while their studies are still in prgress, s that their applicatins can begin t be prcessed prir t graduatin. 7

9 Explre pprtunities t expedite the attractin f immigrants with the skills, knwledge and cmpetencies needed by the sectr. Applicatins culd be expedited thrugh the newly-launched Expressin f Interest prgram. Increase the investment made in prviding infrmatin and rientatin pprtunities fr newly-apprved immigrants while they are still in their hme cuntries. This will ensure that immigrants have a better awareness f the business and talent needs f the sectr befre arriving in Canada, and that they arrive with a greater readiness fr pursuing careers in the sectr. Psitining Trnt as the Nrth American Centre fr Islamic Finance The Islamic financing market represents a tremendus pprtunity fr Canada s financial sectr with Trnt well psitined t becme the Nrth American centre fr Islamic finance. Fr example, Standard & Pr (S&P) expects the $1 trillin glbal Islamic finance industry will grw 20% annually t ver $2 trillin by 2015, dubling in size ver the perid. 6 Canada is well-psitined t attract additinal investment frm cuntries where Islamic finance is becming an imprtant alternative t cnventinal finance, with Trnt well psitined t becme the Nrth American centre fr Islamic finance. Asian ecnmies such as Malaysia and Indnesia and the cuntries f the Gulf C-Operatin Cuncil (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE) are at the frefrnt f the develpment f Islamic finance. Many f these jurisdictins are f strategic imprtance t Canada frm a trade and investment standpint, and a willingness t accmmdate structures that are widely utilized in Islamic finance will facilitate attracting additinal trade and investment pprtunities fr Canada and the Canadian financial industry. Other Western jurisdictins, including the U.K., Ireland, France, Singapre and Australia have taken steps r are in the prcess f making changes t their respective legislative and/r regulatry framewrks t create a level playing field between cnventinal and Islamic finance. Lndn, U.K. has already successfully psitined itself as a glbal centre fr Islamic finance and attracted significant investment as a result. S&P nted that there has als been strnger and mre active supprt frm dmestic authrities, particularly thrugh the creatin f regulatry and tax framewrks, ensuring a level playing field between cnventinal and Islamic instruments. 7 The TFSA has created an Islamic Finance Wrking Grup (IFWG) and the IFWG has dne sme f the initial plicy wrk t identify issues and ptins t level the playing field with cnventinal finance. There are a number f prpsed changes t federal and prvincial legislatin that wuld help level the playing field, thus allwing gvernments and private sectr participants t take full advantage f Islamic finance in Canada. 6 September 21, 2012 GulfNews 7 September 21, 2012 GulfNews 8

10 Recmmendatins: Ontari shuld frm a jint wrking grup with the federal Department f Finance with the bjective f develping specific prpsals t ensure that Islamic finance has a similar tax and regulatry treatment t cnventinal financing. The Ontari gvernment shuld als wrk with financial services stakehlders n tax and regulatry issues that are slely under prvincial jurisdictin, with the bjective f develping specific prpsals t ensure that Islamic finance has a similar tax and regulatry treatment t cnventinal financing. Ontari shuld wrk with the federal gvernment t market Trnt as the Nrth American centre fr Islamic finance. Financial Services as a Pririty Area The Prvince has prvided tremendus supprt t the effrts t prmte the Trnt financial services sectr internatinally and attract freign firms t invest in the Prvince. Amng the key activities has been participatin by Ontari fficials in direct investment attractin initiatives, the spnsrship f very successful business missins, the n-ging supprt fr glbal media relatins, the develpment f financial services sectr marketing prducts, and the expansin f the Internatinal Business Develpment Representative (IBDR) teams in internatinal markets. The TFSA was pleased that financial services was recently chsen as ne f the sectrs t participate in the Ontari Open fr Business initiative. This further demnstrates the cmmitment by the gvernment t wrk cperatively n many key issues impacting the grwth f the financial services sectr The TFSA was als pleased t nte that the recent reprt f Ontari s Jbs and Prsperity Cuncil, Advantage Ontari, referenced financial services as a strategic area fr grwth and exprt pprtunities. Recmmendatins: Financial services shuld cntinue t be a pririty area in terms f gvernment marketing and ecnmic develpment initiatives. Cntinue dedicated resurces aimed at prmting the financial services sectr and ensure that these resurces are well integrated with the marketing and ecnmic develpment effrts f ther levels f gvernment. Cntinue t strengthen and frmalize the ties between the prvincial gvernment and TFSA t ensure that there is a practive sharing f infrmatin such as market intelligence and the identificatin f ptential investment leads. Ensure that the financial services sectr receives apprpriate cverage in the Prvince s marketing cllateral used t prmte the regin s cmpetitive advantages. 9

11 Cnclusin The TFSA cngratulates the Ontari gvernment n their active leadership and cmmitment t resurces in helping the Trnt regin becme a glbal financial services centre. The Ontari gvernment has prvided a strng fundatin and partnership fr ur mutual strategy f grwing the financial services sectr and attracting new investment and jbs t Ontari. The TFSA and the financial services sectr cntinue t lk frward t wrking clsely with the prvincial gvernment t ensure a strng and grwing glbal financial services sectr. 10