(Bloomberg) -- Royal Bank of Canada’s top executive said the country’s economic policy has veered off track, and it needs a more competitive tax regime and a tighter relationship with the US.
“We’re definitely on the wrong path,” Chief Executive Officer Dave McKay said Tuesday during a question-and-answer session at an event in Toronto.
Prime Minister Justin Trudeau has been under pressure on economic issues in an environment of tepid growth, rising unemployment and weak private-sector investment. McKay didn’t criticize the prime minister by name, but said the country has adopted a less competitive tax structure that’s harmful to entrepreneurial risk-taking.
In June, the government increased the tax rate on capital gains for businesses and for individuals over a certain threshold — a move that’s expected to generate tens of billions of dollars in tax revenue over several years, but which drew condemnation from business groups.
The government is also phasing out some tax breaks on new business investment, a reversal of earlier measures that were meant to help firms compete with the US by allowing quicker write-offs of certain assets.
McKay suggested it’s not an option for Canada, an export-driven nation of 41 million people, to have a tax regime that’s on the same level as the US, which has an economy more than 10 times larger.
“When you’re small and trying to compete with the big guys, you can’t just match,” he said.
The RBC executive also said it’s important for Canadian policymakers and businesses to figure out “what the United States needs from us” and to be more responsive to its most important trading partner. That may include greater spending on defence and security and a more accommodating approach to developing natural-resources projects quickly, he said.
“They need our resources. They need our critical minerals,” he said. “The US needs less rhetoric from Canada and more get-stuff-done.”
--With assistance from Erik Hertzberg.
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