Canadian business leaders look for innovation and pro-growth measures in upcoming Federal Budget

Taxes, incentives, supports all top of mind in a new KPMG in Canada survey of medium-sized companies

TORONTO, March 3, 2022 /CNW/ - Heading into the third year of the COVID-19 pandemic, Canadian business leaders want measures in the upcoming federal budget that will support innovation and growth amid the latest risks to a global economy already struggling with rising inflation and supply chain issues, finds a new KPMG in Canada survey of 508 medium-sized companies. Yet, despite it all, they remain optimistic for the future with most expressing confidence in their company's growth prospects.

Nearly nine in 10 (88 per cent) of medium-sized companies surveyed tapped government support programs for assistance during the pandemic and almost four in five (78 per cent) feel they still require relief programs to survive. In light of the challenges companies have faced over the last two years, an overwhelming majority (89 per cent) say they must invest quickly in digital operations and 82 per cent believe their industry is in "for a major shakeup" and will require government support for them to invest in emerging and clean technologies.

"The vast majority of business leaders told us that they're looking for support to help them invest in digital innovations that open up new business opportunities and revenue streams and build their resiliency to better weather economic storms," says Mary Jo Fedy, National Leader, Enterprise, KPMG in Canada. "They also believe that targeted government relief programs that help the hardest hit businesses and individuals should be maintained in the  near-term. Our poll findings also indicated that skilled labour shortages continue to represent a risk to recovery."

Key survey findings:

• 91 per cent of business leaders at Canadian medium-sized companies believe businesses need more tax incentives/credits to expense investments in innovation, digital transformation, and research and development (e.g. software, automation, patents), with nearly half (45 per cent) agreeing strongly
• 88 per cent of mid-sized companies say they tapped government support programs for assistance during the pandemic, with 53 per cent agreeing strongly
• 78 per cent say their company "still needs government relief programs or we won't make it", with 36 per cent agreeing strongly
• 86 per cent strongly or somewhat agree that "targeted government relief programs that help the hardest-hit businesses and people shouldn't be wound down just yet", with 45 per cent agreeing strongly
• 89 per cent say they need to be quicker to shift investment to digital operations and divest businesses that face digital obsolescence, with 40 per cent agreeing strongly
• 82 per cent believe their industry is in "for a major shakeup and will need government support to invest in emerging / disruptive technologies, with 37 per cent agreeing strongly
• 74 per cent say they are having a hard time hiring workers with the skillsets needed to grow their business (32 per cent agreeing strongly)
• 77 per cent are having a hard time hiring workers with the skillsets needed to maintain current levels of operation (30 per cent agreeing strongly)
• 95 per cent say, "despite it all, I feel optimistic about the future", with nearly half agreeing strongly
• 95 per cent say they are "very confident in the growth prospects" for their business, with 45 per cent agreeing strongly

A Taxing Dilemma

While business leaders appreciate targeted government relief programs, they are concerned about how governments will fund them and the potential tax implications of further spending, adds Dino Infanti, National Leader of Enterprise Tax for KPMG in Canada.

"Our poll findings show that a majority of business leaders are concerned that higher taxes will  stifle economic growth, investment, and consumer demand," says Mr. Infanti. "They want a fiscally-sound approach from this budget that features highly targeted relief programs, prudent stimulus spending, and modern tax policy that will boost Canada's growth potential. Striking the right balance in these three areas will go a long way toward improving business confidence and accelerating the transition to a greener, digital economy."

Other survey findings:

• 91 per cent are worried the government will impose higher taxes on businesses to pay down the deficit and national debt, with 60 per cent agreeing strongly
• 92 per cent are concerned governments will hike personal and business taxes, negatively impacting consumer demand, wealth creation, and economic growth, with 46 per cent agreeing strongly
• 96 per cent say government spending must be prudent, targeted and focused on initiatives that will grow our economy, with 50 per cent agreeing strongly
• 93 per cent believe that imposing special taxes on profitable industry sectors is punitive and will inhibit growth and discourage foreign investment, with 45 per cent agreeing strongly
• 90 per cent believe further tax relief is necessary to encourage businesses to re-invest in their operations and hire more workers, with 45 per cent agreeing strongly
• 93 per cent say personal taxes should not increase owing to the necessity for strong consumer demand on overall economic recovery, with 43 per cent agreeing strongly
• 92 per cent believe governments need to provide more financial support/subsidies to business, with sector-specific plans, help meet Canada's net-zero emissions/climate commitments (41 per cent strongly agreed)
• 93 per cent say businesses need more tax incentives / investment tax credits for clean energy sources and technologies (e.g. carbon capture, renewables, hydrogen, etc.), with 45 per cent agreeing strongly

A careful balance needed on infrastructure investment

Well over nine in 10 (95 per cent) business leaders want governments to invest in major infrastructure projects to position society/economy for future growth, with 46 per cent agreeing strongly.

"Our research shows that business leaders are mostly looking for projects that build industrial capacity, such as public transit, rail, ports ? and of course, alleviate supply chain issues," says Gary Webster, National Leader of KPMG's Infrastructure team and Head of Capital Projects Leadership. "With inflation driving up the cost of everything, tax dollars will need to be spent strategically to make the most impact."

The poll also found that:

• 90 per cent are concerned about the impact that the military conflict in Ukraine will have on the economy, their industry, and their company, such as rising oil and gas prices, higher commodity prices and reduced supplies, more supply chain bottlenecks (44 per cent agreeing strongly)
• 97 per cent strongly or somewhat agree that it's critical to remain vigilant about COVID-19 variants and follow health and safety measures or risk having their employees and customers at home because they are sick (49 per cent agreeing strongly)

"Medium-sized business leaders are ready to do their part to foster and support Canadian ingenuity and achieve strong, post-COVID economic growth," says Ms. Fedy. "But they are also counting on policies that will enhance long-term productivity and lay the foundations to support their future competitiveness and agility."

About the KPMG medium-sized business federal budget survey

KPMG surveyed 508 Canadians medium-sized business owners and decision makers between February 9 to 22, 2022 using Schlesinger Group's Methodify online research platform. All respondents are business owners or executive-level decision makers. A medium-sized business is defined as having annual gross revenue of more than $50 million and less than $1 billion. Thirty-eight per cent of respondents reported annual gross revenue of over $500 million; 25 per cent have between $300 million to $499 million; 18 per cent, between $200 million and $299 million; 16 per cent, between $100 million and $199 million; and, the remaining 4 per cent have between $50 million and $99.9 million.

About KPMG in Canada
KPMG LLP, a limited liability partnership, is a full-service Audit, Tax and Advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, auditing, and tax services to Canadians, inspiring confidence, empowering change, and driving innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs more than 10,000 people in over 40 locations across Canada, serving private- and public-sector clients. KPMG is consistently ranked one of Canada's top employers and one of the best places to work in the country.

The firm is established under the laws of Ontario and is a member of KPMG's global organization of independent member firms affiliated with KPMG International, a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, see home.kpmg/ca.

SOURCE KPMG LLP