Canada | Economy

Economic pessimism still on the rise, latest survey shows

CPA Canada Business Monitor shows little optimism from Canadian business leaders. Respondents also overwhelmingly favour a comprehensive review of the country’s tax system.

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Business standing in the city, holding out hand in the rain, while under an umbrella The latest CPA Canada Business Monitor found that in the fourth quarter of 2018, 35 per cent of respondents were pessimistic about the national economy for the next 12 months (Shutterstock/tommaso79)

Pessimism about the Canadian economy continues to rise, according to a new survey from CPA Canada.

The CPA Canada Business Monitor (Q4 2018) found that in the fourth quarter of 2018, 35 per cent of respondents—professional accountants occupying leadership roles including CEOs, COOs and CFOs—were pessimistic about the national economy for the next 12 months. That’s up from 28 percent in the previous quarter and is significantly higher than a year earlier when pessimism stood at 16 per cent.

Optimism sits at just 26 per cent—its lowest since 2016.

“Despite the recent spate of strong economic data, the sharp deterioration in economic sentiment highlights that Canada’s business leaders are rightly worried about the numerous external risks facing the economy,” said Joy Thomas, president and CEO of CPA Canada.

The top three challenges to the Canadian economy cited by respondents were: protectionist trade sentiment in the U.S.; uncertainty surrounding the Canadian economy; and oil prices. Other challenges noted included lack of skilled workers and employee recruitment, retention and development.

“The increase in pessimism is a continuation of a trend we have been seeing for more than a year and reflects the continued risks facing the Canadian economy,” said Francis Fong, CPA Canada’s chief economist. “Economic growth this year is expected to slow substantially relative to 2018, while issues like trade and geopolitical risks continue to cloud the outlook.”

In advance of the 2019 federal budget and election, there continues to be strong support among those surveyed for a comprehensive review of Canada’s tax system. The results showed that 79 per cent of respondents think a review is required, while 66 per cent call for political parties to make prioritizing that review part of their 2019 federal election campaign platforms. [See No time like the present for tax reform in Canada, says global community]

These numbers are not surprising to Bruce Ball, CPA Canada’s vice-president of taxation, who says CPAs understand that the combination of tax reform in the U.S. and a Canadian tax system that has become very complicated is a serious issue.

 “Many are also concerned about the high rates of personal tax,” said Ball. “So overall, there are continuing concerns on Canada’s competitiveness and the complexity of the tax system. Those factors plus the length of time since the last review—more than 50 years—are the reasons why a review is long overdue.”

Among the benefits of a comprehensive review of the tax system, respondents were most likely to cite that Canada’s tax system would become less costly and time-consuming for both individuals and businesses; that Canada would attract more investment; and that it’s a key to enhanced international competitiveness. [See Tax system review will boost business, better serve Canadians]

Adds Ball: “Given that there are so many different things that can be discussed in an election, I believe that having two-thirds of respondents agreeing that conducting a tax review should be a specific election issue sends a strong statement on the need for a review.”

READ THE LATEST BUSINESS MONITOR

The CPA Canada Business Monitor, commissioned by CPA Canada and conducted by Nielsen, is issued quarterly. For the Q4 2018 study, emailed surveys were completed by 698 of 6,782 people identified as holding senior positions in industry between December 4 and December 21, 2018.