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Economy

Downtowns seek federal dollars to boost recovery of Atlantic Canada's economy – The Journal Pioneer

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Downtowns have been ailing for a while — and not just because of COVID-19.

In St. John’s, offices were already emptying due to a downturn in the oil industry. The pandemic-prompted move toward working from home only made matters worse.

“It’s kind of like us and Calgary were hit with our own oil-bust pandemic prior to the COVID pandemic,” said Scott Cluney, executive director for Downtown St. John’s, a business improvement area organization.

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In Halifax, Paul MacKinnon likens the city’s downtown core to a 20,000-person town, with those people coming in every day and supporting the local businesses.

“Overnight, that turned into a town of 5,000 people, and so the impact on a lot of businesses has been pretty horrendous,” said MacKinnon, CEO of the Downtown Halifax Business Commission and president of Downtowns Atlantic Canada.


Paul McKinnon is the CEO of the Downtown Halifax Business Commission. - Contributed
Paul McKinnon is the CEO of the Downtown Halifax Business Commission. – Contributed

Uniting as one

Recognizing their voices are stronger when united, groups representing downtown and main street business communities are joining forces on a campaign directed at the federal government. In her fall economic statement delivered a few weeks ago, Finance Minister Chrystia Freeland outlined government’s vision for a three-year plan to aid recovery in the country. Knowing that’s the case, these organizations are making a joint pitch to government, asking federal officials to collaborate with them on creating programs that can address the needs of downtowns and main streets throughout Canada.

According to Ken Kelly, a Halifax-based project manager for the Canadian branch of the International Downtown Association, downtowns and main streets are a community focal point and a barometer for a place’s well-being.

“If you enter any community, whether it’s a smaller one or a larger one, you really can base your impressions on the community in what you see in the downtown or on the main street,” he said. “It’s a focal point for the community and it reflects the ideals, the aspirations, the achievements of any community. If you look at the buildings, the businesses that populate those buildings … I’ve got a pretty good sense if this is a robust community or this is a community that’s trying, but needs a little bit more work.”

These areas also draw in people, whether it’s for work, shopping or entertainment. That’s why Kelly believes it’s in the government’s best interest to listen.

“Work with us — we’re the ones who are closest to these issues,” he said. “We’re the ones who can provide insights that you haven’t thought of. We want to work with you as partners. We can not only contribute the intellectual. We can contribute the financial.”


Ken Kelly is a project manager for IDA Canada based in Halifax. - Contributed
Ken Kelly is a project manager for IDA Canada based in Halifax. – Contributed

Ideas brewing

Downtown St. John’s and the City of St. John’s already have some infrastructure projects in development for 2021, and Cluney said having multiple levels of government on board is a must to make them happen.

“Otherwise, we’re back to the drawing board if it’s just us and the city,” he said, adding such projects would need to be pushed back to 2022 or phased in over multiple years if other governments are not on board.

IDA Canada and its partners have areas they want government to help address — community well-being, community vitality, urban mobility, infrastructure and entrepreneurship. Kelly said social, cultural and economic matters impacting downtowns and main streets merit attention and that good things can spinoff from programming devoted to those issues.

In Charlottetown, retail and restaurants have managed OK, according to Downtown Charlottetown executive director Dawn Alan. But the hospitality sector was hit hard by a lack of tourism, and Alan expects that situation will not change until safe travel resumes. She would welcome opportunities to collaborate with decision makers.

“When monies come forward, we can be at the table to help make those decisions as to how it would be best spent,” she said. That holds true regardless of how many levels of government are involved.

“We’re the ones who have our ears to the businesses and talk with them daily and know how they’re being impacted and maybe how best they can be helped.”


Dawn Alan is the executive director of Downtown Charlottetown Inc. — SaltWire Network file photo
Dawn Alan is the executive director of Downtown Charlottetown Inc. — SaltWire Network file photo

Inclusivity, accessibility

MacKinnon considers creating more inclusive spaces and maintaining downtown vitality major issues for Halifax and something the federal government has to address for most Canadian cities.

“That doesn’t mean saving every business — that’s probably not going to be possible,” he admitted. “But it means when making infrastructure investments, what are those best ways that we can make those investments — we know they’re coming — to really help the downtown.”

Over the summer, MacKinnon noticed parts of downtown Halifax adjacent to scenic areas — including Argyle Street and the waterfront — did pretty well. He suggested further infrastructure work to help beautify the downtown would benefit the city.

Cluney said it would be great for the three levels of government to work with Downtown St. John’s on accessibility issues dually hindered by local geography and the age of many buildings. With the general population of the province aging rapidly, he said it’s important for the downtown area to get with the times and be accessible to everyone.

“All the new builds in our downtown are all accessible from the time you come in the front door right on through,” he said.

MacKinnon and Cluney both noted that the federal government has been less involved with urban downtowns in recent decades. A main streets program in the 1980s poured a lot of money into cities and larger municipalities and helped establish many downtown development groups.

“That investment is now 30, 40 years old. It’s time for a renewal of that and some new thinking,” MacKinnon said, pointing out the help is especially needed now given municipal governments are dealing with their own financial issues as a result of the pandemic.

Discussions are already moving forward with the federal government. MacKinnon and Kelly were scheduled to take part in a virtual meeting with Infrastructure and Communities Minister Catherine McKenna on Friday, Jan. 8, and more meetings with federal officials are scheduled this month.

Andrew Robinson is a business reporter in St. John’s.

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Economy

Biden's Hot Economy Stokes Currency Fears for the Rest of World – Bloomberg

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As Joe Biden this week hailed America’s booming economy as the strongest in the world during a reelection campaign tour of battleground-state Pennsylvania, global finance chiefs convening in Washington had a different message: cool it.

The push-back from central bank governors and finance ministers gathering for the International Monetary Fund-World Bank spring meetings highlight how the sting from a surging US economy — manifested through high interest rates and a strong dollar — is ricocheting around the world by forcing other currencies lower and complicating plans to bring down borrowing costs.

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Economy

Opinion: Higher capital gains taxes won't work as claimed, but will harm the economy – The Globe and Mail

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Canada’s Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland hold the 2024-25 budget, on Parliament Hill in Ottawa, on April 16.Patrick Doyle/Reuters

Alex Whalen and Jake Fuss are analysts at the Fraser Institute.

Amid a federal budget riddled with red ink and tax hikes, the Trudeau government has increased capital gains taxes. The move will be disastrous for Canada’s growth prospects and its already-lagging investment climate, and to make matters worse, research suggests it won’t work as planned.

Currently, individuals and businesses who sell a capital asset in Canada incur capital gains taxes at a 50-per-cent inclusion rate, which means that 50 per cent of the gain in the asset’s value is subject to taxation at the individual or business’s marginal tax rate. The Trudeau government is raising this inclusion rate to 66.6 per cent for all businesses, trusts and individuals with capital gains over $250,000.

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The problems with hiking capital gains taxes are numerous.

First, capital gains are taxed on a “realization” basis, which means the investor does not incur capital gains taxes until the asset is sold. According to empirical evidence, this creates a “lock-in” effect where investors have an incentive to keep their capital invested in a particular asset when they might otherwise sell.

For example, investors may delay selling capital assets because they anticipate a change in government and a reversal back to the previous inclusion rate. This means the Trudeau government is likely overestimating the potential revenue gains from its capital gains tax hike, given that individual investors will adjust the timing of their asset sales in response to the tax hike.

Second, the lock-in effect creates a drag on economic growth as it incentivizes investors to hold off selling their assets when they otherwise might, preventing capital from being deployed to its most productive use and therefore reducing growth.

Budget’s capital gains tax changes divide the small business community

And Canada’s growth prospects and investment climate have both been in decline. Canada currently faces the lowest growth prospects among all OECD countries in terms of GDP per person. Further, between 2014 and 2021, business investment (adjusted for inflation) in Canada declined by $43.7-billion. Hiking taxes on capital will make both pressing issues worse.

Contrary to the government’s framing – that this move only affects the wealthy – lagging business investment and slow growth affect all Canadians through lower incomes and living standards. Capital taxes are among the most economically damaging forms of taxation precisely because they reduce the incentive to innovate and invest. And while taxes on capital gains do raise revenue, the economic costs exceed the amount of tax collected.

Previous governments in Canada understood these facts. In the 2000 federal budget, then-finance minister Paul Martin said a “key factor contributing to the difficulty of raising capital by new startups is the fact that individuals who sell existing investments and reinvest in others must pay tax on any realized capital gains,” an explicit acknowledgment of the lock-in effect and costs of capital gains taxes. Further, that Liberal government reduced the capital gains inclusion rate, acknowledging the importance of a strong investment climate.

At a time when Canada badly needs to improve the incentives to invest, the Trudeau government’s 2024 budget has introduced a damaging tax hike. In delivering the budget, Finance Minister Chrystia Freeland said “Canada, a growing country, needs to make investments in our country and in Canadians right now.” Individuals and businesses across the country likely agree on the importance of investment. Hiking capital gains taxes will achieve the exact opposite effect.

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Economy

Nigeria's Economy, Once Africa's Biggest, Slips to Fourth Place – Bloomberg

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Nigeria’s economy, which ranked as Africa’s largest in 2022, is set to slip to fourth place this year and Egypt, which held the top position in 2023, is projected to fall to second behind South Africa after a series of currency devaluations, International Monetary Fund forecasts show.

The IMF’s World Economic Outlook estimates Nigeria’s gross domestic product at $253 billion based on current prices this year, lagging energy-rich Algeria at $267 billion, Egypt at $348 billion and South Africa at $373 billion.

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