Canada’s economic
Canada’s economic freedom score is 79.4, making its economy the 6th freest in the 2013 Index. Its overall score is 0.5 point lower than last year, reflecting declines in freedom from corruption and business freedom that are only partially offset by a notable improvement in the management of public spending. Canada continues to be the freest economy in the North America region.
The foundations of economic freedom in Canada remain strong and well-supported by solid protection of property rights and an independent judiciary that enforces anti-corruption measures effectively. While many large advanced economies have been struggling with the heavy burden of government and fiscal constraints that result from years of unrestrained public spending, Canada’s public finance management has been comparatively prudent, with efforts to downsize government made on a continuing basis.
Canada’s economy has been resilient, benefiting from a strong commitment to open-market policies that facilitate global trade and investment flows. Efficient regulations are applied evenly in most cases, encouraging dynamic entrepreneurial activity in the private sector. Steady reduction of the standard corporate tax rate has also contributed to global competitiveness.
BACKGROUND
Prime Minister Stephen Harper won a second term in the 2011 parliamentary elections, and his Conservative Party secured a solid majority. The opposition New Democratic Party also picked up seats, particularly in the province of Quebec. Canada’s federal democratic system provides substantial autonomy to its 13 provinces and territories. Tensions between Anglo and French Canadians have softened in recent years, but cultural protectionism in international and domestic trade is an ongoing threat. Canada is a party to the North American Free Trade Agreement and a major exporter of oil, minerals, automobiles, manufactured goods, and forest products. The proposed expansion of the TransCanada Keystone pipeline system to increase oil exports from Alberta to the United States has been delayed by the Obama Administration.
RULE OF LAWVIEW METHODOLOGY
Property Rights 90.0 Create a Graph using this measurement
Freedom From Corruption 87.0 Create a Graph using this measurement
Canada’s foundations of economic freedom are solid. Private property is well protected, with an independent and transparent judicial system firmly in place. Enforcement of contracts is very secure, and expropriation is highly unusual. Protection of intellectual property rights is consistent with world standards. Effective anti-corruption measures discourage bribery of public officials and uphold the government’s reputation for integrity.
LIMITED GOVERNMENTVIEW METHODOLOGY
Government Spending 44.8 Create a Graph using this measurement
Fiscal Freedom 79.8 Create a Graph using this measurement
The top federal income tax rate remains 29 percent, and the top corporate tax rate has been cut to 15 percent. Other taxes include a value-added tax (VAT) and a property tax. The overall tax burden amounts to 31 percent of total domestic income. Government spending is equivalent to 42.9 percent of total domestic output, with deficits recorded in recent years. Public debt has risen gradually to almost 90 percent of GDP.
REGULATORY EFFICIENCYVIEW METHODOLOGY
Business Freedom 91.7 Create a Graph using this measurement
Labor Freedom 82.3 Create a Graph using this measurement
Monetary Freedom 75.2 Create a Graph using this measurement
Canada’s highly competitive regulatory framework promotes business formation and operation. With no minimum capital standards, starting a company requires only one procedure. Flexible labor regulations enhance employment and productivity growth. Inflation has been modest, but the government controls virtually all prices for health care services through its mandatory “single-payer” nationalized program.
OPEN MARKETSVIEW METHODOLOGY
Trade Freedom 88.2 Create a Graph using this measurement
Investment Freedom 75.0 Create a Graph using this measurement
Financial Freedom 80.0 Create a Graph using this measurement
The trade regime is very competitive, with a low 0.9 percent average tariff and few non-tariff barriers. The country’s openness and flexibility strongly sustain the efficient and dynamic investment environment. The prudent banking sector remains stable, weathering the ongoing global financial turmoil with no need for bailouts or large injections of state funds. The “big six” domestic banks dominate the sector.
