By Melissa Shin
(Bloomberg) — Economists at Canada’s biggest banks are calling on Prime Minister Mark Carney to reform taxes, arguing his latest budget investments won’t meaningfully move the needle on competitiveness.
“I don’t think it’s enough,” Beata Caranci, chief economist at Toronto-Dominion Bank, told a sold‑out Economic Club of Canada event in Toronto on Wednesday. “What we’ve seen is a good first step, but really what they’ve done so far is unwind previous bad policy.”
Carney’s November budget pledged to attract $1 trillion in public and private investment over five years through tax incentives and targeted spending on housing, infrastructure and defense. However, several of the corporate tax changes were inherited from the previous government.
The $1 trillion goal is “completely unrealistic” because Canada would need to double investment levels, said Jean-François Perrault, Bank of Nova Scotia’s chief economist. Still, he said the country will benefit from the push even if it’s only partially successful.
Caranci said tax reform is needed to spur growth because the current system discourages higher earnings. For example, preferential tax rates for small businesses stop after $500,000, causing a “bunching” of firms at that threshold, she said.
She recommended, at minimum, indexing that figure. Otherwise, “you’re artificially keeping companies smaller,” she said.
Perrault agreed, saying businesses aren’t trying to maximize profit growth because they see the tax system and regulatory environment as disadvantages.
The Bank of Canada has warned the country is stuck in a “vicious circle,” wherein weak productivity gives rise to reduced investment in a perpetual cycle.
Pipeline urgency
Carney’s government has cleared some regulatory hurdles for new west coast pipelines to ship more oil to Asia, but no company has committed to building one. If a proponent steps forward, construction — and the ensuing benefits — would still be years away.
That’s not soon enough for Stéfane Marion, chief economist at National Bank of Canada. “We need to be a little bit more aggressive in terms of building it, and hopefully we can do it in less than 10 years,” he said on the panel.
U.S. President Donald Trump’s push to access Venezuelan crude is bolstering calls for Canada to diversify its export markets. Prices for Canadian heavy oil grades tumbled this week following President Nicolas Maduro’s capture.
Caranci said unlocking Venezuelan oil will take many years and major investment, making the existing global supply glut the more immediate concern for Canada.
The country risks acting too slowly over the coming year, squandering the urgency it adopted after Trump imposed tariffs and threatened to make it the 51st U.S. state, Perrault warned.
“I’m worried that as much as we want to seize the moment, that we don’t,” he said.
–With assistance from Erik Hertzberg.
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Last modified: January 7, 2026
