Ottawa has softened its capital-gains tax hike. But is that enough?

Hello, readers! Welcome back to Business Cycle – a look at what The Globe and Mail’s business columnists are talking about this week. In the latest edition, we’re talking about the tweaks to Ottawa’s capital gains taxation, Canada’s productivity problem and how the store-within-a-store concept could save physical shopping.??

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Ottawa has softened its capital-gains tax hike. But it’s still not enough

By Daryl Ching, CFA

Earlier this week, Ottawa announced several tweaks to its new Canadian Entrepreneurs’ Incentive, which lowers the capital-gains taxes that eligible business owners pay when they sell their companies, on profits up to a lifetime maximum of $2-million.

Columnist Daryl Ching, CFA , founder of financial advisory firm Vistance Capital Advisory , says that the changes are an improvement on the original rules – but don’t go far enough. He argues that the overall impact of the capital gains increases will continue to drive entrepreneurs and investors out of Canada and to more favourable tax jurisdictions.

"The capital-gains tax as it stands right now affects individuals planning to start a business, every business owner that plans to exit, and investors who make their profit investing in small businesses. Business owners put a substantial amount of life savings at risk to start a business. Families have broken up over the financial stress. It is because of these personal sacrifices made by entrepreneurs that 12 million Canadians currently have jobs."

What do you think of the new tweaks to Ottawa’s capital gains tax? Do you think it will be a disincentive for business owners to remain in Canada? Check out the full opinion piece here.?

Canada’s productivity problem isn’t that big if we exclude oil

By Pau Pujolas and Oliver Loertscher

It’s no secret that Canada has a productivity problem. But according to research published in the Canadian Journal of Economics by Pau Pujolas and Oliver Loertscher , the problem isn’t that big if we exclude oil from the equation.?

Since 2001, Canadian productivity has grown at the same rate as in the U.S. once the oil sector is excluded from the calculations of productivity. The columnists argue that comparing labour productivity between the oil sector and the rest of the economy is flawed because it artificially inflates its labour productivity.

"Given that the two countries’ growth rate for productivity is similar if oil is excluded, this indicates that there is no immediate need for drastic action. Some people have described the oil sector as a boon for the Canadian economy. In a way, that’s true. But that has nothing to do with productivity. The oil sector, like any extractive industry, is akin to selling family heirlooms. Having cash on hand (income) is better than keeping old silver in a drawer, but it doesn’t mean you’re more productive."

Do you agree with the columnists about excluding oil from Canada’s productivity calculations? Check out the full opinion piece here.

The rise of the store-within-a-store, a retail innovation to help save physical shopping

By Joanne E. McNeish

Is the appeal of physical stores on the decline? Forecasts have predicted that in recent years, especially since the pandemic. Yet, Statistics Canada’s latest annual retail survey reports that 89 per cent of retail sales still occur in a physical store.

Joanne E. McNeish , a professor at Toronto Metropolitan University, points to one innovation that has been helping physical retail spaces stay relevant – the “store-within-the-store.” Think Hudson’s Bay’s resurrection of Zellers, or Canada Post stationed in various Shoppers Drug Mart locations. She predicts that more large-space retailers will use this strategy to increase revenue and manage costs.

"With multiple brands within the retail space, foot traffic is increased. Customers come in to look for a specific product and may discover the partner retail brand in the same space. The competitive but complementary offering can be good for both retail brands If done well, the store-within-a store concept is a profitable way for retailers to respond to shifting consumer habits amid high inflation and competition from several old and new retailers."

Do you think the “store-within-the-store” is the answer to saving physical shopping? Check out the full opinion piece here.

More business headlines we’re following this week:?

• Loblaw’s health care empire is growing. But can it earn the trust of Canadian patients?
• Real estate insolvencies in Canada set to surpass levels of global financial crisis
• Former RBC CFO Nadine Ahn sues bank for nearly $50-million, claiming wrongful termination, ‘reputational harm’

The Globe's business opinion pieces are commissioned and edited by Ethan Lou. If you would like to write in this section, please send pitches to [email protected].?

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