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Many articles have been written and posted on social media about the terms "Subsidies", especially what is classify as a subsidy:

Subsidy:

Subsidies come in various forms including direct (cash grants, interest-free loans) and indirect (tax breaks, insurance, low-interest loans, accelerated depreciation, rent rebates). Furthermore, they can be broad or narrow, legal, illegal, ethical, or unethical.

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What is an indirect tax write-off?

Unlike direct taxes, indirect taxes are levied on goods and services, not individual payers, and collected by the retailer or manufacturer. Sales and Value-Added Taxes (VATs) are two examples of indirect taxes.

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As you can see from the above a subsidy is cash or loan given directly to an organization as part of supporting the organization’s operations including capital spending, R&D, and training.

Let me now discuss what is a tax deduction:

A deduction is an expense that can be subtracted from a taxpayer's gross income to reduce the amount of income that is subject to taxation.

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Deductions are not subsidies as rules determine what qualifies as a deduction. You can also add to that their rules for tax reporting and accounting reporting. That is why organizations need to prepare tax calculations to manage timing and permanent differences. Many organizations look at deferred taxes and make assumptions that organizations are not paying their share of taxes.

Accounting for Taxes:

Accounting ?is a fairly broad discipline, but it is essential for a company's administration. It is a pillar of a company's decision-making process.

Accounting is a system for organizing and analyzing a company's financial data. Accounting documents, such as the balance sheet, income statement and cash flow statement, are essential for assessing a company's financial performance. It therefore provides a real-time overview of the evolution of a company's financial statements. Accounting is mainly applied to companies, both large and small, and encompasses various fields such as financial accounting, management accounting and cost accounting.

Good accounting management helps business leaders better understand their annual results and monthly balance sheets. It helps them define more accurate business objectives based on real data and determine the actions needed to achieve them.

Source - https://www.fedfinance.ca/en/news/what-is-the-difference-between-accounting-and-taxation

It is very easy to say that sectors like natural resources, construction, manufacturing, agriculture, and energy receive subsidies. The critical aspects that deductions from income either for accounting or taxable income are not subsidies (Capital Cost Allowance and R&D). There are rules for both accounting and tax that must be followed as part of earning accounting and taxable income.

Competitiveness

Investment is very fluid as such will go where it gets the best return. The role of government is to set policies that will encourage foreign direct investment including capital cost, R&D, training, and other policies that support business expansion.

What is the problem with direct subsidies?

Subsidies handed through loans or grants directly to one particular organization can be perceived as a benefit that the same business competitors may not receive.
Capital markets are designed as a way for organizations to generate cash flow, EBITDA, EBIT, dividends, etc. as part of attracting capital. Direct subsidies infusion could lead to challenges especially if it creates unbalance between organizations.
Unprofitable businesses without direct subsidies do not guarantee the subsidies will lead to profitability. Many startups go through cash as part of developing their products for the market. https://www.arenaev.com/fiskers_future_hangs_in_the_balance__ev_maker_faces_financial_woes-news-3281.php
Subsidies are used for political reasons to shore up support. https://www.fraserinstitute.org/studies/cost-of-business-subsidies-in-canada-updated-edition The Fraser Institute

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Let me now expand on the issues with competitiveness. Competitiveness deals with productivity, innovation spending, skills gap, regulatory environment, taxation, and government regulations.

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Source - https://mauvegroup.com/innovation-hub/blog/19-best-countries-to-set-up-a-company or https://cedakenticomedia.blob.core.windows.net/cedamediacontainer/kentico/media/attachments/wcy2023_imd-global-press-release.pdf

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I am all for supporting businesses as part of attracting foreign capital investments. My concern is that support should be done via the tax code and not through direct hand offs to a particular organization. Here is my blog on innovation. https://www.dhirubhai.net/pulse/what-next-innovation-canada-paul-young-qvyvc/

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Corporations are easy targets for politicians like Jagmeet Singh or Steven Guilbeault or Marit Stiles or Justin Trudeau as for many politicians it is about votes and playing to low inform voters. The problem is consumer spending is driven by products and services in many cases from the private sector.

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Here is my latest analysis of the market. https://www.dhirubhai.net/pulse/stock-market-we-march-15-2024-paul-young-6ghuc/

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What is next for all levels of government?

Revamping the capital cost code as part of attracting foreign direct investments.
Direct subsidies should flow to innovation funds accessed by all organizations.
Creating incubation centers at all colleges and universities as part of supporting ideas from incubation to market.
Eliminating taxes like carbon taxes including streamlining environmental policies as part support economic growth - https://www.dhirubhai.net/pulse/emissions-climate-change-2022-paul-young-yytmc/
Working with the private sector including collaboration on payroll tax management.
All elected and those running for office need to have training in finance, economics, and public finance before running for office. All platforms should be audited by 3rd audit firms.
Investing in infrastructure like ports, roads, bridges, and waterways.
Better balance between protecting the environment while growing the economy in a sustainable way.
Measuring emissions by km2 and not by per capital
Auditing standards for ESG reporting
All levels of government need to get their fiscal house in order.
Establishing tax credits programs for training to better support organizations with attracting and retaining staff
Better alignment of immigration with economic growth
Addressing housing supply and costs.
Reforming the tax code

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Paul Young CPA CGA is a former Senior IBM Customer Success Manager that has deployed over 300 data and AI solutions across geographies for the past 8 years. Paul is also FPA SME on how best to integrate macro and micro indicators as part of the data journey for the operational, management, and regulatory reporting cycles.

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[email protected]

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Courses - https://www.dhirubhai.net/posts/paul-young-055632b_activity-7163302861974519809-ryf3?utm_source=share&utm_medium=member_desktop

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Blog – Analysis and Commentary – Stock Market – WE March 15 2024 -? https://www.dhirubhai.net/pulse/stock-market-we-march-15-2024-paul-young-6ghuc/

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Blog – Top 5 Risks facing the CFO - https://www.dhirubhai.net/posts/paul-young-055632b_activity-7157006448042856448-vQRm?utm_source=share&utm_medium=member_desktop

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Blog – Analysis and Commentary – Stock Market – March 8 2024 - https://www.dhirubhai.net/pulse/analysis-commentary-stock-market-we-march-8-2024-paul-young-rrblc/

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Blog – Analysis and Commentary – Australia – Stock Market – March 8 2024 - https://www.dhirubhai.net/pulse/analysis-commentary-australia-stock-market-march-8-2024-paul-young-9r11c/