KPMG International LLP

Canadian Business Costs Lowest Among G7 Countries, Reports KPMG

Toronto, Canada (ots/PRNewswire) - - Study Says Canada Maintains Cost Advantage Over US Despite Rising Dollar TORONTO, Canada, March 21 /PRNewswire/ -- Canada leads the G7 countries as the most cost- effective location for business, according to a 2006 study that compares business costs in nine industrial countries in North America, Europe and Asia Pacific. Canada ranked second out of the nine countries examined, with business costs approximately 5.5 percent below those in the United States. Singapore is the overall leader among the countries studied, with business costs approximately 22.3 percent below those in the United States. According to KPMG's study, Competitive Alternatives: KPMG's Guide to International Business Costs, Japan and Germany rank as the most expensive countries in which to do business. The study results were determined using recent exchange rates, with the Canadian dollar valued at US85.2 cents (C$1.1735 per US$). "Even with the strong appreciation of the Canadian dollar relative to the U.S. currency, Canada continues to have a cost advantage relative to the United States," says Mark MacDonald, a director in KPMG's Advisory practice. "The Canadian dollar would have to rise in value by approximately 13 percent, almost to par with the U.S., to bring Canadian cities to a breakeven position with the U.S. in terms of overall business costs. While this would vary from city-to-city and business-to-business, this is still positive news overall for Canada." KPMG's 2006 Competitive Alternatives study measured 27 cost components - including labour, taxes, real estate, and utilities - as applied to business operations in nine countries: Canada, France, Germany, Italy, Japan, the Netherlands, Singapore, the United Kingdom and the United States . The research included an analysis of these costs in 128 cities worldwide. The study's basis for comparison was the after-tax cost of startup and operation for 17 types of business, over a 10-year planning horizon. For larger cities in Canada, Edmonton and Montréal rank as those with the greatest cost advantages relative to the United States. While costs in Toronto and Vancouver are the highest within Canada, and on par with such low-cost U.S. cities as Atlanta and Tampa, these cities do still offer significant cost advantages over most of the large US cities included in the study. Among the smaller cities examined, Canadian cities generally continue to offer lower cost structures than equivalent U.S. cities, even after allowing for the higher value of the Canadian dollar since 2004. "The advantage seen for many of the Canadian cities relative to the U.S . is generally the result of combination of lower labour costs, including lower employer costs for private medical coverage, lower real estate costs, and lower electricity costs in Canada than in the United States, where deregulation has seen electric costs soar in many regions." KPMG's Mark MacDonald stated. "Various federal and provincial tax cuts over the last decade have also made Canada's tax system more competitive with the U.S., and have contributed to the positive position of the Canadian cities," MacDonald concluded. Comparison of Cost Indices Among Selected Cities in Canada ----------------------------------------------------- City Cost Index ----------------------------------------------------- Sherbrooke, QC 90.1 Moncton, NB 91.1 Charlottetown, PEI 91.7 Halifax, NS 92.2 Quebec City, QC 92.6 Saskatoon, SK 92.8 Edmonton 93.3 Chilliwack, BC 94.0 Winnipeg, MB 94.1 Montreal, QB 94.3 St. John's, NF 94.3 Waterloo Region, ON 94.3 Calgary, AB 94.7 Ottawa, ON 95.1 Toronto, ON 96.5 Vancouver, BC 96.9 (x) Source: KPMG's 2006 Competitive Alternatives Study (x) Business Costs are expressed as an index with the United States being assigned a baseline index of 100.0. A cost index less than 100 indicates lower costs than the US. A cost index greater than 100 indicates higher costs than the US. For example, an index number of 95.0 represents a 5.0% cost advantage relative to the US. Cost index is determined by averaging variables from various industries and operations. Canada and International Comparison ------------------------------------------------------------------------- Canada ------------------------------------------------------------------------- Canada ranks second overall and first among the G7 countries for low business costs, with a cost advantage of 5.5 percent over the United States. ------------------------------------------------------------------------- Combining salary and wage costs along with all benefits, total labour costs are lowest in Singapore, followed by Canada. However, expressed as a percentage of payroll, benefit costs in Canada are lower than in any of the other countries studied. ------------------------------------------------------------------------- Industrial facility costs, including land purchase and factory construction costs, are lowest in Canada, followed by Italy, the United States, and France. ------------------------------------------------------------------------- Canada, along with the United Kingdom and France, are the countries that offer the greatest tax incentives to encourage research and development (R&D) activities. ------------------------------------------------------------------------- Canada offers the lowest electricity costs among all countries studied. ------------------------------------------------------------------------- ------------------------------------------------------------------------- Other Countries ------------------------------------------------------------------------- Singapore ranks first among the countries studied, with business costs 22.3 percent lower than in the United States. With GDP per capita now on par with some western European nations, Singapore is the first newly industrialized country to be included in Competitive Alternatives. ------------------------------------------------------------------------- France and Netherlands ranks third and fourth respectively, with overall business costs lower than in all other European countries, and a cost advantage of approximately 4.4 percent over the US. ------------------------------------------------------------------------- Italy and the United Kingdom rank fifth and sixth respectively, with business costs approximately 2 percent below the seventh ranked United States. ------------------------------------------------------------------------- Japan and Germany were the most costly places to set businesses, with business costs approximately 7 percent higher than in the United States. ------------------------------------------------------------------------- Singapore, the United Kingdom and the Netherlands offer relatively low effective corporate income tax rates for the widest ranges of operations. ------------------------------------------------------------------------- Office leasing costs are lowest in Italy, followed by Germany, and the Netherlands. ------------------------------------------------------------------------- (x) Source: KPMG's 2006 Competitive Alternatives Study International rankings and relative cost indices are illustrated in the following chart. The benchmark cost index (U.S. (equal sign) 100) is defined as the average of nine representative U.S. cities. -------------------------------------------------- Cost-Competitiveness: 2006 Rankings by Country -------------------------------------------------- Country Cost Index Rank -------------------------------------------------- Singapore 77.7 1 -------------------------------------------------- Canada 94.5 2 -------------------------------------------------- France 95.6 3 -------------------------------------------------- Netherlands 95.7 4 -------------------------------------------------- Italy 97.8 5 -------------------------------------------------- United Kingdom 98.1 6 -------------------------------------------------- United States 100.0 7 -------------------------------------------------- Japan 106.9 8 -------------------------------------------------- Germany 107.4 9 -------------------------------------------------- Source: KPMG's 2006 Competitive Alternatives Study -------------------------------------------------- To access copies of the full report, please go to www.competitivealternatives.com About Competitive Alternatives KPMG's 2006 Competitive Alternatives study provides an independent comparison of international business location costs in 128 cities around the world. The study enables businesses executives to take a quick, initial scan of how business costs compare among a variety of cities in leading industrialized countries. It also assists KPMG professionals and economic developers in their work with businesses considering relocation, and enables policy makers to help determine the impact of a proposed tax and/or incentive policy change on the cost-competitiveness of their jurisdiction in relation to others. The study is available online at www.CompetitiveAlternatives.com About KPMG in Canada KPMG LLP is the Canadian member firm of KPMG International, the global network of professional services firms whose aim is to turn knowledge into value for the benefit of their clients, people and the capital markets. With nearly 94,000 people worldwide, KPMG member firms provide industry- focused audit, tax, and advisory services from more than 717 cities in 148 countries. KPMG assists clients as they consider expanding, relocating or consolidating their business activities. More than 100 KPMG professionals throughout the world offer a variety of global location and expansion services, ranging from strategic planning, to site analysis, to determining the availability of business incentives. KPMG's Canadian Web site is located at www.kpmg.ca ots Originaltext: KPMG International LLP Im Internet recherchierbar: http://www.presseportal.ch Contact: For further information: Media Contacts: Sharon Godsell, Media Relations, KPMG, +1-(416)-777-3533, sgodsell@kpmg.ca; Julie Bannerjea, Senior Manager, Media Relations, KPMG, +1-(416)-777-3243, jbannerjea@kpmg.ca

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