CANADA: THE MOST COST-COMPETITIVE
COUNTRY AMONG G7 COUNTRIES
CANADA KEEPS TOP SPOT AS MOST COST COMPETITIVE MATURE MARKET
FOR BUSINESS, KPMG STUDY REVEALS
 Competitive Alternatives 2016 - KPMG’s guide to international business location costs - shows that Canada has
emerged once again as the most cost-competitive country in the G7 in which to do business, with a 14.6% cost
advantage over the U.S.
 In knowledge-based areas such as R&D Services, Canada’s cost advantage increases to an average of 27.7%, thanks to
robust performances in Clinical trial administration (29.6%), Product testing (27.8%) and Biotechnology (26.6%).
 Canada demonstrates very strong results in Digital Services, with a 30.6% cost advantage in Digital entertainment and
a 22.1% cost advantage in Software design relative to the U.S. baseline. This significant advantage is due in part to
substantial incentives that some Canadian provinces provide to digital media production firms.
 Canada offers a highly cost-competitive environment for Manufacturing. In fact, Canada has the lowest cost structure
among G7 countries in the 12 manufacturing industries included, with cost advantages ranging from 7.5% for
Chemicals to 13.1% for Medical devices.
 Canada’s labour costs, which represent the largest cost-category in the study, are the lowest in the G7. With
competitive salary levels and lower healthcare costs, companies based in Canada benefit from total labour costs that
are 31.2% lower than equivalent costs in the U.S.
 Progressive reductions in both federal and provincial taxes created a significant advantage for companies operating in
Canada. According to KPMG, the effective income tax rate in Canada is 17.9% or 11.9 percentage points below that of
the U.S.
COST ADVANTAGE RELATIVE TO THE U.S. IN %
OVERALL
RESULT
RESEARCH &
DEVELOPMENT
14.6
26.0
27.7
21.0
10.7
22.4
16.0
12.2
11.0 11.2
BASELINE
16.5
BASELINE
11.9 12.8
14.4
BASELINE
7.3 7.7
9.1 9.5
DIGITAL
SERVICES
US JP DE UK FR IT CA
US UK JP DE IT FR CA
US DE JP FR UK IT CA
 Among the 34 major Canadian and U.S. cities (all cities with metropolitan populations of 2 million or more), Montreal
continues to be the most cost competitive in Canada, followed by Toronto and Vancouver, ranking ahead of all 31
large U.S. cities. In fact, all Canadian cities included in the study were found to be more cost competitive than any of
the U.S. cities featured.
 The rise in value of the US dollar relative to its Canadian counterpart through 2015 is the main driver of improved cost
index results for Canada and its cities in 2016.
 There are places in the world where production costs are lower than they are in Canada. But there is no other place
where costs are this competitive and other advantages – such as having the best business environment in the G20
and the most-educated workforces in the OECD – are so bountiful.
CANADA: MORE COST-COMPETITIVE THAN THE U.S. ACROSS ALL INDUSTRIES
(CANADA’S COST ADVANTAGE RELATIVE TO THE U.S. BASELINE IN %)
7.5%
Precision manufacturing
7.7%
MANUFACTURING
Chemicals
Automotive
Electronics
9.2%
Agri-food
9.5%
Telecommunications
9.6%
Green energy
9.9%
Aerospace
9.9%
Pharmaceuticals
11.2%
Plastics
11.5%
Metal components
11.5%
Medical devices
Software design
Support services
SERVICES
8.2%
Biotechnology
13.1%
22.1%
24.9%
26.6%
Professional services
27.6%
Product testing
27.8%
Clinical trial administration
Digital entertainment
29.6%
30.6%
KPMG's 2016 Competitive Alternatives study provides an independent comparison of international business locations in more than 100 cities
in 10 countries around the world, including Australia, Canada, France, Germany, Italy, Japan, Mexico, the Netherlands, the United Kingdom
and the United States. Competitive Alternatives is a biennial KPMG study that examines 26 significant business cost elements, including
labour, facilities, transportation, utilities and taxes. KPMG initiated this study to help Canadian and international businesses make informed
global business decisions.
March 2016
Follow us on
@invest_canada
Find out more at www.investincanada.com