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#Written by David Tam, 1999.           #       
#davidkftam@netscape.net Copyright 1999#  
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From tamda@ecf.toronto.edu Mon Jul 12 18:21:41 1999
Date: Mon, 11 Jan 1999 23:29:42 -0500 (EST)
From: David Kar Fai Tam <tamda@ecf.toronto.edu>
To: APS 424S <aps424@chem-eng.toronto.edu>
Subject: #3-01/12/99-"Quebec lobs salvo in high-tech tax war"

The Globe and Mail, Thursday, January 7, 1999 , Technology 
Section, C1, C2.

    This article discusses the fact that the province of Quebec 
is offering very enticing tax breaks to companies that set up R&D 
facilities in its region.  This new incentive comes at a time 
when many other provinces are also trying to lure businesses to 
their respective regions.  This article demonstrates the 
influence governments can have on business.

   My first reaction was that the vicious cycle that the 
provinces are following, by competing with each other for the 
other's established high technology firms, can have detrimental 
effects to Canada. These provinces should not be trying to lure 
already established businesses from other provinces. Instead, 
they should be trying to attract new, foreign businesses.  
Politicians should realize that they are, in fact, NOT creating 
any new jobs by interprovincial competition, nor improving the 
overall Canadian economy.  This business grabbing only gives the 
illusion of economic benefit.

   In an engineering economics course, which examined the 
Canadian tax structure and investments, we have been cautioned 
that investments decisions SHOULD NOT be based on government tax 
incentives.  If a decision is made that a business investment 
should not be made, government influence should not be able to 
cause the decision to change to the positive.  In other words, if 
an investment is a bad decision, it will still be a bad decision 
despite government influences.  There are more fundamental 
reasons for such decisions.

	As also mentioned by Mr. Larry Fox, these incentives can be 
revoked by the government at any time. Such was the case in 
Ontario when the Progressive Conservatives gained power and 
immediately issued a review of all investment decisions.  
Businesses should be cautioned not to be influenced too much by government 
promises and policies.  As mentioned in the paper, quality of 
life, proximity to universities and colleges, a critical mass of 
similar industries, education level, quality of life, access to
transportation networks, and proximity to suppliers, are
several other reasons to locate a business in a particular area. 

David Tam