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Treasury Secretary Steven Mnuchin, right speaks at the White House on Wednesday.Carolyn Kaster/The Associated Press

Canada's business community is urging Ottawa and the provinces to start preparing for tax cuts north of the border after U.S. President Donald Trump unveiled his plans for "massive" reductions to corporate and personal tax rates.

Treasury Secretary Steven Mnuchin announced Wednesday that the White House would like to see the U.S. corporate tax rate reduced to 15 per cent from 35 per cent. Personal income-tax rates would also come down, paid for in part by eliminating a wide range of credits to simplify the tax code.

The White House announcement lacked many important details, however, and is widely viewed as a starting point for negotiations with Republicans and Democrats in Congress.

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Canadian Business Council president and chief executive officer John Manley, who is in Washington this week meeting with members of Congress, said the plan as outlined would put Canada at a competitive disadvantage. He said provincial and federal governments have some time to wait and see what emerges, but should start preparing to cut tax rates in their next round of budgets.

"I think [Canadian governments] all know we can endure somewhat higher rates, but we can't endure big discrepancies," he said.

In his news conference on Wednesday, Mr. Mnuchin dodged the question of whether the Trump administration would consider slapping a tax on all imports, saying those details must be worked out with Congress. The possibility of such a border-adjustment tax is a major concern for Canada and observers say it remains a possibility.

Economist Phil Verleger warns that the Republicans in the White House and Congress will eventually look to border levies to help pay for the $2-trillion in tax cuts that Mr. Trump has proposed. Mr. Verleger has worked with the Canadian Association of Petroleum Producers to assess the impact of possible border levies, which would force oil exporters to accept significant discounts for their crude in the U.S. market.

"They have to find $2-trillion someplace," he said. Taxing imports may be the path of least political resistance, he added.

Francis Fong, chief economist at Chartered Professional Accountants of Canada, agreed that some form of border adjustment still appears to be on the table based on Mr. Mnuchin's comments about wanting a "territorial" tax system. However, Mr. Fong stressed that Wednesday's announcement is far from a done deal.

"It's not a piece of draft legislation. It is just [Mr. Trump] drawing a line in the sand," he said. "Until a piece of legislation has actually gone through the congressional wringer, it's hard to say ultimately what comes out on the other side of that."

Canada's federal corporate tax rate has been at 15 per cent since 2012 after several years of reductions. It stood at 21 per cent in 2007. The federal rate on small business was reduced in 2016 to 10.5 per cent from 11 per cent. However, the Liberals have shelved a campaign promise to reduce the rate further to 9 per cent.

Jack Mintz, a tax expert at the University of Calgary school of public policy, also said he questioned the plan's ability to pass through Congress. But he has run models with the 15-per-cent U.S. federal rate, and said once state and provincial taxes are factored in, the U.S. could have a tax advantage over Canada of about six percentage points. Doing rough math, he said that could cost federal and provincial governments $5- to $6-billion a year.

"We would lose, entirely, our business-tax advantage we've built up since 2000," he said. "It's a real threat to competitiveness in Canada."

Ben Bergen, executive director of the Council of Canadian Innovators, a lobby group for Canada's emerging tech companies, said he's been hearing from executives that their concerns around competitiveness centre on access to skilled talent, capital and eager customers. A lower U.S. corporate tax rate would definitely affect Canadian business, he said, but fixating on the rate alone would be overlooking other opportunities. "It's a bit of a simplifying of the issue," he said.

Others don't see a great deal of value in waxing theoretical. The Conference Board of Canada's chief economist Craig Alexander, for instance, can't picture Mr. Trump's tax plan passing through Congress.

Structured as is, Mr. Alexander believes it would give the U.S. a "significant" edge over Canada. A lower corporate rate could make investment there more attractive, to the particular disadvantage of Canadian companies trading on international exchanges. He said the proposal to repatriate corporate earnings from abroad would pull away money that might have stayed in Canada, while lowering U.S. personal income tax would make it harder for Canadian companies to attract talent.

But, Mr. Alexander said, "here's the thing: I don't think America can actually afford the tax relief Trump has outlined." Lowering business and personal taxes is possible, "but there's tradeoffs and limits to how far you can go."

With a report from Shawn McCarthy in Ottawa

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