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MONTREALGLOBAL FINANCIAL CENTREYOUR COMPETITIVE
Feb 2011
‣ Canada at a glance
‣ Montreal: a snapshot
• Quality of life
• Talent advantage
• Montreal’s financial sector
• Low operating costs
‣ IFC/The value-added proposition
• Proximity to markets
• THE IFC incentive
‣ A winning combination
• Case study
• Testimonials
CONTENTS
2
CANADA’S COMPETITIVE POSITION
Large base of existing investors
* Source: International Financial Consulting Ltd
Size and opportunity in local market:
Access to US market (NAFTA)
High capability for innovation (generous R&D tax credit)
‣ One of the world’s largest economies – larger than India’s
‣ Outperforms the rest of the G8
‣ Ranked by the Economic Intelligence Unit as the #1 place to do business in the G8 for the next 5 years*
‣ Forecast to have fastest economic growth in G8 over next years
‣ Growth in labour market forecast to be amongst highest in developed world 2009-2013 – 25% higher than USA
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‣ Canada ranks #2 in the G8 as regards the generosity of total R&D tax incentives*
CANADA’S COMPETITIVE POSITION
* Source: International Financial
Consulting Ltd
4
‣ KPMG surveys highlight Canada leading the G8 in low business costs, especially taxes *
‣ The World Economic Forum placed Canada at the top of the rankings for streamlined procedures to set up a business
‣ Canada’s educated workforce ranks #1 in the OECD for college completion rates, #7 for university completion rates*
‣ The World Economic Forum ranked Canada #3 for the quality of its management schools in 2010 *
‣ Canada has been enjoying a Triple A international credit rating from Moody’s since 2002*
Quicker and cheaper to start a business than in USA and UK
High credit rating
Well-educated workforce
CANADA LEADING AFTER THE FINANCIAL CRISIS
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‣ In terms of banks’ soundness, Canada ranks at the 1st position, followed by New Zealand and Australia (NB: Hong Kong and Singapore rank 8th and 9th respectively)
‣ Federally regulated banking sector with 72 banks
‣ During the recent crisis, no banks failed, none required injection of public capital and interbank money market continued to function
In 2010, and for the 3rd consecutive year, the World Economic Forum ranked Canada's banking system as the healthiest in the world
Market capitalization of TSX listed companies jumped from 2% to 4% of world market capitalization in 2009
In 2010, the TSX registered a record number of trades, jumping 4% from the previous year
WHAT YOU WON’T HAVE IN CANADA
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Stricter regulation
Tougher banking regulations like in the US
Risk of higher taxes on financial institutions and bonuses
Canadian Finance Minister Jim Flaherty has no intention of heading down the same path as the US or UK: “WE have not had financial institutions fail in Canada and cost taxpayers billions of dollars”
Report on Business, January 13, 2010
Strong professional services support
Recognized Canadian leader in:
‣ Aerospace
‣ Life sciences
‣ Larger proportion of employment in pharma than Boston and San Diego
‣ Information & communications technologies
‣ Finance
‣ R&D
‣ Quebec has the highest proportion of employment in R&D in Canada
‣ Population of 3.8M,
2nd largest city in Canada
‣ 9% of Canada’s GDP
GDP of $125 billion
AN optimum location‣ Approx. 1 hour flight to New York,
Boston, Toronto, Washington, and Philadelphia and 2 hour flight to Chicago.
‣ (accounting, legal, engineering, asset services)
MONTREALA SNAPSHOT
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‣ Housing costs among North America’s lowest:
‣ Affordable single family house within 20 mins of downtown for less than 500k
‣ Rent for housing: under $1000 for 2 bedrooms, garden, 5 mins to subway, within 20 mins of downtown
‣ Lakefront country house for less than 500k – 60 mins from downtown
‣ 7$ a day for daycare
‣ Access to free healthcare
‣ Affordable university tuitions
MONTREAL: GLOBAL FINANCE AT HOME
‣More than 10,000 international restaurants
‣ Low crime rate
‣ Home to:
‣ Grand Prix
‣ NHL
‣ Canadian Football League
‣ Rogers Cup (Tennis)
‣ Nascar Nationwide
‣ International Jazz Festival
‣ Cirque du Soleil
AN OUTSTANDING QUALITY OF LIFE
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YOUR TALENT ADVANTAGE IN A CHANGING WORLD ‣ Highly educated workforce and
diverse talent (+/- 50,000 immigrants per year)
‣ Strong support from universities (COOP programs, placement)
‣ Centre for Innovation:
‣ Ranks first in Canada for amount of research funding
‣ 30 units of academic research specifically in the areas of derivative products, portfolio management, finance engineering, and financial accounting
‣ CFA Association is the 10th largest worldwide with more than 2,000 members (highest rate per capita)
‣ Approximately 40,000 accountants accredited in Quebec
‣ In Montreal, over 16,000 (CA > 7,131; CMA > 4,600; CGA > 4,725)
‣ Ranks 1st in North America for the number of university students per capita
‣ 168,000 university students, including 20,000 foreigners of which:
‣ 8,000 students enrolled in finance related programs each year
‣ 400 graduate diplomas given every year (Masters and Ph.D.)
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McGill University is the best public university in North America and ranks 18th among the world’s top 200 universities*
John Molson School of Business / Concordia University ranked 1st in Quebec & 4th in Canada in the Corporate Knight School Ranking 2010
HEC Montréal MBA Makes the Forbes Top 10 The Only Canadian school in the top one-year program ranking
Source: Times Higher Education Supplement survey 2009
SHAPING YOUR NEW TALENT STRATEGY
0
15
30
45
60
Montréal Ottawa Québec Winnipeg Toronto Calgary Vancouver
LANGUAGES SPOKEN IN MONTREAL‣ 80 languages spoken
‣ The most trilingual population in Canada: nearly 20% of the population is fluent in at least three languages
‣ Over 50% is fluent in both French and English
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Source: Statistics Canada, 2006 Census and Association of Canadian Studies
Biliguism Trinliguism
YOUR TALENT ADVANTAGE
MONTREAL’S FINANCIAL SERVICES INDUSTRY
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11
‣ 40% in securities, pension funds, and fund management
‣ 38% in banking
‣ 22% in insurance
Home to:‣ The derivatives arm of the TMX Group which recently partnered with the
London Stock Exchange
‣ The Investment Industry Association of Canada (IIAC) chose TMX’s CDCC (Canadian Derivatives Clearing Corporation) to develop a central counterparty facility for the fixed income market
‣ Finance related IT expertise thanks to CGI and Morgan Stanley (Over 7,000 jobs)
‣ Large talent pool in financial and actuarial mathematics
OTHER Local giants include:
3,000 companiesOver125,000 jobs
12
IBM-PLI LOCATION BENCHMARKING TOOL - NORTH AMERICA
Source : March 2010
COST QUALITY FOR FINANCIAL SERVICES
LOW OPERATING COSTS BENEFITS IN KIND
Gross earning (annual) 7 & 8 $30,000$30,000 $50,000$50,000 $75,000$75,000
Deductions
QPP1 $1,311.75 $2,118.60 $2,118.60
QPIP2 $145.20 $242.00 $300.08
EP3 $414.00 $583.74 $583.74
Federal Taxes $2,127.38 $5,150.91 $9,736.13
Quebec Taxes $2,545.00 $6,169.00 $11,169.00
$6,543.33 21.81% $14,264.25 28.53% $23,907.55 31.88%
Net earnings $23,456.67 $35,735.75 $51,092.45
Employer’s Contributions
QPP1 $1,311.75 $2,118.60 $2,118.60
QPIP2 $203.10 $338.50 $419.74
EP $579.60 $817.24 $817.24
HSF4 $810.00 $1,350.00 $2,025.00
LSC5 $24.00 $40.00 $48.40
OHS6 $180.00 $300.00 $363.00
$3,108.45 10.36% $4,964.34 9.93% $5,791.98 7.72%
Total Cost $33,108.45 $54,964.34 $80,791.98
13
1: Québec Pension Plan (4.95%) 5: Labour Standards Commission (0.08%)
2: Québec Parental Insurance Plan (employee 0.484%; employer 0.677%) 6: Occupational Health and Safety (0.6% in the services sector)
3: Employment Insurance (employee 1.38%; employer 1.932%) 7: Vacations are a minimum of 4%
4: Health service Fund (2.7% of total payroll is below $1 million) 8: Gross earnings include holidays (+/- 10 days = 4%)
LOW OPERATING COSTSREAL ESTATE & WAGES
One US$ = C$ 1.02 as of March 2010 Source: CBRE May 2010
City (CBD)
New York - Midtown
Toronto
Boston
Montreal
Weighted Average Class A Gross Rental RateWeighted Average Class A Gross Rental Rate
Rent ($/sq. ft./annum) Price difference
64.51 63.65%
59.86 51.85%
40.52 2.79%
39.42 Base
Estimated Median Annual Salary - Financial Services(Without benefits, in $CAD)
Estimated Median Annual Salary - Financial Services(Without benefits, in $CAD)
Estimated Median Annual Salary - Financial Services(Without benefits, in $CAD)
Estimated Median Annual Salary - Financial Services(Without benefits, in $CAD)
Back office employees Montreal Chicago % DiffComputer Operations Manager $96,754 $107,113 10.71%Business Manager $91,701 $101,477 10.66%Risk Management Manager $94,641 $103,113 8.95%Financial Analysis Manager $96,445 $109,768 13.81%Financial Analyst $74,571 $77,746 4.26%Economic Analyst Superviser $89,846 $92,373 2.81%Database administrator $88,014 $96,549 9.70%Credit Manager $84,995 $92,413 8.73%Quality Assurance Programmer $82,088 $85,072 3.64%Account Manager Sales $79,345 $86,247 8.70%Account Supervisor $70,385 $74,335 5.61%Marketing Representative $61,773 $62,058 0.46%Public Relations Representative $59,947 $60,106 0.27%Systems analyst $70,874 $76,211 7.53%Budget analyst $66,558 $70,431 5.82%Benefits analyst $58,138 $61,984 6.62%Market Research Analyst $67,677 $70,002 3.44%Payroll Supervisor $62,945 $68,544 8.90%Accounting Supervisor (Professional) $78,645 $85,634 8.89%Accountant $55,583 $59,292 6.67%Foreign-Exchange Trader $92,011 $99,838 8.51%Funds Electronic Transfer Clerk $43,340 $43,746 0.94%Administrative assistant $46,516 $48,449 4.16%Average difference 6.51%
‣ The average median base salary in Montreal is over 6% lower than in Chicago
‣ For executive poisitions, the difference is much greater
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Source: January 2010*The federal tax rate in Canada will go down to 15% in 2012
Federal Province/State City TOTALDifference with
Montreal
Montreal 16.50* 11.90 -- 28.40 base
Toronto 16.50* 12.00 -- 28.50 0.35%
Chicago 32.45 7.30 -- 39.75 39.96%
Boston 31.94 8.75 -- 40.69 43.27%
New York 29.00 7.10 10.05 46.15 62.50%
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Corporate tax rate in Chicago 40% higher than in Montreal
A NORTH AMERICAN COMPARISON OF 2011 CORPORATE TAX RATES (Effective Tax Rate %)
LOW OPERATING COSTSCORPORATE TAX RATES
IFC - MONTREAL IS A PRIVATE CORPORATION DEDICATED TO DEVELOPING THE FINANCIAL SERVICES SECTOR OF THE CITY OF MONTREAL
Determining whether your company is eligible for the IFC measure
Guiding you through the application process
Providing expertise and counselling on financial tax incentives
Connecting you to our network of partners and collaborators to optimize your business opportunities
Answering your requests for information
WHY IFC MONTREAL?
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Salary paid $40K $50K $66.67K $75K
Tax credit per job $12K $15K $20K $20K
Tax credit for 100 employees $1,2M $1,5M $2,0M $2,0M
Tax credit for 200 employees $2,4M $3,0M $4,0M $4,0M
Tax credit for 300 employees $3,6M $4,5M $6,0M $6,0M
‣ Activities must involve at least one of the 25 Qualified International Financial Transactions (QIFT) – see appendix
‣ The Financial Transaction must cross a border:
‣ For local client > transaction regarding foreign product
‣ For foreign client > transaction regarding either local or foreign product
‣ The transactional decision process must be conducted in Montreal
‣ The operations must be conducted by a corporation and employ at least 6 employees
An unlimited* annual refundable tax credit of 30% on salaries paid to employees of an IFC (capped at $20,000 per job per year representing a salary of $66,667).
*unlimited in time and amount
Fiscal impact for the corporation (over 1 year)
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Corporate incentive ELIGIBILITY
THE IFC INCENTIVE:CORPORATIONS
THE IFC INCENTIVEHOW TO QUALIFY?
QUALIFIED INTERNATIONAL FINANCIAL TRANSACTIONS (QIFT)
1. Dealing in securities2. Clearing house services3. Investment advising and
portfolio management4. Deposits5. Loans6. Loans and deposits among
IFCs7. Acceptance or issuance of
letters of credit8. Financing by means of a bill
of a exchange9. Foreign exchange operations10. Financial packaging
(engineering)11. Development or design of
new financial products12. Insurance brokerage13. Reinsurance
14. Fiduciary services15. Factoring services16. Financial leasing 17. Organization of a qualified
investment fund18. Administration of a qualified
investment fund19. Management of a qualified
investment fund20. Distribution of the shares of a
qualified investment fund21. International treasury management22. Back-office operations23. Documentary collection24. Activities performed under the
Quebec Immigrant Investor Program
25. Discount operations carried out regarding a letter of credit or a commercial instrument
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THE IFC INCENTIVE:FOREIGN EXPERTS
‣ $250,000 annual base salary‣ 2009 income tax rates have been applied to the 5 year payroll computation‣ Income tax rates have been computed assuming the employee has a spouse and
four children as dependents
deduction in the calculation of all taxable incomededuction in the calculation of all taxable income
Year 1 100%
Year 2 100%
Year 3 75%
Year 4 50%
Year 5 37.5%
You could save $176,136.80 over 5 years by working out ofMontreal instead of Toronto*
19
Hypotheses
Access to 65% of North
American Markets
Your talent advantage
Low operating costs
International Financial
Centre Status
‣ Proximity to large markets
‣ Local market potential
‣ Montreal’s pension funds among largest in Canada
‣ Strategic location
‣ International city
‣ Large talent pool
‣ Centre for innovation
‣ Low cost rent
‣ Low salaries
‣ Among lowest corporate income tax rates in North America (29.9%)
‣ An appealing business case
‣ 30% refundable tax credit
‣ 37.5 - 100% personal income tax exemption for foreign specialists
‣ Approx. 40% higher corporate tax rate in Chicago compared to Montreal
INTERNATIONAL FINANCIAL CENTRE
STATUS
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THE VALUE-ADDED PROPOSITION
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The financial assistance offered by Emploi-Québec is flexible
Grant allowed for the creation of more than 50 jobs
‣ For example, it can apply to either labour force training costs or recruitment expenses. ‣ The financial assistance will vary
between 25% to 50% of eligible expenses depending on the number of jobs created and location.
‣ Up to 25% of eligible training expenses (max $2M)
‣ Up to 50% of human resource management services (max $100,000)
OTHER INCENTIVES LABOUR TRAINING PROGRAM
CanadaCanada US
Montreal Toronto NYC Boston Chicago
Revenues 3 279 3 548 4 207 3 886 3 628
Costs 2 523 2 729 3 236 2 989 2 791
Net profit before corporate income taxes 757 819 971 897 837
Corporate income tax
National tax 125 135 282 286 272
Provincial/State tax 90 98 167 78 61
Total income taxes 215 233 448 365 333
Total costs, including income taxes 2 737 2 962 3 685 3 354 3 124
Total costs including MTL IFC measure 2 377
FOR A 25 FTE FINANCIAL SERVICES BACK OFFICE IN MONTREAL
Revenues: "Cost-plus 30%" -- normal corporate income tax rate (‘000 USD)
AN IFC BUSINESS CASECOST COMPARISON
22
Montreal Toronto NYC Boston Chicago
% difference between MTL & other cities base 8,21% 34,60% 22,52% 14,10%
With MTL IFC measure 24,60% 54,98% 41,07% 31,38%
‣ (A) 100% Quebec tax exemption on salary earned from an IFC for years 1 & 2‣ (B) 75% Quebec tax exemption on salary earned from an IFC for year 3‣ (C) 50% Quebec tax exemption on salary earned from an IFC for year 4‣ (D) 37.5% Quebec tax exemption on salary earned from an IFC for year 5‣ 2009 income tax rates have been applied to the 5 year payroll computation‣ Income tax rates have been computed assuming that the employee has a spouse and 4 children as dependents
FOREIGN EXPERTS AND LOCAL EMPLOYEES
AN IFC BUSINESS CASEEMPLOYEE INCENTIVES
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QUEBEC PERSONAL TAX
Gross earnings
Deductions
Quebec pension plan
Quebec parental insurance plan
Unemployment insurance contribution
Salary before income tax deductions
Federal income tax
Quebec income tax
Net earnings
Year 1(A)
Year 2(A)
Year 3(B)
Year 4(C )
Year 5(D)
Total
$250,000 $250,000 $250,000 $250,000 $250,000 $1,250,000
$2,119 $2,119 $2,119 $2,119 $2,119
$300 $300 $300 $300 $300
$584 $584 $584 $584 $584
$3,002 $3,002 $3,002 $3,002 $3,002
$246,998 $246,998 $246,998 $246,998 $246,998
$48,427 $48,427 $48,427 $48,427 $48,427
$0 $0 $6,578 $20,965 $28,465
$198,571 $198,571 $191,993 $177,606 $170,106 $936,845
Hypothesis
‣ 2009 income tax rates have been applied to the 5 year payroll computation‣ Income tax rates have been computed assuming that the employee has a spouse and 4 children as dependents
FOREIGN EXPERTS AND LOCAL EMPLOYEES
AN IFC BUSINESS CASEEMPLOYEE INCENTIVES
24
ONTARIO PERSONAL TAX
Gross earnings
Deductions
OPP
EI
Salary before income tax deductions
Federal income tax
Ontario income tax
Net earnings
Year 1(A)
Year 2(A)
Year 3(B)
Year 4(C )
Year 5(D)
Total
$250,000 $250,000 $250,000 $250,000 $250,000 $1,250,000
$2,119 $2,119 $2,119 $2,119 $2,119
$732 $732 $732 $732 $732
$2,850 $2,850 $2,850 $2,850 $2,850
$247,150 $247,150 $247,150 $247,150 $247,150
$58,019 $58,019 $58,019 $58,019 $58,019
$36,989 $36,989 36 989 36 989 36 989
$152,142 $152,142 $152,142 $152,142 $152,142 $760,708
Hypothesis
TOTAL NET SAVINGS OF $176,137 OVER 5 YEARS
AN IFC BUSINESS CASEMAPLES FINANCE
On october 1st 2009, MAPLES Finance, an independent global fund administrator that provides fiduciary, accounting and administrative services, announced the opening of a montreal office to service the north american region and its growing fund administration business.
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MaxiNe Rawlins, CEO of MAPLES Finance described the montreal office as “a long-term investment in developing a regional hub that expands MAPLES Finance’s global footprint.”
MAPLES Finance selected Montreal for its position as a global financial centre and gateway to north american markets. The resources and advantages the city offers global financial service companies include: a base of highly trained local financial services and technology professionals; a large cosmopolitan city with a well-educated population; a diverse demographic and multi-lingual capabilities; and world-class universities.
TESTIMONIALS
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“We are delighted to expand our internal operations in Montreal, one of Canada’s leading financial centers that is well regarded for its highly skilled talent base”
“We will look to grow our onshore fund administration business particularly in North America. Opening an office in Montreal expands Maples Finance’s global presence. With offices in seven jurisdictions, we decided to expand into Montreal for its highly trained workforce, its established financial expertise and proximity to North American financial centres.”
Gregory Chrispin, Managing DirectorState Street Global Advisors Canada, December 2008
Joseph Iannicelli, President & CEOStandard Life Canada, May 2008
Jim Rosenthal, Managing DirectorMorgan Stanley, May 2008
Maxine Rawlins, Chief Executive OfficerMaples Finance Fund Administrator, May 2009
“Compared to other large centres, Montreal is cost-effective, plus the quality of life is excellent. It helps us attract talent.”
« Montreal is the country’s best-kept secret »
1130 Sherbrooke West, 16th floorMONTREAL (QC)
514-287-1540 WWW.IFCMONTREAL.COM
THANKYOU
John RookeVice-President,
Business [email protected]
INTERNATIONAL FINANCIAL CENTRE
MONTREAL
