There were no surprises in Ottawa today – federal Finance Minister Jim Flaherty delivered a steady-state budget with limited program spending increases and a plan to pay down the national debt. While debt reduction, tax assistance for Canadians, post-secondary education, support for manufacturing and social programs were the primary focus, issues such as the environment, crime and security, the infrastructure and Canada’s leadership abroad were also addressed.
“The current economic environment merits a cautious approach,” says Anthony Ariganello, President and Chief Executive Officer of CGA-Canada. “Canada needs to be protected from possible economic fallout from south of the border and the continuing pressure of a rising Canadian dollar on the manufacturing sector. The Finance Minister tried to address these issues. However, we had hoped that more direct support to the manufacturing sector and to individuals in the way of tax reductions would be provided.”
A tax-free savings account has been introduced and, while CGA-Canada welcomes this new saving opportunity, Ariganello notes that, “the impact of this new measure will be limited, representing only modest tax savings for individuals at a relatively low cost to the government. The ability to deduct capital losses or provide a higher threshold would have been preferable.”
In 2007, the CGA report Where Does the Money Go: the Increasing Reliance on Household Debt in Canada highlighted concerns around the saving habits of Canadians. According to our report, the personal savings rate in Canada fell to a dramatic low of 1.2 per cent in 2005, down from 20.2 per cent in 1982. And in 2006, household debt reached a record high of one trillion dollars.
Traditional savings mechanisms – such as the RRSP – may not be attractive to all investors, points out Ariganello. In fact, Where Does the Money Go points out that less than half of Canadians contribute to an RRSP. That’s why one of the recommendations in the report was to provide incentives that would encourage not only retirement savings but also savings for personal security. This tax-free account, while modest, is a step in the right direction.
Going forward, the government needs to work towards making Canada’s personal tax rates truly competitive, contends Ariganello. Highly skilled individuals are internationally mobile and have many opportunities. Tax incentives will help to attract and retain the best and brightest.
Incentives for individuals, together with the federal corporate tax reductions previously announced that will bring the federal corporate tax rate down to 15 per cent by 2012 – the lowest in the G8 countries – will put Canada on the right track by stimulating productivity and economic growth.
CGA is the fastest-growing accounting designation in Canada. The CGA designation focuses on integrity, ethics and the highest education requirements. Recognized as the country’s accounting business leaders, CGAs provide strategic counsel, financial leadership, and overall direction to all sectors of the Canadian economy.
The Association sets standards, develops education programs, publishes professional materials, advocates on public policy issues, and represents CGAs nationally and internationally. The Certified General Accountants Association of Canada represents 68,000 CGAs and students in Canada, Bermuda, the Caribbean, Hong Kong, and China.
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