As Canada’s Economic Action Plan moves into its second and final year of stimulus measures, significant policy challenges face the nation – not only over the next few years, but over the long term.
CGA-Canada has put forward recommendations to the federal government on priorities going forward in the areas of fiscal prudence and expenditure, tax competitiveness, regulatory efficiency as well as meeting tomorrow’s challenges.
Here is how Budget 2010 measures up from CGA-Canada’s perspective:
FISCAL PRUDENCE AND EXPENDITURE
TAX COMPETITIVENESS
REGULATORY EFFICIENCY
MEETING TOMORROW’S CHALLENGES
| FISCAL PRUDENCE AND EXPENDITURE | |
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CGA-Canada Proposals |
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2010 Budget |
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Bring forward a plan which maps out a strategy to address government spending, deficit and debt management. |
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Budget 2010:
- Confirms $19 billion in new federal stimulus under year two of Canada’s Economic Action Plan
Once the economy has recovered, the Government will:
- Follow through with the “exit strategy” built into the Economic Action Plan. Temporary measures in the Action Plan will be wound down as scheduled – March 31, 2011.
- Restrain spending through targeted reductions. For example, for 2011-12 and 2012-13, operating budgets of departments will be frozen at 2010-11 levels. Budget 2010 proposes $17.6 billion in savings over five years.
- Undertake a comprehensive review of government administrative functions and overhead costs to identify additional savings and improve service delivery.
In terms of Canada’s fiscal outlook:
- The deficit is projected to be cut to $27.6 billion in 2011-12 and $17.5 billion in 2012-13.
- The debt-to-GDP ratio is expected to peak at 35.4 per cent in 2010-11 and then fall to 35.2 per cent in 2011-12 and 31.9 per cent by 2014-15.
- Program spending as a share of GDP is expected to decline from 15.6 per cent in 2009-10 to 13.2 per cent in 2014-15.
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| Comments |
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While the global economy is showing signs of stabilization, recovery is fragile.
CGA-Canada supports the government’s approach to spending: implement the remaining stimulus measures, as promised, and – following that – limit the growth of spending, as is required.
CGA-Canada is pleased to see a roadmap with fixed target dates to rebalance public finances and reduce the federal debt. However, CGA-Canada would like to see a prudence factor built within the annual federal budget to better cushion Canada’s economy. | |
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CGA-Canada Proposals |
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2010 Budget |
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Appoint an independent panel of experts to recommend immediate steps to improve Canada’s tax regime. |
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No action taken. |
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Simplify Canada’s tax system. |
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No significant measures. In terms of the international tax system, action will be taken to narrow the definition of taxable Canadian property, which will eliminate the need for tax reporting under section 116 of the Income Tax Act for many investments. |
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Keep personal and corporate income taxes on a downward track. |
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- As part of the $19 billion in new stimulus for 2010-2011, $3.2 billion will be devoted to personal income tax relief.
- The initiative to reduce the general corporate income tax rate to 15 per cent by 2012 is proceeding as planned.
- Aggressive tax planning will be curtailed to help ensure all taxpayers pay their fair share of tax on income earned in Canada and abroad.
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| Comments |
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Sound tax policy is an essential lever of the economy – be it recovery, productivity, growth, competitiveness or sustainability.
Despite some downward movement in personal and corporate income tax rates, Canada’s tax system is among the most complex in the world – and this hurts our economy.
Tax simplification means increased compliance rates and lower compliance costs for taxpayers, less paperwork for businesses and lower administrative costs for government. It means a stronger system with a more secure tax base and predictable revenue.
The government needs to take aggressive measures to simplify Canada’s tax legislation and tax system – this would enable Canadians to compete globally. | |
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Needs improvement. |
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| Comments |
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CGA-Canada recognizes that action in some of these areas is being taken outside of the parameters of the federal budget. For example, collaborative federal-provincial-territorial efforts are currently underway to strengthen the Agreement on Internal Trade.
CGA-Canada is disappointed that the budget contained no measures to address the backlog of technical changes to the Income Tax Act that are needed – as many as 400 changes, according to the Auditor General.
On the other hand, CGA-Canada is pleased to see that its efforts and work with the government to address the regulatory and paperwork burden are being met with positive results. We commend the government for the initiative being taken to establish a Red Tape Reduction Commission and an Advisory Committee on Small Business and Entrepreneurship.
Regulatory efficiency must be a priority for this government, as it is a concrete measure that can further the government’s productivity goals. | |
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| MEETING TOMORROW’S CHALLENGES | |
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CGA-Canada Proposals |
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2010 Budget |
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Provide opportunity for Canadians to improve their skills. |
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Government predictions for the unemployment rate are as follows:
- 8.5 per cent for 2010
- 7.9 per cent for 2011
- 7.4 per cent for 2012
As part of the $19 billion in new stimulus for 2010-2011, the government is:
- Delivering $1.6 billion to strengthen benefits for the unemployed;
- Providing $1 billion to enhance training opportunities for Canadian workers;
- Maintaining EI premium rates of $1.73 to the end of 2010. When the temporary freeze is lifted in 2011, premium rates will be set by an independent arm’s length Crown corporation, the Canada Employment Insurance Financing Board (CEIFB) and will be subject to a 15-cent limit on annual changes.
Budget 2010 also builds on the Economic Action Plan with targeted actions to protect Canadian workers, including:
- Temporarily extending the maximum length of work-sharing agreements.
- Supporting the next generation of business leaders with $10 million in new funding for the Canadian Youth Business Foundation.
- Providing $60 million in 2010-2011 to assist more young Canadians while the labour market recovers.
- Investing $20 million in support of Pathways to Education Canada’s work to support disadvantaged youth.
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Strategically support programs and initiatives that boost innovation, productivity and growth. |
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- Launch a new Small and Medium-sized Enterprise Innovation Commercialization Program with $40 million over two years.
- Make Canada a tariff-free zone for manufacturers, by eliminating all remaining tariffs on productivity-improving machinery and equipment and goods imported for further manufacturing in Canada.
- Provide $45 million over five years to establish a post-doctoral fellowship program to help attract the research leaders of tomorrow to Canada.
- Increase the combined annual budgets of Canada’s research granting councils by an additional $32 million per year, plus an additional $8 million per year to the Indirect Costs of Research Program.
- Renew and make ongoing $49 million in annual funding for the regional development agencies to support innovation across Canada.
- Invest almost $1.9 billion in post-secondary education infrastructure, research, technology innovation and environmental protection.
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Continue working with the provinces and territories on pension reform. |
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- Ensure Canada’s retirement income system remains strong and efficient through spring consultations and a review of policy options at the Finance Ministers’ meeting in May 2010.
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| Comments |
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Realistic, prudent and responsible fiscal planning must always take account of the challenges over the medium and long term – the demographic, economic and social challenges facing the nation.
Major public policy issues are on Canada’s horizon. CGA-Canada is pleased that the government is looking ahead and prepared to deal with some of these issues sooner rather than later. | |
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