$14B in tax savings for businesses
Ottawa’s economic update forecasts an $18.1-billion deficit
OTTAWA—Confident the Canadian federal coffers can weather global economic uncertainty, the Liberal government proposes a $14.4-billion package of tax measures to boost manufacturing and clean energy production, as well as a new fund to drive social and environmental investment and aid for struggling media outlets.
The fall economic blueprint, entitled “Investing in Middle Class Jobs,” does not chart a path to a balanced budget, instead projecting an $18.1-billion deficit this year.
However with an election now less than a year away, Wednesday’s statement was as much a political as it was an economic document, as the Liberals reaffirmed their commitment to a carbon tax and poked critics who would “bury their heads in the sand” on climate change.
It delivers a key measure sought by business groups with tax changes to allow companies that invest in manufacturing or in “clean energy” to fully write off spending immediately on new equipment and machinery. Meanwhile other businesses of all sizes and in all sectors will be able to more quickly write off a greater portion, but not the full amount, of their capital spending.
Altogether, the three tax changes total $14.4 billion over five years in foregone revenue to federal tax coffers.
On top of that, Finance Minister Bill Morneau promised $1.4 billion over five years in spending to help explore new markets for Canadian exports, millions more to remove internal trade barriers and trim regulations, and an extra $800 million over five years will be injected into an existing business innovation fund. That means a total package of $16.48 billion in measures to keep Canadian businesses competitive, said Morneau.
Big business had urged Morneau to match the U.S. corporate tax rate after President Donald Trump slashed it from 35 per cent to 21 per cent. He portrayed that as an irresponsible course to pursue, saying it would cost tens of billions.
The pro-business measures, from a finance minister who last year angered Canada’s business community with corporate tax changes, were only partially offset — from a political perspective — by new spending to boost socially conscious projects and, in Morneau’s words, to boost democracy in Canada by allocating $595 million over five years to aid journalistic outlets.
A new $755-million 10-year “social finance fund,” loosely modelled on the U.K.’s “Big Society” fund, will provide loans to non-profits or for-profit ventures to juice riskier, low-return investments in social housing, job training or environmental measures to improve Canada’s longterm social health — moves that attempt to hew to the Trudeau government’s “progressive” brand.
Conservative Leader Andrew Scheer was not in the Commons to deliver the Official Opposition response to the update.
But Conservative finance critic Pierre Poilievre slammed it, noting that the deficit is “three times the size the Liberal party promised in the last election.”
The measures outlined in the update pushes the deficit to $18.1 billion in the current fiscal year, rising to $19.6 billion next year before starting downward, reaching a projected $11.4 billion in 2023-24.
New Democratic Party Leader Jagmeet Singh said the Liberals’ “blanket giveaways” to corporations show they “are playing Santa Claus to the corporations but abandoning ordinary Canadians” who he said need more help with affordable housing and prescription drugs. He said the capital spending measures will allow corporations “to buy limousines and corporate jets.”
In a speech to the Commons, Morneau talked up Canada’s economic prospects even in the face of uncertainty from rising interest rates, debt-burdened consumers, slumping oil prices, and ongoing trade disputes with the country’s biggest trading partner south of the border.
He said Canada’s debt continues to decline as a function of the country’s overall economic output, and he defended the choice not to move quickly to cut the yearly deficit, saying to do so would have entailed drastic spending cuts.
Morneau touted the success the Liberals had in reaching a new North American free trade pact with the U.S. and Mexico, but said Canada would chart its own way toward economic success and not try to match the U.S. approach by adopting what he called “an “aggressive package of tax cuts for large corporations.” He said to do that in Canada would add “tens of billions in new debt” and so he chose a more “targeted, measured, and fiscally responsible” approach.
The document, a mini-budget, sprinkled other money around: $240 million toward sustaining Canada’s wild fish stocks; $14.6 million over five years to boost Canadian content on a new multilateral French-language digital platform with TV5MONDE, a public broadcaster that provides the first global channel in French; and $62.6 million over five years for food security in the north, and a one-time $25-million endowment for Avalanche Canada to promote avalanche safety. The Prime Minister’s brother died in a 1998, B.C. avalanche.