Morneau touts benefits of budget, defends tax changes to oilpatch
Finance Minister Bill Morneau said Monday that last week’s federal budget will boost a reviving Alberta economy, even as he defended tax changes that have upset the oilpatch.
Speaking at a Calgary Chamber of Commerce luncheon as part of his cross-country budget tour, Morneau said he believes Alberta is on the rebound after two years of recession spurred by low oil prices.
“There is emerging evidence that the worst effects of the oil shock are fading,” he told a crowd of more than 300, including TransCanada Corp. CEO Russ Girling and Alberta Finance Minister Joe Ceci, at the downtown Hyatt Regency.
“But we do know Alberta families have had it tougher than most families ... we know that we can do more. We can do more to help the economy and to help Albertans prepare for the jobs of today and the jobs of tomorrow.”
Morneau said the Liberal government’s financial plan increases transfers by $2.7 billion to provinces for skills and employment training while focusing on developing an “innovation-driven economy.” That includes a $1.26-billion innovation fund to foster investments in sectors such as agri-food and clean technology, where Alberta is already a player.
But the federal budget also drew fire from the energy sector groups such as the Canadian Association of Petroleum Producers for tax changes.
The Liberal budget will see drillers by 2018 no longer able to claim full tax deductions for discovery wells in the first year, with the deductions instead spread out over time. A further change will see small oil and gas companies no longer able to reclassify development expenses as immediately deductible exploration expenses when they are renounced to flowthrough share investors.
Morneau told reporters at a news conference at SAIT earlier in the day that the tax changes were a necessary step as part of the government’s G20 commitment to “phase out fossil-fuel subsidies by 2024.”
“We have an ongoing effort to ensure our tax system is efficient, that it’s less complex and that it’s fair. We will be looking on an ongoing basis at tax expenditures that don’t meet those criteria,” he added, telling the chamber later that the deduction was not “targeted appropriately.”
Conservative MP Tom Kmiec, who attended the chamber luncheon, said Morneau delivered a “stock speech” that should give little reassurance to Albertans. He slammed the budget’s $28.5-billion deficit and said the energy sector tax changes are a “disaster.”
“That’s going to hurt people ... and he tried to sugarcoat it here,” said Kmiec, the MP for CalgaryShepard.
“(The tax deduction) did exactly what it was intended to do. I’ve got lots of small and medium-sized business guys in my riding — this was their sole focus area.”
Chamber of commerce president Adam Legge said businesses welcomed the budget’s focus on competitiveness and innovation, but want Ottawa to accelerate its timetable for returning to surplus budgets instead of living with potential decades of deficits.
“There is a long road back to balance,” he said.
But Morneau touted the government’s debt-to-GDP ratio, which he said gave it the best balance sheet in the G7.
“We don’t want to miss the opportunity to make investments at a time it makes sense,” he said during a question and answer session with Legge.
Morneau toured SAIT in the company of Mayor Naheed Nenshi, who again pitched the idea of locating in Calgary the planned new Canada Infrastructure Bank — an institution aimed at leveraging dollars from large institutional investor and pension funds to be used for capital projects.
“Calgary is the right place,” said Nenshi.
Morneau, former president of human resources giant Morneau Shepell, said in an interview he is focused on getting the infrastructure bank up and running this year.
“We’ve hired an adviser ... likely one of the things he will be considering is geography and that will be purely a decision based on how can the bank have the biggest impact? Not focused on the local economy, but focused on, what’s the decision on geography that allows the bank to be most successful.”
That’s (the energy sector tax changes) going to hurt people ... and he (Bill Morneau) tried to sugar-coat it here.