Canada’s business and economic leaders welcomed the March 21 federal budget with relatively open arms—particularly Jim Flaherty’s repeated assertion that the books will be balanced a year ahead of schedule.
“Not a lot of surprises, and not a lot of surprises were expected,” says RBC chief economist Craig Wright. “The growth forecast has been brought lower and there’s still uncertainty around the globe, so there wasn’t a great deal of room to do anything new and large,” he adds. “It’s interesting to look at what there wasn’t in it, and there weren’t the large deficits we’re seeing in other countries.
“The infrastructure side is interesting in the longer-term focus of it,” Wright goes on. “Most of the money kicks in at the end of the horizon. It allows better planning when you have a 10-year commitment. I think that was kind of new.”
Paul Ferley, assistant chief economist with RBC, expands on Wright’s comments. “Where they provided the offset to more revenue growth was cutbacks to a number of program expenditure areas,” he says. “Additional spending is probably going to kick in, but the government’s track record has been not bad.”
John Manley, president of the Canadian Council of Chief Executives, offers a mix of praise and regret. “The reiteration of the importance of the international trade negotiations that are going on, particularly the Trans-Pacific Partnership, Europe, Japan, India—those are good things,” he says. “We were hoping they would have addressed the Scientific Research and Experimental Development tax credit issue that was created by last year’s budget. We were hoping to see action more generally on the defined benefit pension problems faced by Canada’s federally regulated employers—the rails, telecoms and some others. They are seeing their capital expenditure budgets seriously affected by pension obligations.”
Corinne Pohlmann, vice-president of national affairs for the Canadian Federation of Independent Business, says her members were happy with the idea of a balanced budget coming soon, the increase in EI benefits and a few other things. For example, “the lifetime capital gains exemption was increased from $750,000 to $800,000 and they’re going to index it to inflation. That was a really important measure—we’ve been calling for that for a number of years,” she says. “It’s critical for small businesses when they want to exit their business. Many owners use the value of their firms as retirement, because they don’t have pension plans.”
But one thing Pohlmann would like to see is a lower tax rate for small businesses. “While there was no movement on that, we took some comfort in one statement in the budget that said they would consider looking at lowering taxes again once the deficit is eliminated, including small business taxes,” she says. “We felt that was at least a step in the right direction.”