Business waits for Goodale's 'minibudget': Election
preview
National Post
Sat 12 Nov 2005

Page: FP3
Section: Financial Post
Byline: Paul Vieira
Dateline:
OTTAWA
Source: Financial Post

OTTAWA - In two days, Canada's business community hopes
to learn how serious the government -- and in particular, Ralph Goodale, the
Finance Minister -- is about boosting productivity.

On Monday, Mr. Goodale is scheduled to table the Liberal's beefed-up fall
fiscal update as well as a "prosperity paper," which focuses on future
productivity growth, the key economic metric that measures standard of living.
The update and prosperity paper are widely seen as a minibudget in the lead up
to a pending election that could be triggered in the next few weeks.

For the past year, economists and the Bank of Canada governor have warned
Ottawa about the need to focus on productivity growth, which measures the amount
of output produced per hour of labour worked. Canada's productivity has climbed
annually by 0.9% since 2000, compared with 3.5% during the same period in the
United States.

"I think this is the chance for the Finance Minister and the government to
outline their long-term vision for the Canadian economy," Jayson Myers, chief
economist for the Canadian Manufacturers and Exporters, said of Mr. Goodale's
announcement on Monday.

"I am looking for a fairly bold vision that at least sets out the objective
of raising Canadian real income levels at least in line with those in the United
States over a period of 10 to 15 years."

Expected to be included in Mr. Goodale's statement are personal and corporate
tax cuts -- including the reintroduction of $3.4-billion in relief for business
removed from the 2005-06 budget at the behest of the NDP -- and more spending on
education.

He can unveil such initiatives because the federal surplus for the coming
fiscal year is estimated to be $10-billion to $12-billion. Economists suggest
over the medium term, Ottawa could finance up to $5-billion in tax cuts and
program spending.

The Financial Post surveyed business advocacy groups about what elements they
would like to see included in the fiscal update:

- Nancy Hughes Anthony, president of the Canadian Chamber of Commerce

"I want to see a commitment articulated in that document for some action on
tax reduction. What I want to hear Mr. Goodale say is not only all the good
words that we have heard many times about where we are going to make
productivity-enhancing expenditures -- which we support, in terms of
post-secondary education and infrastructure. But how is he going to deal with
the fiscal and tax side of the equation."

The chamber has already called on Mr. Goodale to provide an immediate
$3-billion in tax relief and limit spending to improve education and
infrastructure.

Ms. Hughes Anthony said she is also keen for a commitment that the current
pace of government spending -- a 15% year-over-year increase for 2004-05 -- will
be reined in.

- David Stewart-Patterson, executive vice-president of the Canadian Council
of Chief Executives:

He agrees that tax relief must be a key part of this productivity plan,
noting that the C.D. Howe Institute has indicated Canada has the second-highest
rate of tax on business investment among 35 large industrialized countries.

"Tax cuts are an essential part of the agenda. They are not the whole agenda,
however, but an essential part," said Mr. Stewart-Patterson.

He said the tax breaks contemplated should have an immediate impact on
productivity, such as: accelerated rates at which companies can write off
assets; and cuts to marginal tax rates.

"The pace of growth we have seen is simply not sustainable, and if we don't
get a handle on that we are creating a whole raft of problems down the road.
More specifically, they need to ensure whatever new spending they do commit to
actually has a real impact on productivity."

- Jayson Myers, chief economist of the Canadian Manufacturers and Exporters:

For starters, Mr. Myers would like to see the government make the economy a
priority. "There has to be some recognition that yes, we face some social
problems, the only way we can continue to afford to pay for this, especially
with an ageing population, is if we are generating more in terms of economic
value, or wealth. That's why the productivity issue is so important."

The government's plan must address taxes on business investment, specifically
on two items: accelerated depreciation rates on machinery and equipment; and a
more attractive tax credit related to research and development.

Also crucial is a commitment to ease commercialization in Canada, or the
ability of businesses and organizations to bring new products to market.

"You have to be talking about commercialization as an important part of
productivity. If we are not, then we are missing the point all together."

- Garth Whyte, executive vice-president of the Canadian Federation of
Independent Business:

Tax cuts on the personal income side are among the top priorities the
government needs to address, Mr. Whyte said.

"We are concerned with individual productivity. And one of things is that
high tax rates for some individuals dissuade them from working more."

As for the corporate taxes, his group would like to have the corporate tax
threshold for small and mid-sized businesses increased, to $400,000 from
$300,000.

And they would like a move to raise the capital gains exemption on the sale
of businesses and farms, from $500,000 to $750,000.

Another element Mr. Whyte believes should be part of the productivity agenda
is a concerted effort to reduce the paperwork between businesses and government.
He said regulatory burdens are costing small businesses roughly billions of
dollars a year.

"You don't have to get rid of regulations, but reduce a 10-step process to
five steps. It can be done in a positive way, and at little cost to taxpayers,"
Mr. Whyte said.

Illustration:
• Colour Photo: Chris Wattie Reuters
/ BUSINESS LEADERS' GREAT EXPECTATIONS: 'I want to see a commitment articulated
in that document [Monday's fiscal update and prosperity paper] for some action
on tax reduction' Nancy Hughes Anthony, President, Canadian Chamber of
Commerce
• Colour Photo: Chris Wattie Reuters / 'There has to be some
recognition that yes, we face some social problems, the only way we can continue
to afford to pay for this ... is if we are generating more ... wealth' Jayson
Myers, chief economist, Canadian Manufacturers and Exporters
• Colour Photo:
Chris Wattie Reuters / 'The pace of growth we have seen is simply not
sustainable, and if we don't get a handle on that we are creating a whole raft
of problems down the road' David Stewart-Patterson, Exec. VP, Canadian Council
of Chief Executives
• Colour Photo: Chris Wattie Reuters / 'You don't have to
get rid of regulations, but reduce a 10-step process to five steps. It can be
done in a positive way, and at little cost to taxpayers' Garth Whyte, Exec. VP,
Canadian Federation of Independent Business

Edition: National
Story Type: Business
Note:
[email-masked].
Length: 945 words