BC Chamber of Commerce Express Newsletter - July 2010 Issue

• Industrial property taxes under review – Conflicts between major industrial properties and B.C. municipalities have led to the creation of a joint review of major industrial property assessment and taxation, established between the Province, the Union of B.C. Municipalities, and industry. The committee’s challenge is to balance the revenue needs of municipalities with the needs of major industry to pay competitive property taxes. The committee is expected to report to the province by the fall of 2010. Read more

• Clean-energy projects top major projects inventory list - A record number of major construction projects are proposed in British Columbia, and nine of the 10 top-valued projects focus on clean energy. The number of proposed major construction projects has risen to a record high of 516. The value of the projects planned or underway is $187 billion, near the all-time high of $189 billion. Among the clean energy projects planned or underway across the province are the $1.2-billion Rocky Creek Wind Energy Project, the $900-million Machmell River Hydropower Project in Campbell River and the $222-million Upper Lillooet River Hydroelectric Project. Read more

• One step closer to the HST – The governments of Canada and B.C. signed a human resources agreement to provide provincial public servants with positions within the Canada Revenue Agency as part of the move to wind down PST and implement HST on July 1, 2010. Read more

• New chair appointed to Forest Practices Board - Al Gorley will assume the role of chair of the Forest Practices Board for three years effective May 1, 2010. Created in 1995, the Forest Practices Board is an independent watchdog that reports to the public about compliance with forest practices legislation. The other members of the board are vice-chair John Dunford of Kamloops, Dr. Rachel Holt of Nelson, Andrea Lyall of West Vancouver, Mike Nash of Prince George, Dave Patterson of North Vancouver and Debbie Zandbelt of Vernon. Read more

Question Period Topics

• Budget debate
• Mintz report on HST
• Impact of harmonized sales tax on restaurant and tourism industries
• Community gaming grants
• Tax on private sale of vehicles and motorboats
 • Government support for tourism industry

Status of Bills
BILLS INTRODUCED (first reading)

Government Bills
• Bill 3 – Supply Act (No. 1), 2010

Reports
• Auditor General's report No. 10, 2009-2010, Wireless Networking Security in Government: Phase 2

Download PDF Version here

FOR IMMEDIATE RELEASE

March 8, 2010 – A report released today on Harmonized Sales Tax by public economic expert Jack Mintz states that the HST will have an unequivocal benefit for the province by attracting $11.5 billion in capital investment and creating 113,000 jobs by the end of the decade. 

“This report is further evidence that the HST is essential for creating jobs and attracting new investment in British Columbia”, said John Winter, President and CEO of the BC Chamber of Commerce.  “The HST will further contribute to BC being one of the best investment climates in the world and make our businesses more competitive.”

 The Mintz Report, commissioned by the Provincial Government, states that every industrial sector in British Columbia will benefit from the implementation of the HST.  Effective tax rates for businesses will decline by 30 percent, putting them below the G20 average.  The report estimates that the same tax rate for small businesses will drop by 60 percent.  With the introduction of HST, the tax burden on small business investment will be virtually eliminated by 2012.

“There has been much discussion about the increased prices facing consumers with the implementation of HST,” continued Winter.  “Making businesses more competitive, and eliminating the layers of imbedded PST on consumer products, will mean lower prices on a wide range of goods.  We saw this when the Atlantic Provinces adopted HST.  Savings passed on to consumers means that household incomes will have increased purchasing power, and that too will strengthen BC’s economy.”

Jack Mintz, a noted tax expert, states that by 2020 the combined effect of the corporate tax cuts and HST will be to increase capital stocks by more than $14 billion, which translates into an increase of 141,000 jobs.

For further details contact;
John Winter
President and CEO, BC Chamber of Commerce
W 604 638 8113
C 604.376.3577
E jwinter@bcchamber.org

 Click here for  Summary of the BC Mintz Report on HST – March 2010

Canadian Chamber of Commerce
Reaction to Budget 2010

You can now find The Canadian Chamber's budget analysis on our Web site.

Please click here to be redirected to the document.

NEWS RELEASE

Federal Speech from the Throne 2010:
Today’s priorities, tomorrow’s opportunities

FOR IMMEDIATE RELEASE

March 3, 2010 – The Federal Government delivered its Speech from the Throne on Wednesday. The following release was produced by the Canadian Chamber of Commerce and is being reproduced. The BC Chamber would like to draw your attention in particular to the second to last paragraph concerning environmental review, an issue the BC Chamber has taken a lead policy role in.

Today’s Speech from the Throne, entitled ‘A Strong Canada. A Strong Economy’, demonstrates the government’s recognition that while it must address the country’s short term economic priorities, it must also lay out a strategy for Canada’s long-term competitiveness.

The details of the government’s plans will be provided in tomorrow’s Federal Budget. According to the Speech from the Throne, the federal government will complete the second year of its economic stimulus commitments under Canada’s Economic Action Plan and return Canada to fiscal balance. This has been a core position of the Canadian Chamber of Commerce and its network of more than 340 local chambers of commerce and boards nationwide.

In addition to winding down economic stimulus spending by March 31, 2011, the government said it intends to contain its own costs through such measures as freezing the salaries of the Prime Minister, ministers, members of parliament and senators, as well as by freezing ministerial and departmental budgets. The government will also take measures to improve its efficiency through an aggressive review of its administrative services and departmental spending. It will also eliminate unnecessary federal appointments.

The Canadian Chamber has also told the government that while it is critical to eliminate the federal deficit so that it is not left to future generations to shoulder, increasing the tax burden on businesses and consumers will only slow our economic recovery. This is why the government’s commitment to balance its books without raising taxes is good news for Canada’s businesses and all Canadians.

From the early days of the recession, the Canadian Chamber has said that the government needs to look beyond the recession and equip the Canadian economy to “hit the ground running” in the global economy. We are heartened to see that longer-term initiatives for which the Canadian Chamber has advocated were reflected as priorities in the Speech from the Throne. These include the government’s commitment to a strategy for a digital economy, strengthening intellectual property rights and copyright protection, fostering innovation by expanding opportunities for the commercialization of research and postdoctoral studies, as well as ensuring the country has the skilled workforce it needs through improving the education and training opportunities for Aboriginal Canadians. The Canadian Chamber also looks forward to the re-introduction of an amended spam bill that works for business and consumers.

The importance of the economic contribution made by Canada’s small and medium-sized businesses and the need to reduce the regulatory burdens they face, were specifically acknowledged.

The need to expand the scope of Canada’s international trade, fight trade protectionism, increase the amount of capital available to Canada’s businesses by lifting foreign ownership restrictions in key sectors, negotiating new air agreements and the creation of a national securities regulator have long been forwarded by the Canadian Chamber of Commerce as measures to make us more competitive.

Dealing with climate change remains a real challenge for Canada. We welcome the continued recognition that this must be done in a manner that acknowledges our economic integration with the United States.

The Canadian Chamber is particularly pleased to see the government acknowledge the need to improve the regulatory oversight and project approvals regime for environmental and energy projects. This was outlined in the Canadian Chamber of Commerce’s 2009 policy paper Powering Up Canadian Prosperity as being one of the essential steps government must take to enable Canada to fully leverage its energy sector’s potential.

The Throne Speech represents a statement of intent from the government; it does not represent solid policy commitments. As such the Chamber movement at all levels will be watching the coming session and engaging with government Ministries on the measures outline above to ensure that the commitments made in the speech result in concrete achievements over the coming session and the coming year.

If you have any questions on the Throne Speech, material or comments provided above, please contact:

Jon Garson
Vice President, Policy Development
D 604.638.8113
C 778.960.3712
E jgarson@bcchamber.org

NEWS RELEASE

BC CHAMBER APPLAUDS GOVERNMENTS ANNOUNCEMENT TO HARMONISE PROVINCIAL
AND FEDERAL SALES TAX

FOR IMMEDIATE RELEASE

Vancouver, July 23, 2009 – Chambers of Commerce from across the province today welcomed the bold and timely announcement from the provincial government that BC will be harmonizing its sales provincial sales tax with the federal Goods and Services Tax effective July 1, 2010, an issue member chambers reaffirmed as a priority for government at its recent Annual Meeting.

“Harmonization of BC’s sales tax with the federal GST is one of the most important policy directions we can put in place today to position us for a strong recovery at the end of our current economic difficulties,” explains John Winter, President and CEO of the BC Chamber of Commerce. “With the commitment to harmonization and the other measures announced regarding personal, corporate and small business tax the provincial government must be congratulated for creating the most competitive taxation regime in North America.”

The new tax will as a true value-added sales tax which would apply to the same goods and services as the GST while maintaining some existing exemptions under the current provincial sales tax.

“This measure saves business money and reduces government expenditures while providing protection for those on low-incomes,” continues Winter. “In addition to these savings the consumer will also be a winner as business will pass the savings they make, such as $150 million annually in compliance costs alone, onto the consumer in the form of lower prices”

“Small business across the province are supportive of because not only is this good news economically, this is particularly good news for small business,” states John.  “Small business are the tax collectors for government so this measure will remove the need for small business to deal with an unreasonable and complicated tax this will allow us to focus on growing our businesses and creating jobs,”

 For further details contact;

 John Winter

President and CEO

BC Chamber of Commerce

C 604.376.3577

E jwinter@bcchamber.org

BC'S NEW CABINET RECEIVES PRAISE FROM BC CHAMBER OF COMMERCE

FOR IMMEDIATE RELEASE

June 10, 2009 - The BC Chamber of Commerce offered its congratulations to Premier Gordon Campbell and the newly appointed Cabinet Ministers today after Premier Campbell announced the new Cabinet in Victoria.

Chamber of Commerce members will be particularly pleased to see newly elected MLAs Naomi Yamamoto (North Vancouver/Lonsdale) and Steve Thomson (Kelowna-Mission), both past Chairs and Governors of the BC Chamber of Commerce (1997-1998 and 2003-2004 respectively), take up ministerial positions.  Yamamoto and Thomson join Hon. Bill Bennett, former First Vice Chair of the Chamber (2000).

The Chamber also expressed its pleasure at the restructuring of the Ministry of Small Business, Technology and Economic Development.

"We are very happy to see the focus placed on small business in this Ministry," said John Winter, President & CEO of the BC Chamber of Commerce.  "This emphasis indicates to us that the Provincial Government recognizes the important role small business will play in getting the province back on track in terms of the recession."

Winter noted that, with so many of the Ministers having strong backgrounds as business people, this Cabinet as a whole will be part of the answer to the question of British Columbia's economic rebound.

"The premier has made strong and encouraging choices," said Winter. "This is a Cabinet up to the challenge, and we look forward to working with them as they lead this province forward."

For more information contact:

John Winter
President & CEO
T  604.638.8110
C 604.376.3577
E  jwinter@bcchamber.org

BUDGET 2009

FACTS AND FIGURES

PDF of Budget 2009 Facts and Figures

Budget 2009 was presented as “Builds Stability, Confidence For the Future.” 

 One of the strong features of Budget 2009 is on the strong record of fiscal management in BC. This focus is in keeping with the direction of Budget 2009 which indicates that BC’s recession will be short with recovery coming in 2010 and seems to suggest that given our solid fiscal footing the economy is well positioned to weather this storm.

 With this in mind it is not surprising that in an election year the focus of Budget 2009, certainly in terms of spending initiatives, is firmly on social programs such as education, health and social programs.

BC’s Fiscal situation

2007/09

(millions)        Budget                 Updated           Budget                         Plan                 Plan

                                                  Forecast           Estimate           2010/11             2011/12

                                                                                               
2009/10

 Revenue                                      38,490             38,455             38,812             39,795             41,182

Expenses                                     (37,690)           (38,405)           (39,307)           (40,040)                      (41,182)

Surplus (Deficit) before

forecast allowance                          800                  50                    (495)                (245)                -

Forecast Allowance                         (750)                -                       -                       -                       -

Surplus (Deficit)                            50                    50                    (495)                (245)                -

Capital spending:

Taxpayer-supported capital

spending                                        3,859               4,133               4,746               4 ,650              3,382

Total capital spending                         5,766               5,951               6,945               7 ,155              5,924

Provincial Debt:

Government direct operating debt         7,408                   6,437                           6,847                           7 ,104                          7,074

Taxpayer-supported debt                   27,741                27,692                         30,213                         3 2,392                        34,078

Total debt                                    37,741                 37,487                         40,471                         4 4,203                        47,215

Government direct

operating debt-to-GDP ratio               3.7%                3.2%                3.5%                3.4%                3.3%

Taxpayer-supported

debt-to-GDP ratio                           14.0%              13.8%              15.2%              15.7%              15.8%

Total debt-to GDP ratio                    19.0%              18.7%              20.4%              21.4%              21.8%

Growth

                                                           2008                2009                2010                2011-13          

BC’s real GDP % change

Ministry of Finance                             1.0                   -0.9                  2.4                   2.6      

Economic Forecast Council                1.3                   0.0                   2.8                   2.6      

Government Expenditure

Government has dramatically cut government spending in a number of areas to offset declining revenue.  This is focused on;

 Travel                                                              -22%

Contacted professional services                      -23%

Office and business services                           -8%

Advertising                                                     -76%

Operating equipment and vehicles                  -9%

Discretionary grants                                        -7%

In addition all Ministries with the exception of Children and Family Development; Education; Health Services; Healthy Living and Sports; Housing and Social Development and Transportation and Infrastructure will face cuts in their Budgets.

These measures represent a saving of $1.9 bn over 2009/10 – 2011/12 with a commitment to find an additional $250 million in savings.

 New commitments

Budget 2009 focuses on increased expenditure in three primary areas, protecting health care, increased education and sustaining social services. These increases in funding are combined with a requirement that each of these areas will be required to find cost savings.

 Health care

Budget 2009 commits to maintaining the increases in health care spending of $3.9 bn over 3 years allocated in Budget 2008 while also committing an additional $920 million in 2011/12 as well as $25 million in 2009/10 for the Lower Mainland Innovation and Integration Fund.

 Healthcare funding represents fully 90% of all new spending the three year fiscal plan laid out in Budget 2009 and now stands at $17.5 bn (with total government expenditure standing at just over $41 bn)

Collectively health authorities will be required to achieve administrative savings of $25 million per year, representing approx. 2% of health authorities’ admin and support service costs. Each dollar saved will be redirected to patient care.

 Post-Secondary Education

Budget 2009 will see an increase of $244 million in operational spending;

-          $165 million to further enhance access

-          $40 million to expand health education opportunities

-          $23 million in 2010/11 to fulfill the commitment to increase the number of doctors

-          $16 million to support immigrant workers –

Collectively public post-secondary education institutions will be required to achieve admin savings of $11 million per year. It is expected that these savings will be redirected to education and training in these institutions.

 K12 

Budget 2009 will see funding remain stable that given falling enrolment numbers represents an increase in per-pupil funding (no specific figures provided)

Collectively school districts will be required to achieve admin savings of $12 million per year. It is expected that these savings will be redirected to the classroom.

 Social Spending

Budget 2009 directs $110 million over 3 years for priority programs and services;

-          $47 million to support children in care and for preventative and family support services

-          $25 million for the child care subsidy program

-          $38 to support families and children with special needs

$73 million for programs for adults with developmental disabilities and their families.

$110 million for increased income assistance

Infrastructure

Budget 2009 announced $14 bn in infrastructure investment. This investment represents $3.4 bn in new spending, $2 bn for accelerated infrastructure spending and $1.4 bn in grants to communities for infrastructure. The remaining $10.6 represents existing spending commitments in the provincial government’s capital plan.

Budget 2009 states that this funding will create 88,000 new construction jobs.

Full details on the projects included in the govenrmets infrastructure plan can be found ion page 33 onwards.

 Supporting Communities

-          $6 million over 3 years to support the strategic development of shale and tight gas

-          $20 million ($5 in 2008/9 and $15 in 2009/10) on resource road maintenance (mainly forest service roads) near remote BC communities

-          $30 million in 2009/10 to support community adjustment and job creation in rural BC

-          $50 million for Towns for Tomorrow

-          $20 million in 2008/09 for local road maintenance and rehabilitation

As part of an ongoing efforts to restructure local government funding arrangements $151 million will be provided to local governments in 2008/09 to support local government priorities

Public Sector Pay

The Budget contains no funding for annual wage increases in the next round of public sector bargaining

Risks

• A protracted recession or low growth in the US
• Reduced global demand for BC exports
• Continued turmoil in global financial markets
• Low commodity prices
• Spending pressures

Chamber is also concerned with the lack of flexibility in the plan given the lack of forecast allowance (which is expected in a deficit situation) that means that if any of the governments projections regarding tax revenue (either personal or corporate) are wrong we will run a deficit beyond the two years.

Carbon Tax

Budget 2009 will increase to $15 per tonne effective July 1, 2009.

However, Budget 2009 does introduce several new measures;

 -          Increase in low income climate action tax credit by 10% to $115.50 per adult and $34.50 per child, effective July 1, 2011

-          A new Northern and Rural Homeowner benefit of up to $200 beginning in 2011

-          Increase in the Industrial Property Tax Credit to 60% from 50% beginning in 2011

-          Reduce school property taxes for farm land by 50%, beginning in 2011

 These new measures do not represent a shift in the measures already in place to return carbon tax to British Columbians, in fact these new measures will mean that the government returns $194 million more to BC than is collected through the tax.

Conclusion

Budget 2009 cannot be viewed in isolation of the 10 point Economic Plan announced in October and the Throne Speech announced on February 16, 2009.

 The 10 point plan included a number of taxation measures that has ensured BC has extremely competitive tax rates at the personal (for incomes below $111,000 BC has the lowest personal income tax rate), small business rates which will be 2.5% by 2011 and a corporate tax rate that will be the 10% by 2011.

 These measures, combined with significant reductions in regulation mean that we are well positioned to weather these difficult times. Indeed, it could be said that if you want to be anywhere in North America you want to be in Canada and further, if you want to be anywhere in Canada you want to be in BC.

Despite the strength of BC’s fiscal position as a small, open trading jurisdiction BC is not immune to the turmoil of what is a deep global recession. Indeed, whether it is job losses, falling exports, or the continuing challenges facing our largest trading markets BC is facing a difficult year in 2009 which will see the crisis getting worse rather than better.

 The Throne Speech, while thin on specifics, laid out a vision that recognises that in difficult times we must look to the future with a new vision and with a renewed focus on what are the future opportunities, not what has been. When we come out of this recession (and we will) we must be looking to build a foundation for the next generation economy. The Throne Speech certainly focuses on many of the areas that present BC with unique opportunities, whether it is our growing role as an International Finance Centre, opportunities from hospitality (convention centres etc), cultural, film, tech, or our role as the Gateway to Asia Pacific the possibilities for BC are significant.

To take advantage of these opportunities BC needs to continue to focus on the economy. If this crisis has taught us one thing it is that government’s fundamental responsibility is to ensure a robust fiscal foundation that provides business with a basis to exploit new opportunities. To do this requires focus and a long term vision and plan, the chamber will be working with government to ensure this is place to ensure that as we come out of recession we do so with a clear vision for a vibrant, innovative economy.

BUDGET 2009 REPRESENTS A PRUDENT APPROACH TO UNCERTAIN ECONOMIC TIMES

February 17, 2009                                                                                                                   For immediate release

 Victoria – The BC Chamber of Commerce gave a cautious welcome to Budget 2009, tabled today by the Finance Minister, as representing a prudent response to the economic challenges facing the provincial economy.

 “Budget 2009 clearly shows that our sound approach to fiscal management through paying down debt, reducing taxes and controlling public spending, has allowed the province to be better positioned to weather this storm than virtually any other jurisdiction in North America,” stated John Winter, President & CEO of the BC Chamber of Commerce. “The Chamber is pleased to note that while there is a focus on reducing costs government has also recognized the need to enter a short period of deficit financing to protect government programs and to contribute to our ability to recover. Our support for short term deficit is predicated on ensuring that the level of deficit is manageable and there is a plan that will ensure that we will be back into surplus by 2011-2012.  Budget 2009 clearly meets these criteria.”

 Budget 2009 includes significant protection for social programs with continued increases in funding for education, healthcare and social services. In addition to these funding increases Budget 2009 contains significant commitments to new infrastructure projects with $4 billion in new and accelerated investment in addition to the $10 billion already committed.

 “While the Chamber recognizes the importance of protecting the social network that supports families, particularly in difficult times, the current economic reality must ensure that government maintains a focus on ensuring that BC business is well positioned to come out of the recession stronger, more innovative and more productive” states Winter. “Budget 2009 suggests that the fundamentals of BC’s economy remain strong, while this is true the Chamber recognizes that there are significant risks to the Budget projections that require government to remain focused on the economy. Only if BC’s recovery is quick and strong can we ensure people have jobs, investment and government programs.”

 -30-

For further information contact;

John Winter - President and CEO                                                        604 683 0700 (ext 110) (w)

BC Chamber of Commerce                                                                 604 376 3577 (c)

Budget Addresses Key Economic Issues:

Canadian Chamber of Commerce

 Ottawa, January 27, 2009 – The Canadian Chamber of Commerce today welcomed Ottawa’s plan to respond to the global recession.

“Since the meltdown in global financial markets last fall, we have called for a comprehensive strategy to limit the impact of the recession on Canada and to speed recovery. While there are elements that we would have designed differently, the government has consulted extensively and has answered our request to show how it thinks we can get our economy moving again. In the interests of all Canadians, the plan should be given a chance to work,” said Chamber President and CEO Perrin Beatty.

 In his Budget speech, Finance Minister Jim Flaherty responded positively to a number of the Canadian Chamber's proposals to mitigate the impact of the recession and stimulate the economy, including:

·         Accelerating infrastructure spending

·         Providing greater access to credit for businesses

·         Offering tax relief for low- and modest-income Canadians

·         Providing incentives for new business investment

·         Continuing the previously-announced corporate tax reductions

·         Strengthening labour adjustment programs and training for unemployed workers

The Canadian Chamber welcomed the extensive budget consultations and engagement of the government, and how it took into account the suggestions from the Chamber network across Canada. However, it noted that the government’s projections for recovery are more optimistic than most private sector economic forecasts, and it will closely monitor progress to ensure that deficit financing does not become permanent.

“Both yesterday’s Throne Speech and today’s budget announcement acknowledged that economic conditions have deteriorated rapidly and that the government needs to respond urgently.  While the next several months will be rough for both families and businesses, and we will watch carefully to ensure that Ottawa does not return to long-term structural deficits, the fact that we now have a clear strategy should help to restore consumer and investor confidence over the medium term. We believe it is an important step forward,” said Mr. Beatty. 

-30-

 Contact: Katie Anderson

Cell: 613.797.1860

Go to http://www.chamber.ca to view the Canadian Chamber’s budget analysis.

FEDERAL BUDGET ENCOURAGING BUT LACKS FOCUS, SAYS BC CHAMBER OF COMMERCE

FOR IMMEDIATE RELEASE

January 27, 2009 – The BC Chamber of Commerce heard encouraging words in Ottawa today, as the Federal Government unveiled its 2009 Budget, but is harbouring concerns that the Government’s deficit spending may be allocated too broadly to have the desired impact, especially where small business is concerned.

“The infrastructure building program, the total housing package, the strategic training and transition fund, and the tax cuts – these are all good things, and part of a Budget that we can ultimately support,” said John Winter, President and CEO of the BC Chamber of Commerce.  “But we are concerned at this point about the sheer range of projects that the Government has identified for funding.”

The Chamber movement has been the leading voice calling for a focus on the economy, and Chamber members will be pleased to see that the government has acted on many of the Chamber’s recommendations by including initiatives such as improving access to credit, targeted investments in training, expedited infrastructure spending, as well as many targeted taxation incentives for investment in technology and machinery.

However, while there is a heavy focus on training, infrastructure and tax cuts, Budget 2009 aims to address the recession’s unprecedented economic challenge by spending widely across virtually all sectors – a strategy that, while certainly optimistic, in the Chamber’s opinion will not necessarily bring about the results the Government has promised.

“This Budget represents some of the most difficult financial decisions to be made in Canada’s history, and clearly the Government has been listening carefully throughout its consultations,” continued Winter.  “Given that, it’s hardly surprising that the Government has tried to include provisions for as many areas as possible, and tried to avoid making choices between projects, regions and sectors.  Although this inclusivity is admirable, it’s not certain that Canada’s economy would not benefit more from increased focus on the Government’s part, especially when it will be spending at unprecedented levels.”

- 30 -

Access BC Chamber of Commerce Budget highlights at www.bcchamber.org

MEDIA ADVISORY: Former Associate Deputy Minister for the Federal Department of Finance to Comment on Federal Budget Announcement – January 28, 2009 – Executive Luncheon with Don Drummond, Senior Vice President and Chief Economist for TD Financial Group.  For more details visit: http://www.bcchamber.org/news/releases/drummond_lunch_advisory.html

For more information contact:

John Winter

President and CEO

BC Chamber of Commerce

T 604.638.8110

C 604.376.3577

E jwinter@bcchamber.org 

January 27, 2009 Federal Budget 

Fiscal Stimulus and Then Some

Introduction

 In one of the most anticipated budgets in memory, the federal government unleashed a raft of new measures in an effort to help stimulate the economy, limit the impact of the recession, and speed recovery. Much of the contents of the budget document had been leaked and, therefore, there were few surprises. It featured something to appeal to almost everyone.

 While there are elements that we would have designed differently, the government has consulted extensively, and has answered our request to show how it thinks we can get our economy moving again. It adopted many of the Canadian Chamber's proposals, including accelerating infrastructure spending; reducing the tax burden facing low- and modest-income Canadians; providing incentives for new business investment in machinery and equipment; continuing the previously-announced corporate tax reductions; and ensuring access to credit for Canadian businesses and consumers. 

 The fiscal stimulus package will result in deficits higher than otherwise.  The government projects a deficit of $1.1 billion in fiscal 2008-09, $33.7 billion in fiscal 2009-10; $29.8 billion in 2010-11, $13 billion in 2011-12, and $7.3 billion in 2012-13.  The government is projecting a small surplus in 2013-14.  Overall, the government projects a cumulative deficit of $85 billion over five years.

Budget 2009 projects federal debt to reach $542.4 billion in fiscal 2012-13 – $90 billion higher than forecast in the November Economic Update.

Highlights of Key Measures Announced

Measures to improve access to financing

 §  Commits an additional $50 billion in the first half of 2009-10 to the Insured Mortgage Purchase Program to provide lenders will additional flexibility and capacity to lend to consumers and businesses.

§  Enhances the flexibility and capacities of financial Crown Corporations by increasing the authorized capital limits of EDC and BDC by $1.5 billion each, and increasing their associated borrowing limits as necessary.

§  Increases the maximum eligible loan amount a small business can access under the Canada Small Business Financing Program from $250,000 to $350,000 and to $500,000.

§  Allocates up to $12 billion to a new Canadian Secured Credit Facility to purchase term asset-backed securities backed by loans and leases on vehicles and equipment. This new facility will help consumers and businesses access financing for these products.

§  Establishes a new Canadian Life Insurers Assurance Facility to guarantee wholesale term borrowings for life insurers, modeled on the Canadian Lenders Assurance Facility.

§  Provides the Canada Deposit Insurance Corporation (CDIC) with greater flexibility to enhance its ability to safeguard financial stability in Canada.  It proposes to increase CDIC’s borrowing limit from $6 billion to $15 billion.

§  Commits to working with willing partners to establish a Canadian securities regulator.

§  Will consult on the legislative and regulatory framework for federally regulated pension plans.

 Provides for increased support for laid off workers, and workforce training

 §  Increases for two years all regular Employment Insurance (EI) benefit entitlements by five extra weeks and increases the maximum benefit duration to 50 weeks from 45 weeks.

§  Provides $500 million over two years to extend EI income benefits for Canadians participating in longer-term training.

§  Extends work-sharing agreements by 14 weeks, to a maximum of 52 weeks, so more Canadians can continue working.

§  Extends the Wage Earner Protection Program to cover severance and termination pay owed to eligible workers impacted by employers’ bankruptcy.

§  Will consult with Canadians to develop options to provide self-employed Canadians with access to EI maternity and parental benefits.

§  Increases funding for training delivered through the EI program by $1 billion over two years.

§  Invests $500 million over two years in a Strategic Training and Transition Fund to support the needs of individuals who do not qualify for EI.

§  Freezes EI premium rates for both 2009 and 2010. The Canada Employment Insurance Financing Board will be mandated not to recover any EI deficits as a result of the two-year $2.9 billion of enhanced EI benefits and training announced in Budget 2009.

 Provides tax relief to stimulate spending

 §  Personal income tax measures include increasing in 2009 the basic personal amount to $10,320 from $9,600, and the top of the two lowest personal income tax brackets[1]; increasing the level at which the National Child Benefit supplement for low-income families and the Canada Child Tax Benefit are phased out; doubling tax relief provided by the Working Income Tax Benefit; and increasing the Age Credit amount by $1,000 to provide further tax relief to seniors.  These are permanent measures.

§  Corporate income tax measures include a temporary 100 percent capital cost allowance rate for computers acquired after January 27, 2009 and before February 1, 2011; extending the temporary 50 percent straight-line accelerated CCA rate to investment in manufacturing or processing machinery and equipment undertaken in 2010 and 2011; repealing the interest deductibility constraints in section 18.2 of the Income Tax Act; permanently eliminating tariffs on a range of machinery and equipment; and extending for one year the temporary 15 percent mineral exploration tax credit to help companies raise capital for mining exploration.

§  For Canada’s small business sector, Budget 2009 increases the amount of small business income eligible for the reduced federal tax rate of 11 percent to $500,000 from the current limit of $400,000 as of January 1, 2009.

Takes action to stimulate housing construction

§  Implements a temporary Home Renovation Tax Credit to provide an incentive for Canadians to undertake new renovation projects.  The 15 percent tax credit will apply on the portion of eligible expenditures exceeding $1,000, but not more than $10,000.

§  Provides additional funding over two years to the ecoEnergy Retrofit program.  This program provides home and property owners with grants of up to $5,000 to offset the costs of making energy-efficiency improvements.

§  Allows individuals to withdraw up to $25,000 (up from $20,000 at present) from their RRSPs to purchase or build a home without having to pay tax on the withdrawal made after January 27, 2009.

§  Provides first-time home buyers a $5,000 non-refundable income tax credit on a qualifying home acquired after January 27, 2009.  This will provide up to $750 in tax relief. 

§  Invests in social housing by providing $1 billion over two years for renovations and energy retrofits; and $400 million over two years for the construction of social housing units for low-income seniors.  Support is also provided for social housing in the North and on First Nations reserves.

§  Makes available up to $2 billion over two years in direct, low-cost loans to municipalities to finance improvements to housing-related infrastructure.

Accelerates and expands investment in infrastructure

 §  Provides, in total, almost $12 billion in new infrastructure stimulus over two years.

§  $4 billion over two years to establish an Infrastructure Stimulus Fund that will provide funding to provincial, territorial and municipal infrastructure rehabilitation projects.  The federal government will project plans, and will cover up to 50 per cent of eligible project costs.

§  $1 billion over five years for the Green Infrastructure Fund to support projects such as sustainable energy.

§  $1 billion over two years to expedite ready-to-go infrastructure projects.

§  $500 million over two years for infrastructure projects in small communities.

§  $2 billion to repair, retrofit and expand facilities at post-secondary institutions.

§  $750 million for infrastructure through the Canada Foundation for Innovation.

§  $225 million over three years to Industry Canada to develop and implement a strategy on extending broadband coverage to unserved communities.

§  $407 million for VIA Rail Canada.

§  $14.5 million for two bridges at two of the busiest U.S–Canada border crossings: the Blue Water Bridge in Sarnia and the Peace Bridge in Fort Erie.

Provides support for sectors, regions and communities

§  Including $170 million over two years to Canada’s forest sector; $500 million to Canada’s agriculture sector; and $175 million for the procurement of 98 new Coast Guard vessels. 

§  Offers short-term repayable loans to the automotive sector, in collaboration with the Province of Ontario and the U.S. government.

§  Establishes a new Clean Energy Fund that supports clean energy research development and demonstration projects, including carbon capture and storage.

§  Support for regional developments includes more than $1 billion over five years for a Southern Ontario development agency to help workers, communities and businesses in this region; and $1 billion over two years for a Community Adjustment Fund that will help mitigate the short-term impacts of restructuring in communities. Regional support will be provided through regional development agencies, and the establishment a new regional economic development agency for the North.

Federal Budget Analysis

The government’s Action Plan contained a myriad of measures.  In the Canadian Chamber’s view not all qualify as fiscal stimulus in the traditional sense.   

The most successful stimulus measures are those that are timely in response, and well-targeted to the needs of the economy.  Infrastructure spending fits the bill. It was a top priority in Budget 2009, and rightly so. Not only can it provide short-term stimulus but also tremendous long-term benefits. High quality infrastructure is critical in encouraging private sector investment, attracting foreign direct investment, and boosting international trade. It is crucial in strengthen our nation’s competitiveness and productivity going forward.    

 Measures to reduce the tax burden on Canadians are also welcomed from a long-term competitiveness perspective. Raising the maximum Working Income Tax Benefit (WITB) will encourage more people to enter the labour force and current WITB recipients to extend hours of work. Increasing the basic personal amount and the top of the two lowest personal income tax brackets will enable Canadians to earn more income before paying federal income taxes, or before being subject to higher tax rates. While it does offer some potential to provide short-term stimulus across the board, it is lower-income individuals that are more likely to be credit constrained and more likely to be among those with the highest propensity to spend.

Incentives in Budget 2009 for new businesses investment – like the temporary accelerated CCA rate for investment in manufacturing or processing machinery and equipment, and the temporary 100 percent CCA rate for investment in computers – change the timing of when capital is acquired and, thus, can provide short-term stimulus.  From a longer-term perspective, they contribute to boosting Canada’s productivity through the faster adoption of newer technology and by encouraging the retooling needed by businesses.  Whether Canadian businesses take advantage of these tax incentives at this time remains to be seen as many face slowing demand, deteriorating profit margins, and difficulty in obtaining corporate financing.

The Canadian Chamber is encouraged by the Government’s continued efforts to provide additional support for Canadian credit markets by utilizing all tools at its disposal. It compliments the aggressive measures taken by the Bank of Canada to ensure liquidity and the affordability of credit for Canadian businesses and consumers.

The measures announced in Budget 2009 come with a high cost – large deficits for the foreseeable future. We need to be mindful that there is a price to be paid when a deficit is incurred.  Canadian will have to pay it back in the future - both principal and interest - making it harder to cover program costs, like health care and education, and meet the needs of an aging population. If deficits persist over a long period of time, Canadians and Canadian businesses will face a higher tax burden, and our competitiveness will be threatened. 

The problem with running a deficit, even during recessionary periods, is that the government may lose its ability to bring spending into line when the economy recovers.  The government said it will “continue to carefully manage spending” and “focus spending measures in two years”.  This appears to be contingent on the government “taking action to ensure the Equalization program grows in line with the economy” and limiting growth in federal public sector compensation. 

More work needs to be done on the government's plan to get us back to a surplus position. The government is hoping that budgetary revenues will rise fast enough – about 7 percent per year over the 2009-10 to 2013-14 period – to get us back into a surplus position.  With nominal growth in the economy expected to average about 4-5 percent per annum, it may be difficult to accomplish.

The Canadian Chamber is disappointed the government did not state that it will adopt more prudent budgeting principles including allocating annual funds (i.e. setting aside a reserve) within the budget to cover the indebtedness when the budget returns to surplus.  This approach would assure Canadians and international investors that the government is serious in getting Canada’s books back in surplus position.  The government plans to use budget surpluses first of all to repay the deficits expected in the upcoming four years.

 Taken overall, however, the budget represents an important step forward.

Media news releases from Fort Nelson Chamber of Commerce

NEWS RELEASE

 

CANADIAN BUSINESSES TO GOVERNMENT: “FOCUS ON ECONOMY” ________________________________________________

FOR IMMEDIATE RELEASE

Vancouver, December 5, 2008 – The Canadian Chamber of Commerce has reached out to businesses

across the country this week to find out exactly how they are reacting to the current political uncertainty in

the face of the global economic crisis.

The survey results, released today, send a very clear message to the Federal Government: Get back on

track.

“Businesses in BC and across the country are telling the government that it’s time to put citizens first and

politics aside,” said John Winter, President & CEO of the BC Chamber of Commerce. “The economy is

and should be our country’s priority. This is not the time to lose that focus.”

This survey is the latest of several appeals to the Federal Government to cease their internal struggles

and work together on safeguarding Canada against the economic turbulence.

Of chief concern to British Columbians is the potentially negative impact the political instability will have

on Canada’s international image. As a province which relies heavily on its export markets, and thus relies

directly on Canada’s reputation as a stable and reliable trading partner, any political maneuvering which

so publicly calls our stability into question is particularly troubling.

“The federal political parties of Canada must begin immediately to redress any damage which may have

been incurred as a result of their recent actions,” said Winter. “The businesses and citizens of this country

have made their needs and views very clear – the government should be reading the skywriting.”

 

For more information contact:

 

John Winter

 

President and CEO

BC Chamber of Commerce

T 604.638.8110

C 604.376.3577