Finance Minister Bill Morneau. (Sean Kilpatrick/The Canadian Press)

Ottawa’s fall update features $16B competitiveness response to U.S. tax reforms

Bill Morneau had faced pressure to lower the corporate tax rate in response to major tax and regulatory reforms in the U.S.

The federal Liberals have come up with a $16-billion answer to Canada’s competitiveness concerns.

Ottawa’s long-awaited plan to help Canada compete with the United States for investment dollars is the centrepiece of its latest fall economic statement, which forecasts slightly deeper annual deficits over the coming years.

Finance Minister Bill Morneau had faced pressure to lower the corporate tax rate in response to major tax and regulatory reforms in the U.S.

But in Wednesday’s economic update Morneau chose to use billions worth of extra federal fiscal space to offer tax incentives for businesses who invest in Canada.

Morneau said the government is benefiting from “a very good situation – but we know that we have to consider investments in the future…. That’s why we listened to and heard the anxieties of the business sector.”

By far, the biggest-ticket items among the proposed tax measures are changes that would enable businesses to immediately write off the full cost of some types of machinery and equipment, and allow companies of all sizes and in all sectors to expense a larger share of newly acquired assets.

READ MORE: Federal fall update expected to offer more support for struggling news outlets

The new write-offs alone are expected to cost the federal treasury about $14 billion over the next half-decade.

As part of its competitiveness plan, the government also proposes about $1.1 billion over the coming years towards efforts to open new market access for Canadian exporters. It is also looking to add another $800 million over five years to its strategic innovation fund, which supports “innovative” investments in all sectors.

A stronger economy has given the government about $22 billion in extra fiscal room over the coming years, compared to what federal forecasters projected in last February’s budget. But the new initiatives will also contribute to slightly larger-than-expected annual shortfalls, beginning next year.

The government is now projecting deficits of $18.1 billion in 2018-19, $19.6 billion in 2019-20 and $18.1 billion in 2020-21. After 2020-21, the annual shortfalls are expected to shrink each year to $11.4 billion in 2023-24.

The fiscal update contains no timetable to eliminate the Liberals’ deficits. The government has drawn criticism from the Opposition Conservatives and some economists for failing to provide a timeline back to balance, especially with the economy running close to full strength.

Following the 2015 election, the Liberal government abandoned pledges to run annual deficits of no more than $10 billion and to balance the books by 2019. Instead, it has focused on reducing the net debt-to-GDP ratio – also known as the debt burden – each year.

The debt-to-GDP ratio is now projected to gradually fall from 30.9 per cent in 2018-19 to 28.5 per cent in 2023-24.

Morneau’s fall economic statement also proposes additional support for the country’s struggling journalism industry by enabling non-profit news organizations to receive donations and through the creation new tax credits – all of which are part of a plan expected to reduce government revenues by $600 million over five years.

The government plan also proposes $240 million towards sustaining Canada’s wild fish stocks, with a focus on Pacific salmon.

The Canadian Press


Like us on Facebook and follow us on Twitter.

Just Posted

Paintearth Community Adult Learning boasts another successful year

The 2019/2020 school year looks to bring back many popular programs and some new ones

Red Deer man arrested in connection with Leduc armed robbery

Leduc RCMP asking for public assistance after armed robbery – UPDATE

Community tradition

Castor Community Hall played host to the annual Bridge Tournament on May 4th

Alberta RCMP shares tips for motorcycle safety month

Showing off does not pay off – but driving defensively does

Castor looking into animal control bylaws and improving training for staff

The training is being undertaken by the Town employees to minimize public, staff, and animal risk

B.C.’s fight to regulate bitumen through pipelines to go to Canada’s top court

BC Appeal Court judges found B.C. cannot restrict bitumen flow along Trans Mountain pipeline

Scheer says it would take Conservatives five years to balance budget

Scheeraccused the Liberal government of spending $79.5 billion of previously unbudgeted funds

New airline regulations bring compensation for tarmac delays, over-bookings

Some of the new regulations will roll out in July, while others are expected for December.

Theresa May to quit as party leader June 7, sparking race for new PM

The new Conservative leader will become prime minister without the need for a general election

CMHC defends mortgage stress test changes amid calls for loosening rules

Uninsured borrowers must now show they could service their mortgage if rates rose two per cent

School bus crash in Edmonton sends 12 to hospital, 2 with broken bones

Alberta Health Services said there were no life-threatening injuries

Crews fight fire with fire to keep blaze from northern Alberta town

The wildfire now covers some 920 square kilometres

Supreme Court of Canada won’t hear Alberta murder appeals

Sheena Cuthill and her husband Timothy Rempel were found guilty three years ago of killing Ryan Lane

Pipeline protester chimes in on Justin Trudeau’s B.C. fundraising speech

The government purchased the Trans Mountain pipeline and expansion project for $4.5 billion

Most Read