March 23, 2016
The business community of Alberta has significant concerns with the approach and commitments laid out by the 2016 – 2017 Federal Budget. To avoid being a purely political document without economic substance, the budget needs significant detail and specific information about the government’s plans.
“We’ve been going over the various documents and it’s tough to put together a clear picture of where we’re going or how we’re going to get there,” says Ken Kobly, ACC President and CEO. “What is clear is that commitments to business have been put on the back burner by this wait and see budget. It’s disappointing.”
Some highlights affecting business include:
Planned reductions to the tax rate of Small Business of 0.5% per year, from 11% to 9% by 2019, have been put on hold indefinitely
Planned reductions to EI premiums, from 1.88 to 1.49, have been scaled back to 1.61
Immediate capital spending will not be dedicated to areas which would benefit from stimulus – areas such as Alberta, Saskatchewan and Newfoundland which have been hit hard by the economic downturn
While many in Alberta will appreciate the improved access to and scope of extended EI benefits in the short term, business is left wondering how structural obstacles contributing to unemployment will be addressed in the long term.
“It’s tough to get behind a budget that touts innovation and creating a new economy when we can’t get a pipeline from the west to the east in this country, let alone to markets that will pay more for our products,” says Kobly. “I’m pretty skeptical of a vision to be a global innovation leader while we continue to import oil and gas despite having an abundant local supply.”
With the exception of taking measures to strengthening labour market development there was little, if any, uptake of the ACC’s recommendations presented to the Federal Standing Committee on Finance during pre-budget consultations:
- Strengthen Canada’s fiscal competitiveness and tax environment
- Reduce barriers to trade and investment in competitive strengths
- Strengthen labour market development with the view to attract and retain global talent
- Adopt a proactive approach in policy design and implementation
Contrary to recommendations made by chambers, new tax compliance measures were introduced for Canadian companies operating in foreign jurisdictions or foreign companies operating in Canada. These measures risk increasing compliance costs and undermining competitiveness by avoiding the simple solution to addressing tax evasion: simplify the tax code.
This budget also introduces Accelerated Capital Cost Allowances (ACCA) for electric generation and storage industries, while the ACCA remains in place for manufacturing and other natural resource sectors. Despite chambers’ persistent advocacy to reinstate the ACCA for petrochemicals mining and processing, this budget picks winners and losers and misses the opportunity to bring a measure of relief to Alberta’s economy by encouraging investment in one of the province’s core industries.
The lack of details provided in the budget documents makes it difficult to see exactly what accounts for the $29 billion deficit projected for this year and very difficult to know whether future projections of indefinitely continuing but declining deficits are valid. Lack of detail in how Canada will get back to fiscal balance presents a very real risk to fiscal sustainability and flies in the face of prudent fiscal management.
Before any Phase 2 spending commences, the ACC wants to see a transparent model of performance metrics developed and applied to all prospective capital initiatives.
“Because of the uncertainty that comes with back loading the capital spending, and not knowing where government will invest or how they will divide the pie, they need to develop performance metrics that define capacity building measures and will keep things on track through the life of those investments.” says ACC Chair Carman McNary. “We will accept what they are saying about the overall economic position now but reporting, verification and transparency of the government have never been more important.”
The Alberta Chambers of Commerce is a federation of 128 chambers of commerce representing 24,000 businesses.