FEDERAL BUDGET: Some satisfying tax reductions that will stimulate the economy, but an overly timid hike in provincial transfer payments
Montreal, February 28, 2000 the Board of Trade of Metropolitan Montreal looks forward to investments in R&D favourable to our businesses in new technologies
Pierre Laferrière, president
"The budget unveiled today by the federal Finance Minister, Paul Martin, will contribute to encouraging the economic development and the competitiveness of Canada," said the president of the Board of Trade of Metropolitan Montreal, Pierre Laferriere.
"The personal income tax reduction targeting the middle class, the full indexation of tax brackets starting in 2000, and the raise in the basic personal exemption to $8,000 will all lift a substantial fiscal burden from taxpayers and will contribute to reducing the pressure on the provinces as to the amount of their own tax reductions. However, it is regrettable that the elimination of the 5% surtax is phased over 5 years, leaving in place a tax whose objective was to accelerate the elimination of the federal deficit and which no longer has a reason to exist.
"Furthermore, no reduction was announced for taxpayers in the highest tax brackets. This will maintain an unproductive gap with the United States and will encourage the brain drain.
"The reduction from 28% to 21% on corporate income tax will contribute to making Canadian businesses more competitive and prompt them to proceed with increased investments in research
and in equipment. But this measure does not come into effect until 2001 and then only progressively.
Transfers to the provinces: a disappointing contribution
"Moreover, the Board is disappointed by the timidity of the hike in transfer payments to the provinces. These transfers will go up by only $2.5 billion in 4 years, which is very far from
returning them to the 1994 level.
"At the moment where the provinces are trapped by high increases in the cost of health care, among others, this support can not be considered as very satisfactory and it renders federal
interventions less and less credible in the matter of health systems management.
Substantial investments in research: good news for the Montreal region
"The federal budget includes substantial investments in research and innovation. Thus, a sum of $900 million is immediately slated for the Canadian Foundation for Innovation, a sum of $160
million will enable the creation of the genetics centers of Genome Canada, so important for our biopharmaceutical industry and our health industry.
"Significant investments will also encourage the information technologies, telecommunications, and multimedia sectors. A sum of $360 million over 4 years will enable the financing of
academic chairs and of research in universities. The Board thinks that these amounts should be accessible to all existing academic chairs, and not only to new chairs, which would be tantamount to creating an entirely new program without recognizing the quality and the reputation of our universities.
Higher spending and a slight reduction in debt
"Finally, we are forced to note that the federal government does not seem determined to reduce or stabilize its program spending. The budget for this year in effect foresees an increase of more than $5 billion in program spending, in relation to last year's forecasts, and as much in 2001-2002, this spending culminating then at $121.5 billion.
"On the other hand, the Finance Minister promises to reduce the debt/gross-domestic-product ratio to under 50%, by 2005, without devoting substantial sums to paying down the debt. He thus counts principally on the continued growth of the Canadian economy during the next 5 years, which constitutes an optimistic forecast. Nevertheless, the objective of the Minister is that which the Board of Trade of Metropolitan Montreal has been proposing for several years," Laferriere concluded.
The Board of Trade of Metropolitan Montreal has more than 7 000 members. Its mission is to be the leading group representing the interests of the Greater Montreal business community. The objectives are to maintain, at all times, relevance to its membership, credibility towards the public and influence towards government and decision-makers.