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

Avalanche Canada issues special public warning

Very weak layer buried under recent snow a cause for concern

From the Hill: The millstone of a cannabis conviction

Richard Cannings writes about records expungement for cannabis convictions

Tips for avoiding Canada Revenue Agency scams

Grand Forks RCMP are asking residents to be vigilant.

Grand Forks celebrates the holidays with Santa Claus parade, light up

The Christmas tradition was a hit on Friday night.

RDKB receives funding for disaster response ‘work space’ in Midway

The work space and storage will be used by disaster response volunteers.

VIDEO: Royals reveal the images on their Christmas cards

Prince William and his wife Kate are shown outside in casual clothes, their three young children in tow

ICBC to apply for 6.3% hike to basic insurance rates

Crown Corporation said it will be submitting its next basic rate application to the British Columbia Utilities Commission Friday

Media, robotics, Indigenous studies coming to B.C. Grade 12 classrooms in 2019-20

Provincial tests are also being changed for students in Grade 10 to 12, the Education Ministry said

Stranded B.C. trucker writes final wishes before being rescued 3 days later

‘I was just praying someone would come along’

Canfor Corp. extending temporary curtailment of sawmills in B.C.; cutting hours

Vancouver-based company says the decision is due to declining lumber prices, high log costs and log supply constraints

Canada’s prospective world junior team members await final roster decisions

Thirty-four players were invited to the national junior selection camp

Final phase of Kelowna hospital cardiac centre completed

Finishing new recovery rooms marks completion of $381 million project

Family searching for B.C. professor last seen at Colombian salsa club

Ramazan Gencay, a professor in economics at Simon Fraser University, was last seen in Medellin

Rash of bomb threats a learning opportunity for response capacity, Goodale

Thursday’s wave of bomb threats swept across communities on both sides of the Canada-U.S. border

Most Read