How to achieve a sustained economic recovery: create quality sustainable jobs; ensure relatively low rates of taxation; and achieve a balanced budget – these are the main areas of focus that we believe the federal government should concentrate on as we head into this year’s budget consultations.
Many of our members in London and indeed businesses across Canada entered this past summer with great optimism and most Canadians were brimming with confidence. Now, in the face of the alarming events abroad, most are less sure.
Because of this uncertainty and the instability of the global economy, many in Canada would prefer, in fact would strongly suggest, that the Government of Canada needs to change course. We politely disagree. As a reminder, it was this Chamber of Commerce supported by the national chamber in Ottawa that called on the Federal Government to balance its books by fiscal 2015-16 and to do so by restraining annual government spending growth. We have not changed our minds on this – nor should the Federal Government.
We only have to look at what is happening in Europe (Greece, Italy, Ireland, and Spain) or what happened in Canada in the 1990s to know that deficits can quickly spiral out of control triggering a huge financial and economic crisis. All Canadians and indeed markets worldwide need assurances that our government will not veer away from the current plan to return to surplus in the medium-term.
By delaying elimination of the deficit beyond 2015-16 we jeopardize the long-term interests of the country. It’s imperative that we get our finances in order to regain the kind of financial flexibility we will need in order to deal with the monumental challenges of an aging population and be able to tackle areas that are crucial to Canada’s long-term competitiveness. These include reducing high and uncompetitive marginal personal income tax rates that discourage people from working, saving and upgrading their skills.
To create quality, sustainable jobs in Canada, it’s become obvious that we must embrace a culture of innovation. And it’s innovation that has led to new industries and new jobs in high-tech and advanced manufacturing sectors like aerospace, agri-business, medical devices, life sciences and alternative energy.
Sadly, when it comes to the capacity for innovation, the World Economic Forum ranks Canada in 24th place and we are near the bottom among OECD countries in getting innovative products and services to the marketplace.
To encourage innovation, the government must focus on implementing a national strategy with particular attention on research, training, retraining, and education. We must build a strong entrepreneurial interface between post-secondary institutions and the private, public and non-profit sectors to accelerate the pace of discovery and commercialization and turn Canadian research efforts into successes in the marketplace. By strengthening Canada’s intellectual property rights regime and ensuring investment tax credits are being delivered in a predictable, consistent and timely manner, we can improve our chances for success. However, this is presently not the case.
Boosting our country’s trade and investment ties with other nations will also ensure ongoing job creation but that will require an ambitious and comprehensive strategy. We will need greater efforts to diversify Canada’s international trade to faster growing markets given the likelihood that the U.S. will see only a modest growth environment for several years to come.
Here at home, by some accounts, interprovincial trade barriers cost the economy some $8billion each year. Remember, we are not talking about trade with Europe, or Asia, or South America – we are talking about trade with each other. How can that possibly make any sense? Eliminating interprovincial barriers to trade and labour mobility along with burdensome regulatory procedures are areas in need of urgent action.
Finally, our tax compliance system is too complex and too burdensome. We recommend that the government launch a national consultation process focused on identifying ways to reduce the complexity of Canada’s tax system and improve tax administration.
As part of this, the government should undertake an independent review of the 260 or so tax preference measures that are part of the federal tax system to determine if they are cost effective and are achieving their intended purpose. Those that are not should be phased out. A more comprehensive tax base would facilitate lower tax rates so all Canadians benefit and our economy made all the better for it.
Bottom line! Stay the course, or as Rudyard Kipling would advise – “bite the bullet”.