Business applauds tax cuts; others say mini-budget ignores them

Business groups generally gave a "thumbs up" to the tax cuts spelled out in the Conservatives' economic update, saying they were long overdue. But big cities and aboriginal groups wondered why there was no money for them and unions said there was little for working families.

The Retail Council of Canada was pleased that the government plans to cut personal income taxes. "That puts the dollars back where they are most needed — in the pockets of hard-working Canadians," said Diane Brisebois, president of the council.

'The government has abandoned working families.'—Ken Georgetti, president of the Canadian Labour Congress

The Canadian Real Estate Association liked the proposed one percentage point cut in the GST, noting it could save new home buyers thousands of dollars and would help Canadians pay for home renovations and furniture.

But the association was hoping that the Conservatives would follow through on their election pledge to allow a capital gains tax deferral if the profits were reinvested within six months.

The real estate association also lobbied for an increase in the maximum withdrawal under the popular Home Buyers' Plan to $25,000, but there was no change there. The limit has been stuck at $20,000 since the program began in 1992.

The Federation of Canadian Municipalities said the economic statement shows that the federal government "obviously has room to cut taxes" and apply the savings toward Canada's cities. So it's wondering why it didn't.

"Even after all the debt payments and tax cuts announced today, the government will still have $26 billion more than it needs over the next five years," said Gord Steeves, the federation's president.

"If the government really wants to provide Canadians with tax relief, it should start by sharing the equivalent of one cent of the GST with cities and communities and making the gas-tax transfer permanent," he said.

The Assembly of First Nations said the federal books show there's plenty of money to allow Ottawa to work with First Nations to eradicate poverty.

"Due to inflation and population growth, First Nations are losing real purchasing power each year," said AFN National Chief Phil Fontaine. "All of this happens in spite of Canada's record surpluses."  

The Canadian Union of Public Employees said the extra tax cuts won't help most Canadians.

"The finance minister is trying to pump up what soon could be a flagging economy with costly tax cuts," said CUPE economist Toby Sanger. "It may help them to buy a spring election, but it will do little to improve the long-term health or productivity of the economy and could lead to deficits and deep cuts to public services in future years."

"The government has abandoned working families," said Ken Georgetti, president of the Canadian Labour Congress, who accused Ottawa of engaging in "trickle-down" economics.

"When fully implemented, the proposed giveaway on corporate taxes would exceed the total resources needed to deliver on child care, on a national prescription drug program, on a commitment to upgrade transportation and urban infrastructure," he said.

Some wanted deeper cuts

The big accounting groups said the tax cuts would make Canada more competitive. But some wished for deeper and quicker corporate tax cuts.

"We'd like to see the government go faster and even further, by reducing the corporate tax rate so that it matches the small business rate, a move that would simplify the tax structure and enhance the prosperity of all Canadian businesses," said Kevin Dancey, CEO of the Canadian Institute of Chartered Accountants.

The Certified General Accountants of Canada said the business and personal tax cuts were "long overdue" but said Ottawa still needs to simplify a tax system that it called "overly complex."

The Canadian Bankers Association said the tax cuts would give Canada a competitive tax advantage. "This will be noticed on the world stage, clearly putting the spotlight on Canada as a place to invest, do business, live and work," said Nancy Hughes, president and CEO of the association.

The insurance industry also liked what it saw. "This will encourage investment, expand employment and make Canada more competitive in the world economy," said Frank Swedlove, president of the Canadian Life and Health Association.

"The industry also welcomes the government's continued efforts to pay down Canada's debt." 

Sal Guatieri, senior economist at BMO Capital Markets, welcomed the tax cuts and debt paydown. But he estimates the measures will result in a net stimulus next year of around 0.8 per cent of GDP.

"This could limit the potential for rate cuts by the Bank of Canada, though the economy may still weaken sufficiently to spur a modest rate decline," he said.