Business Urges Canada To Pass Budget

by Mike Godfrey, Tax-News.com, Washington

11 May 2011

Having secured Canada's first majority administration in seven years, Stephen Harper's immediate priority must be the re-introduction of the postponed 2011-12 Budget, according to an open letter from a key Canadian business group.

The congratulatory letter, sent to Harper by the Canadian Council of Chief Executives, said that his 22 seat majority was a sign that voters desired stability and "a steady hand on the economic tiller".

With this in mind, the letter argues Harper should take advantage of his new mandate "to pursue a number of broader, more ambitious reforms". The most urgent task is to seek approval for the March 22 Budget, which, because of parliament's early dissolution, failed to make it to a vote.

According to the Council, the Budget "would put Canada firmly back on track to balance the books by mid-decade, assuming moderate economic growth, spending restraint and no tax increases".

The Budget, titled the "Next Phase of Canada's Action Plan," had signalled the government's intentions to retain its pre-programmed corporate tax cuts, focus increasingly on controlling government spending, support job creation, and reduce regulatory pressure on businesses.

However, the collapse of Harper's minority government, and the calling of Canada's fourth election in seven years, threw the future of such proposals into doubt. In particular, candidates clashed throughout the campaign over planned reductions in the headline federal rate of corporate tax, with Harper pledging to continue with plans to reduce it.

With victory on May 2, Harper now has the green light to press ahead with the rate reduction, which will drop from 16.5% to 15% in January, 2012.

Finance Minister Jim Flaherty, who had been responsible for the blocked Budget, told the Bloomberg Canada Economic Summit on May 10 of his intention to resurrect the Budget. No specific date was given, but it likely the Budget will be introduced next month.

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