Canadian Budget Blocked As Election Called

by Mike Godfrey, Tax-News.com, Washington

30 March 2011

The future of Canada's recently announced budget proposals and of tax policy in general has been thrown into doubt after the minority Conservative government lost a vote of no confidence, triggering the fourth federal election in seven years.

Canadians are take to the polls on May 2, after weeks of speculation that the embattled minority Conservative government was to fall. On March 25, Michael Ignatieff, leader of the opposition Liberal party, tabled a motion of no confidence in the Harper administration, amid allegations of corruption and a Committee report recommending the government be found in contempt of parliament, which it duly was. The following day, having sought permission from the governor general, Harper announced the impending election, and the country's main parties began their campaigns accordingly.

Harper's initial campaign statements have largely been a reiteration of previous government commitments to a low-tax agenda, which also formed a cornerstone of his party's March 22 Budget. The Conservatives argue that the election represents a choice "between a low-tax plan for jobs and growth and a high-tax agenda that will stall our recovery". At a meeting in Quebec on March 26, Harper stressed that the re-election of his government would "ensure that we continue the economic recovery", and the continued lowering of taxes.

Due to the removal of the government, parliament was unable to vote on the Budget tabled by Finance Minster Jim Flaherty. However, judgment was passed almost immediately after the Budget speech, by Canada's opposition parties, who all announced their rejection of its measures. 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. Despite the opposition generated by his proposals, Flaherty remained determined not to respond to pressure for amendments and, speaking following the dissolution of parliament, he made his position clear once again. The Conservatives are likely to reintroduce the Budget, mostly intact, if re-elected. Flaherty admitted that, "depending on timing, there might have to be an update of economic data," but that "fundamentally, it will be the same document."

Ignatieff has challenged Harper's economic record, and alleged that a vote for the Conservatives "means CAD6bn for more tax breaks for the largest corporations." The party intends to cancel the planned additional corporation tax rate reductions, and, if elected, plans to resort to 2010 rates. In addition, the party will commit to a deficit target of 1% within the first two years of its commencing office, aiming for a further yearly decline until the Budget is balanced. The party is also targeting families with their early campaign, promising public health care and pension reform.

The Conservatives are expected to make their first policy announcements in the coming days, with new tax cuts predicted, focusing on families with children under the age of 18. However, this is not to be applicable until after the Budget deficit has been eliminated, which, according to the Budget, will not be until the end of the 2016 fiscal year. Various polls conducted since the fall of the government have placed the Conservatives at an average of around 40% of the vote, with the Liberal party trailing in the mid-20% region.

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