Canadian Government To Table Early Budget

by Mike Godfrey, Tax-News.com, Washington

03 December 2008

With the country under mounting economic pressure, and with the minority Conservative government's fragile parliamentary position already under threat, the government has decided to bring forward its annual budget announcement to January.

The Department of Finance announced on Sunday that Minister of Finance, Jim Flaherty, will announce the budget on the afternoon of January 27, 2009. The Canadian budget is usually announced in February or March.

The announcement comes after the government released its 2008 Economic and Fiscal Statement, which outlined plans to restrain spending and "reinforce the stability of Canada's financial system." The government also warned that "a deficit cannot be ruled out."

"Without a doubt, here in Canada and around the world, these are difficult times that will require difficult choices," said Flaherty. "We cannot ask Canadians to tighten their belts during tougher times without looking in the mirror. We have a responsibility to show restraint and respect for tax dollars".

Among the goals set out by the government in the statement are commitments to eliminate taxpayer subsidies for politicians and political parties and "reduce the cost and ensure the effectiveness of government operations." However, unlike other major economies such as the United States and the United Kingdom, the Canadian government will not go down the path of temporary economy-boosting tax cuts or stimulus packages, arguing that permanent tax relief announced in previous budgets have put the nation in good stead to stave off an economic crisis. These tax cuts include a rolling programme of reductions in the general corporate tax rate to 15% in 2012, from its current level of 19.5%, and several billion dollars in personal income tax relief.

"Taken together, permanent tax reductions and infrastructure investments represent a substantial fiscal stimulus," the government argued in the economic statement.

Flaherty added: "Our goal must be to ensure the strength of the economy — to protect jobs, to encourage investment and to help businesses grow. We must do that while protecting the long-term fiscal position of the government, so that if we must run a deficit, when the economy improves, we return quickly to balanced budgets."

However, the government's cautious approach to the gathering economic storm has angered opposition parties, and the main opposition Liberal party has drafted a no-confidence motion which is due to be voted on in the Commons on December 8.

While the Conservatives recently increased their representation in the Commons, they still lack a sufficient number of seats to claim an overall majority, and barely two months after they were restored to power by the electorate, Stephen Harper's days as Prime Minister may already be numbered.

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