Martin Proposes Tax And Spending Cuts in Economic Speech

by Mike Godfrey, Tax-News.com, Washington

22 September 2003

In his first major economic speech since leaving the cabinet last year, former Finance Minister Paul Martin has pledged to pursue dual policies of tax cuts and debt reduction, should he succeed Jean Chretien as the country's Prime Minister.

"Governments must never forget the lessons of prudent fiscal management," Martin told an audience of business people last week.

"That means always keeping a firm grip on spending - especially in the uncertain times now facing the global economy. It is absolutely essential that we lower our national debt load in order to keep our interest rates low, continue to lower taxes and keep the flexibility we need to respond to an unpredictable international economy."

Accordingly, Martin is pressing for a reduction of the nation's debt to GDP ratio to a level of 25%, down from 71% in 1997, and 40% currently. Martin's main rival for the Prime Ministership, Finance Minister John Manley meanwhile, has proposed a more moderate reduction to 30% over the coming decade.

Martin urged a fundamental shift in the nation's business culture, highlighting the fact that pension funds provide 20% of venture capital in Canada, whilst the level is 50% in the United States. "I ask you this question: how can we build an economy in the 21st century, if we rely on a concept of risk that dates back to the 19th century?" he observed.

The former Finance Minister did not give specific details or targets in his economic speech, although a recent statement by the Canadian Chamber of Commerce at its annual general meeting urged the government to slash rates of personal income tax in order to become more competitve with the US in terms of attracting skilled workers. “By making our tax rates more competitive, Canada can attract and retain more high-tech skilled workers, upper management, entrepreneurs and professionals,” Nancy Hughes Anthony, President and CEO of the CoC explained. The chamber has proposed an increase in the threshold at which the top rate becomes payable from the current $104,469 to $150,000.

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