2019 federal budget a missed opportunity for business-forward policies
April 1, 2019
On March 19, the federal government presented Budget 2019 ahead of the fall election. The Budget outlined a plan to significantly increase spending, mostly in areas that will not be impactful to key business interests such as improving market competitiveness.
Although there are a few promising spots, the Budget largely missed the mark on making crucial changes that would drive the Canadian economy forward. Billed as a budget that invests in middle-class Canadians, it provided some helpful incentives for individuals and partially addresses some industry concerns around closing the skills gap and trade infrastructure, however, it did not include any game-changing solutions to improve Canada’s sluggish growth projections or strong signals for investors showing the country is ready for growth.
Here’s a recap of some of the highs and lows of what was in the Budget documents.
What we liked
Skills upgrading and training, universal high-speed Internet, and support for the Scientific Research and Experimental Development Program (SR&ED) were areas where the Budget put forth some good measures.
One of the initiatives around skills upgrading and training Budget 2019 introduces is the “Canada Training Benefit”. The Benefit includes:
- A $250/year individual tax credit (maximum $5,000 over a lifetime) that can be used to offset tuition costs and related fees for re-training.
- The Employment Insurance (EI) Training Support which allows workers up to four weeks of paid leave, at 55 percent of average weekly earnings, every four years. The program will also offer rebates to small businesses paying EI premiums of $20,000 or less per year to help offset the cost increase.
- A pledge to consult with provinces and territories to set up leave provisions helping provide job protection if workers choose to pursue additional training.
However, program details are lacking and there aren’t clear indications if there will be consultations with the business community before implementation. Furthermore, if the program comes with an increase to EI premiums paid by employers this would add to layered costs from all levels of government that are increasing the cost of doing business in Canada.
The Budget also included spending to expand work-integrated-learning (WIL) programs and makes permanent the Global Talent Stream, a program designed to help businesses attract international talent.
The government promises to make high-speed internet universal by investing in rural broadband across Canada over the next 10 years. Bringing broadband to rural communities brings new economic opportunities and critical infrastructure to keep driving economic development for some of Canada’s most prominent sectors.
SR&ED is a tax incentive program that provides up to $3 million in credits to businesses, across all sectors, investing in scientific research and experimental development. The portion of credit available to a business shrinks based on taxable income and capital thresholds of corporations. Budget 2019 proposes to repeal the income component increasing the amount of credit available for Canadian corporations. The proposed change would apply to taxation years starting on or after March 19, 2019.
What we didn’t like
Budget 2019 failed to address some of the broader concerns of the business community. It did not include any widespread action on reducing the regulatory or tax burdens on businesses, removal of inter-provincial trade barriers, and details on improving market access.
The Budget highlighted “Regulatory Roadmaps” to reduce regulatory burdens by focusing on:
- Integrating more digital services and providing clearer guidance to industry
- Increasing exploration, innovation, and the use of sandboxes/pilot programs for new programs, and
- Facilitating greater cooperation and reducing duplication within Canada and internationally
Although in line with necessary actions to reduce regulatory burdens, these changes are limited to three sectors only: Agri-foods and Aquaculture, Health and Bio-sciences, and Transportation and Infrastructure. This makes changes too narrow to address burdens faced by many industries across the country that are seeing their ability to compete in the global market negatively impacted.
The Budget does not make any changes to Canada’s corporate income tax rate or system despite widespread calls for changes to keep up with reforms across the world. Announcements in the Fall Economic Statement have not gone far enough, as demonstrated by sluggish projected growth for the country and a drop in non-residential investments. Without tax cuts, Canada will continue to fall behind jurisdictions modernizing their tax systems across the globe.
The government did not renew its commitment to eliminating inter-provincial trade barriers following the fall economic statement. These barriers cost Canadian households $7,500 per year and if the federal government can remove some or all barriers, this would improve the standard of living for all Canadians.
Budget 2019 does not offer any further details on how the taxpayer funded Trans Mountain Expansion project will move forward or how it plans to support small and medium-sized businesses (SMEs) in finding new export opportunities. The Budget outlines plans for improvements to trade corridors and trade diversification, but it does not offer details on the announcements made in the fall economic update on how it plans to support SMEs in increasing their export capacities and reach new domestic and international markets.
What we’re waiting to learn more about
The Budget earmarked investments for Indigenous communities and business development. Along with support for Indigenous post-secondary education, language revitalization and community building, Budget 2019 announced that the government plans to spend $78.9 million over five years to support Indigenous entrepreneurs and economic development. It also earmarks another $50 million over five years of enhanced funding support for Métis SMEs.
Finance Minister Bill Morneau also recently announced that the government is interested in putting the Trans Mountain pipeline and its expansion back in private hands. This includes discussions of indigenous ownership of the pipeline provided this happens with reconciliation in mind and is beneficial for all Canadians.
Both announcements highlight the importance of Indigenous communities in business development and how this will define the future of Canada. We are interested to see how the government plans to work with Indigenous communities to bolster opportunities and economic development.
The Calgary Chamber will continue to advocate for market access for our resources, free and fair trade within and outside of Canada and a business-friendly operating environment. This includes advocating for a less burdensome regulatory environment, a tax system that is more competitive, and creating the conditions that allow businesses to grow and thrive.