The Chamber of Commerce of Metropolitan Montreal

A more social than economic budget: what to retain from the 2018 federal budget

Budget federal

On February 27, the Government of Canada tabled its budget for 2018-2019. The Chamber believes that the budget is more social than economic in character. A number of the measures announced – investments in research and programs promoting pay equity, for example – are positive for Canadian society. However, the creation of spending programs and the lack of information about targets to balance the budget confirm that Canada is now in a situation of structural deficit.

Here is what to retain from the budget tabled on February 27.

1. A decidedly feminist budget

Many incentives were announced to encourage female entrepreneurship, facilitate women joining the workforce and promote pay equity.

What the Chamber thinks

The Chamber welcomed these commitments to women by the government and believes they are good news for the Canadian economy. Given the demographic crunch, we need to correct an imbalance and get all of our society’s assets working toward economic growth.

2. No path to a balanced budget

The 2018 budget forecasts an $18.1 billion deficit for 2018-2019. According to projections from the Minister of Finance, this deficit should keep dropping, reaching $12.3 billion in 2022-2023. There is no clear signal that the budget will be balanced again. Debt should reach $651.5 billion, which represents 30.4% of GDP, according to Government of Canada forecasts.

What the Chamber thinks

The Chamber is concerned by the absence of a clear plan to restore a balanced budget and related tax measures to avoid eroding the competitiveness of our tax system. Furthermore, the Chamber believes that the Government of Canada’s ongoing deficits result in intergenerational inequity and put the country’s economy at risk in the event of a shock or recession.

3. Massive investment in research and innovation

Major investments to make Canada a world leader in scientific research and innovation were announced in the recent federal budget.

  • Close to $4 billion will be invested in scientific research in the next five years:
    • $925 million over five years to finance the three granting agencies in Canada;  
    • $763 million over five years for the Canada Foundation for Innovation;
    • $231 million over five years for the Research Support Fund;
    • $210 million over five years for Canada Research Chairs;
    • $540 million over five years for the National Research Council of Canada;
    • $572 million to fund the exploitation of massive quantities of data.

What the Chamber thinks

The Chamber congratulates the Government of Canada for investing to support research and innovation. Montréal is known around the world as a university city, and the city’s universities and research centres are well positioned to benefit from the investments announced to strengthen innovation and cooperation with companies in Montréal’s sectors of excellence.

4. Competitiveness of our tax system: uncertainty

The 2018 budget provides further detail on tax reform for small business. The new measures ensure that SMEs with investment income of $50,000 and less remain eligible for a reduced taxation rate of 10% (9% beginning in 2019).

What the Chamber thinks

The Chamber believes that taxation of SMEs’ passive investment income over $50,000 becomes more complex despite improvements made to some aspects of tax reform.

Additionally, the absence of explicit measures following massive tax cuts in the U.S. worries the business base in terms of weakening our competitiveness on taxation, the impact on investments and the attractiveness of our business environment.

Finally, no clear measure was announced to apply sales tax to online transactions. This puts local businesses at a disadvantage, whether or not they operate from a storefront, and benefits international businesses that sell goods and services online.

However, the Chamber notes the government’s openness to taxing online transactions based on Statistics Canada results.