BC’s business community applauded the fiscal prudence of a federal budget that sprinkled benefits across various areas of the province’s corporate landscape.
The Vancouver Board of Trade’s report card gave the budget an “A” for its control on government spending. It commended the Conservatives for keeping spending increases at 3.1%, which was below the level recommended by the association.
Jock Finlayson, executive vice-president at the Business Council of BC, praised the budget for striking an “acceptable balance” in providing prudent fiscal management and modest new support for the economy.
Helmut Pastrick, chief economist for Central 1 Credit Union, described the budget as “a sprinkling of a large number of small measures that focuses on deficit reduction and spending restraint.”
Some of the key budget measures that would benefit business in B.C. included:
- extending the temporary accelerated capital depreciation rate by two years to further encourage business investment in machinery and equipment;
- extending the 15% mineral exploration tax credit for another year; and
- spending $97 million over two years to fund development of clean energy and energy efficiency.
Business groups lauded the government for sticking to its multi-year plan to reduce corporate income taxes to 15% by next year.
Fred O’Riordan, national tax adviser at Ernst & Young LLP, said while the new funding and corporate tax initiatives would contribute to productivity and growth, the overall corporate tax rate reduction was the most important measure.
Also applauded was the government’s plan to provide a one-time hiring credit for small business of up to $1,000 put toward an employer’s employment insurance premiums. But Pastrick said the benefit would likely be marginal, with the average company saving $314.29.
Despite these new initiatives, government spending was forecast to remain flat this year, rising marginally to $245.7 billion from $245.2 billion. The bulk of the increase this year was due to a 7.1% rise in government debt-servicing costs to $33 billion from $30.8 billion in 2010-11. The government’s debt is estimated to rise 5.3% to $586 billion this year, up from $556.4 billion in 2010. It’s forecast to hit $615.2 billion by 2014 and will account for 31.3% of Canada’s GDP before it’s projected to decline in 2015.
Bruce Hurst, chairman of the Certified General Accountants of BC, approved of the government’s focus to reduce its debt, noting that continued fiscal stimulus is unsustainable.
Ernst & Young recommended in a report last week that deficit and debt reduction should remain a top government priority. It noted that the amount spent on servicing debt could pay for either the total elimination of corporate income tax, a 27% reduction in personal income taxes or a 55% increase in social transfers.
(See Thumbs Up, page 36, and Head to Head, page 37.)•