TORONTO, March 22, 2016 /CNW/ - The first budget of the new federal government is essentially a 'down payment' on a long-term fiscal plan that charts a course to strengthen the Canadian economy, according to Chartered Professional Accountants of Canada (CPA Canada).
Yet, it is a hefty and costly initial payment. "The real test won't come until next year's budget when we will hopefully see the results from the Advisory Council on Economic Growth, more on the Innovation Agenda, and the government's stated intention to undertake a review of the tax system," says Kevin Dancey, president and CEO, CPA Canada. "These must create an environment that is attractive to businesses and talent as well as enhancing Canada's long-term growth prospects and competitiveness. We clearly are not there yet when we have personal tax rates in excess of 50 per cent in some provinces."
The budget deficit is expected to be $29.4 billion in 2016-17, gradually declining to $14.3 billion in 2020-21. Government debt will increase by over $100 billion and annual interest on the debt will increase by $10 billion. The Debt/GDP ratio will only decrease slightly by 2020-21.
"There is always uneasiness any time a government turns to deficit financing," adds Dancey. The governing Liberals ran on a spending platform but also now face a much more challenging economic landscape than anticipated.
"Going forward, the government must demonstrate an ability to manage costs and deal with the demographic changes facing Canada," stresses Dancey. This initial budget outlines a plan where the Liberals will not deliver on key election promises relating to fiscal management. "We will be closely monitoring the government's handling of the finances, especially as the economy grows, and would prefer the books be balanced by the end of its mandate."
In terms of election promises, the budget introduces the Canada Child Benefit to assist families. However, to help contain the costs of the program, the benefit is being phased out at a more accelerated rate than originally proposed. The fiscal blueprint also outlines plans and commitments for infrastructure spending.
CPA Canada welcomes two tax-related initiatives in the budget:
- Funding to help improve taxpayer services at the Canada Revenue Agency;
- Proposed actions to enhance the integrity of Canada's tax system on both the domestic and international fronts. The budget provides increased resources for better enforcement of the tax laws.
Other tax measures
The budget proposes that the 10.5 per cent small business income tax rate remain unchanged rather than being reduced as originally proposed. It also includes anti-avoidance measures to preclude multiplication of the small business deduction.
There were no changes to the capital gains or stock option rules in this budget.
"We have the first step," concludes Dancey. "The coming year will be crucial for the government and we await next year's budget with interest."
CPA Canada's federal budget commentary and analysis will be available tonight at cpacanada.ca/budget2016.
About CPA Canada
The new Canadian designation, Chartered Professional Accountant (CPA), is now used by Canada's accounting profession across the country. The profession's national body, Chartered Professional Accountants of Canada (CPA Canada), is one of the largest in the world with more than 200,000 members, both at home and abroad. The Canadian CPA was created with the unification of three legacy accounting designations (CA, CGA and CMA). CPAs are valued for their financial and tax expertise, strategic thinking, business insight, management skills and leadership. CPA Canada conducts research into current and emerging business issues and supports the setting of accounting, auditing and assurance standards for business, not-for-profit organizations and government. CPA Canada also issues guidance and thought leadership on a variety of technical matters, publishes professional literature and develops education and professional certification programs. cpacanada.ca
SOURCE CPA Canada
For further information: Tobin Lambie, Principal, Media, CPA Canada, T: 416-204-3228, C: 647-302-3761, [email protected]; Diana Sorace, Manager, Media Relations, CPA Canada, T: 604-694-6700, C: 604-551-4487, [email protected]