Business Leaders say Federal Economic Statement lays Solid Foundation for Sustainable Growth

October 18, 2000

The acceleration of tax and debt reduction in federal Finance Minister Paul Martin’s Economic Statement today, combined with his government’s continuing emphasis on support for research, innovation and entrepreneurship, puts Canada firmly on the track toward sustained growth, says the Business Council on National Issues (BCNI).

In 1999, the BCNI, made up of the chief executive officers of 150 leading Canadian enterprises, launched its Canada Global Leadership Initiative with the goal of making Canada the best place in the world in which to live, to work, to invest and to grow. At the resulting CEO Summit 2000 in April, the Council’s member chief executive officers noted that only by making the right moves on economic policy could Canada hope to achieve its social dreams. “Taxation, spending and debt reduction remain the three legs of the fiscal stool. We need to make sure that each of those legs supports our common goal of stronger economic growth, higher incomes and a more robust tax base. They must work together to focus on people, on innovation, on leadership.”

The measures announced in today’s Economic Statement and Budget Update support progress in each of these areas. In particular, said BCNI President and Chief Executive Thomas d’Aquino, “Mr. Martin’s statement shows that there is now a broad political as well as public consensus on the importance to social progress of moving quickly and decisively to make Canada globally competitive in taxation.”

In its October 1998 Tax Reduction Strategy, the BCNI recommended major increases in the basic and spousal credits, cutting the middle tax rate to 21 percent, reducing the upper tax rate to 26 percent on incomes of up to $150,000 a year, eliminating high-income surtaxes and reindexing tax brackets. With the measures announced today, most of these recommendations will be in place far faster than seemed possible just two years ago.

More recently, the work of the Canada Global Leadership Initiative highlighted the danger to Canada’s growth flowing from rapid reductions worldwide in corporate income tax rates and in the taxation of capital gains. Last February’s federal budget addressed these issues in principle, but moved too slowly.

The acceleration of corporate tax cuts and further improvements in the treatment of capital gains will significantly improve Canada’s ability to attract investment and to foster innovation and entrepreneurship. These measures on the tax front will compound the benefits of the government’s additional funding for research.

Finally, the BCNI is greatly heartened by the federal government’s decision to accelerate debt repayment. By committing a minimum repayment of $10 billion in the current fiscal year, the government will bring its four-year total to $28.7 billion — enough to make a significant dent even in the huge mountain of debt accumulated through decades of deficits. The resulting savings of $1.7 billion a year in interest payments will give the government even more flexibility in meeting the needs of tomorrow.

While the government has not guaranteed future repayments beyond the $3 billion contingency fund, it has projected a decline in the debt to GDP ratio to 40 percent within five years. Most importantly, it has formally embraced the principle that, as Mr. Martin put it, ” when times are good, Canadians pay down their credit cards. Similarly, when times are good, government should pay down debt.”

All of this progress does not mean that Canadians can afford to relax. As the members of the BCNI pointed out in their statement at the CEO Summit last April, the distinguishing feature of the global knowledge-based economy is the speed with which even small mistakes can turn champions into chumps. “Seeking to catch up and surpass the standard of living of others does not mean that we need to imitate their lifestyles, values or policy choices. We certainly should be prepared to learn from others, to adopt and improve those aspects of their models that work for us. But we can and must do better, and create our own uniquely successful model of economic and social development.”

Canada has come a long way and the economic news continues to be overwhelmingly positive. But to become, in Mr. Martin’s words, “the standard by which other nations measure themselves”, we must seek to be global leaders, and outperform our competitors. Today’s Economic Statement lays a solid foundation for that continuing effort.

A non-partisan and not-for-profit organization, the BCNI is the voice of Canadian chief executives on public policy issues in Canada and globally. Its members head companies representing every major sector of the Canadian economy and are responsible for a significant majority of Canada’s private sector investment, exports, training and research and development. With about 1.3 million employees, member companies administer in excess of $2.1 trillion in assets and have an annual turnover of more than $500 billion.