Sustain Growth Through Prudence and Lower Taxes, Business Leaders Tell Finance Committee

November 7, 2002

Sustaining Canada’s performance as the fastest growing economy among G-7 nations will require a careful mix of fiscal prudence, spending choices and strategic tax cuts, the Canadian Council of Chief Executives (CCCE) has told the Standing Committee on Finance of the House of Commons.

In an appearance before the Committee in Montreal today, CCCE President and Chief Executive, Thomas d’Aquino, commended Finance Minister John Manley for restoring significant contingency funds and prudence factors to the budget planning process, and for his emphasis on the need to fund major new initiatives through reallocation of spending from other programs.

Mr. d’Aquino noted that when unused contingency funds go to pay down the public debt, they also provide greater assurance of the government’s ability to sustain and enhance the quality of life of Canadians over time. “Money saved is never money wasted.”

The Council recognized that significant new spending is required in some areas, including Canada’s military. “Our willingness to maintain a credible military capability will have a real impact on our relationship with the United States and our ability to ensure a continued free flow of goods and people across our common border.”

But he said that any move to increase taxes, including the income surtax for health care recently recommended by the Senate Committee on Social Affairs, would be a direct violation of the Finance Minister’s promise not to roll back the tax cuts introduced in the October 2000 budget.

Mr. d’Aquino noted that tax cuts have played a vital role in fostering the economic growth that is projected to generate an additional $46 billion in annual federal tax revenue within the next five years. “Raising taxes is simply the wrong way to ensure that Canada can sustain and enhance public health care.”

If the government wants to boost this growth in the economy and its tax base, the best option is to keep cutting taxes. Mr. d’Aquino said the single most effective move the government could make in the next budget in order to drive innovation and growth would be elimination of federal capital tax. “This tax directly penalizes companies that invest in fixed assets, in the very new plants, machinery and equipment that are critical in boosting productivity and enabling Canadian workers to earn higher incomes.”

Mr. d’Aquino told the Committee that the regulatory regime provides another way to stimulate innovation and growth without new spending. But he added that the most urgent priority is to reduce the costs, complexity and unpredictability of the regulatory process.

As an example of the damage done by regulatory uncertainty, Mr. d’Aquino noted the summary termination of the latest bank merger proposal before an application for review had even been made. “Such arbitrary actions send a disturbing message to financial markets, a message that Canada’s regulatory processes cannot be trusted.”

Similarly, Mr. d’Aquino said that if the government decides to ratify the Kyoto Protocol on global climate change before working out a credible implementation plan, projected federal surpluses are likely to shrink significantly. “The danger to the economic outlook lies not just in the actions that would be needed to meet the Kyoto target, but in the pervasive uncertainty that will envelop business investment in this country until the rules are clarified.”

Formerly known as the Business Council on National Issues, the CCCE is a non-profit, non-partisan organization composed of the chief executives of 150 leading Canadian enterprises. The members of the Council head companies that administer in excess of $2.1 trillion in assets, have annual revenues of more than $500 billion and account for a substantial majority of Canada’s private sector investment, exports and research and development.