Fall fiscal update on The House
Donald Trump's election as U.S. President in 2016 ushered in many changes, including economic ones that continue to have a ripple effect in Canada, according to Finance Minister Bill Morneau.
"The world changed when the U.S. changed its taxation environment, and it's critical that we remain competitive," said Morneau in an interview airing Saturday on CBC Radio's The House.
Trump's move earlier this year to cut corporate and personal tax rates raised concerns in corporate Canada that the cuts could shift profits and investment to the United States.
Those worries didn't go unheeded by the federal government, said Morneau, who presented his fall fiscal update Nov. 21.
"In talking with businesses, with people who make investments, we heard a concern around trade, we heard a concern that we ensure our regulations continue to protect Canadians, and we heard a concern that the next investment may be more likely to go south of the border if we didn't ensure our tax codes stayed up to date," he said.
"I was told directly by organizations making investments that they needed to believe they could make an investment here on a competitive basis, and the U.S. changes were making that more challenging for them."
The government's Fall Economic Statement delivers $17.6 billion in new spending over six years — about $16.5 billion of it in foregone revenue to boost Canadian business productivity.
The biggest move in the update is $14.4 billion earmarked to allow businesses to write off some capital costs more quickly.
Flavio Volpe is the president of the Automotive Parts Manufacturers' Association. In a separate interview on The House this week, Volpe called the capital treatment a "very important hit."
"It was important for Canada to do something to counteract the U.S. tax reform package," he said.
The new measures introduced this week will have an impact for the manufacturers Volpe represents,helping to "harden their footprint" in Canada, he added.
"For them, to be able to sell their goods to their customers with this added bonus of their customers being able to write them off within a year is going to lead to a lot warmer of a sales environment."
"What it does for a lot of parts makers is we would have sourced our tools on the U.S. side of the border into our U.S. operations, because we could have treated them differently on tax," he said. "Now we're going to buy them from the Canadian side. Canadian tool machine mould-makers now have a better playing field to stay here and do it."
That's what the government is trying to ensure happens, Morneau said.
"We're trying to make sure that organizations that are here continue to invest," he told Hall.
The finance minister added he's confident the boost to business — and the consequential move into deeper deficits — is the right one.
When asked if, in five years, there will be more jobs directly related to the decisions he made in the fiscal update this week, Morneau replied with a definitive, "Yes."
His colleagues on the opposite side of the House aren't so confident.
"Justin Trudeau is spending Canadians' tomorrow on his today," Conservative finance critic Pierre Poilievre said in a separate interview on The House this week.
Poilievre's main issue is that the government is going deeper into deficit, with no road map to when or how it intends to get out of the red, he said.
"It's not that we don't trust his promise to balance the budget down the road, he has no promise. The government doesn't have a revenue problem, it has a spending problem."
The NDP's finance critic Peter Julian told The House that the government's fiscal update was a missed opportunity to focus on tax incentives around affordable housing and pharmacare.
"Many small businesses in my area say, 'we're having difficulty getting qualified workers because they can't find affordable housing'. These are the kinds of incentives that help Canadians at the same time as they help our businesses. Social programs also help the business community."
Morneau said his department is working with an advisory committee that will be coming back with recommendations for a universal pharmacare program.
For now, though, the theme of this mini-budget is paving the way for the Liberals' final budget of their current mandate before the 2019 election.
"We are very focused on jobs," Morneau said. "It is the challenge of our time, the changing nature of work, the changing nature of the workforce. That is part of our middle-class agenda. You'll see us continue to focus on the middle class."
The finance minister also hinted at what Canadians can expect to see in the next budget.
"Things like skills and training will be prominent in 2019 as we think about dealing with the future in a way that makes sense for Canadians," he said.