The Certified General Accountants Association of Canada (CGA-Canada) Response to the Department of Finance Consultation Online Pre-Budget ...
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The Certified General Accountants Association of Canada (CGA-Canada)
Response to the Department of Finance Consultation
Online Pre-Budget Consultations for
Budget 2006 and Beyond
April 19, 2006
800 - 1188 West Georgia Street, Vancouver, BC V6E 4A2 Telephone: (604) 669-3555 Fax: (604) 689-5845
1201 – 350 Sparks Street, Ottawa, ON K1R 7S8 Telephone: (613) 789-7771 extension 222 Fax: (613) 789-7772
www.cga-online.orgThe Certified General Accountants Association of Canada (CGA-Canada)
Response to the Department of Finance Consultation:
Online Pre-Budget Consultations for Budget 2006 and Beyond
Page 2 of 6
1. INTRODUCTION
The Certified General Accountants Association of Canada (CGA-Canada) appreciates the
opportunity to participate in the Department of Finance’s web-based pre-budget
consultation.
CGA-Canada is a national self-regulating association of approximately 64,000 Certified
General Accountants and students. CGA-Canada works towards preserving public trust in
financial reporting, conducts research and develops policy, contributes to standards
development and educates accounting professionals.
While CGA-Canada is proud to contribute to your deliberations, we believe that there is a
missed opportunity for broad public consultation on the budget-making process.
In years past, the House of Commons Standing Committee on Finance invited
associations, corporations and other concerned individuals to participate and share their
views about the current and future taxation, spending and other measures that they would
like to see contained in the federal budget. The Committee’s consultation process
touched at the heart of parliamentary democracy. CGA-Canada sees this parliamentary
tradition as an integral part of what we believe deserves to be a transparent and open
process. We also think transparency in budget-making is essential in holding budget
architects accountable to Canadians. To that end, we hope that pre-budget consultations
processes will revert back to the public forum of the House of Commons Standing
Committee on Finance rather than the web-based model led by the federal Department of
Finance.
The federal government plays an important role in contributing to an environment in
which businesses can grow and prosper and citizens can maximize their potential and
opportunities. Through its spending, taxation and other policies, the government
establishes the parameters within which Canadian institutions, businesses and citizens
can thrive.
2The Certified General Accountants Association of Canada (CGA-Canada)
Response to the Department of Finance Consultation:
Online Pre-Budget Consultations for Budget 2006 and Beyond
Page 3 of 6
Canada has made remarkable progress in managing its fiscal resources since the deficit
defining 1970s, 80s and early 90s. Gone are the days of soaring public debt, high interest
rates, increasing inflation and stagnant economic growth.
In its place has emerged budget surpluses, stable inflation rates, and a slimmer, more
responsible management of the public’s resources — one whose genesis was and
continues to be fueled by Canadians’ poor appetite for waste. But the coast is anything
but clear. There remains much room for improvement, particularly in light of the prospect
of inflationary pressures that emanate from well beyond our borders. A devalued U.S.
dollar on the heels of massive deficits and mounting public debt in America; disturbing
signs of a U.S. economy in turmoil — these are just some of the challenges federal and
provincial governments, individual Canadians and Canadian businesses may face in the
months ahead.
What’s more, Canadians are taxed handsomely in comparison to most of our G-7 trading
partners. According to the C.D. Howe Institute’s latest data on the state of taxation in
Canada (The 2005 Tax Competitiveness Report: Unleashing the Canadian Tiger), the
combination of federal and provincial taxes on capital ranks us second overall among 36
leading industrial economies. Given the expanding role trade plays in our national
economy, we cannot remain competitive unless changes are made. Canadians are also
heavily taxed on their income with modest earners paying as much as 60 per cent on their
income and 80 per cent on their savings.
Considering this context, CGA-Canada’s submission urges the government to:
• Spend responsibly; and
• Redefine fair, competitive taxation.
3The Certified General Accountants Association of Canada (CGA-Canada)
Response to the Department of Finance Consultation:
Online Pre-Budget Consultations for Budget 2006 and Beyond
Page 4 of 6
2. SPEND RESPONSIBLY
To ensure economic prosperity, the government must maintain growth in program
spending at acceptable levels.
We recognize and welcome the new government’s ambitious agenda focused on its five
priorities. Although new ideals and priorities are always welcomed, we caution the
government to take into account the fiscal fundamentals before acting and ensuring that
the long term fiscal health of the public finances remains a foremost concern.
CGA-Canada agrees with the assertion of the Canadian Chamber of Commerce that
program spending should never exceed growth in the economy. Prudent, competitive,
and efficient fiscal behaviour is the only means by which Canada will afford to rise to its
full potential. Recently, the government reaffirmed one of its election proposals to
commit to balanced budgets. CGA-Canada therefore asks the Government of Canada to
go one step further and not only commit to balancing all future budgets but also limit
program spending growth to three per cent per year. CGA-Canada would also
recommend that the Government of Canada:
• Commit to an ongoing reduction of the federal debt-to-GDP ratio; and
• Maintain a minimum $3B yearly contingency fund.
Moreover, we would like to congratulate the federal government on its proposed Federal
Accountability Act which will institutionalize the review of government spending as well
as increase government accountability to its citizens.
3. REDEFINE FAIR, COMPETITIVE TAXATION
Minister, your government undertook to reduce taxes on middle-class families starting
with the GST, lower taxes on small businesses, and help our farmers and resource
industries to compete in the world. We are looking to you to implement this promise.
4The Certified General Accountants Association of Canada (CGA-Canada)
Response to the Department of Finance Consultation:
Online Pre-Budget Consultations for Budget 2006 and Beyond
Page 5 of 6
Canada presently boasts the second highest effective tax rate on capital among 36
developed and leading developing competitors. Moreover, Canadians are saddled with an
uncompetitive personal income tax rate. In fact, according to the Canadian Chamber of
Commerce, the top marginal personal income tax rate in Canada averages 45.5 per cent
compared to 38.4 per cent in the United States. Most OECD countries have rates around
or below 40 per cent. In the face of this, successive federal budgets have yielded windfall
surpluses in the order of $60 billion since 1997/98. This undermines our competitiveness
in an increasingly demanding global environment and is in urgent need of remedying.
CGA-Canada calls on the government to:
• Introduce multi-year tax planning: we support the C.D. Howe Institute’s call for a
multi-year plan aimed at lowering the tax burden on individuals and businesses,
thereby fostering economic growth and a higher standard of living for all Canadians.
• Reduce personal income taxes.
• Reduce corporate income taxes: a considerable reduction along the lines of those
introduced in Ireland will position Canada as a gateway for business and international
expansion in North America.
Moreover, we fully endorse your commitment to raise the small business threshold from
$300,000 to $400,000. We expect Budget 2006 will implement this action.
A word of caution: the right balance is needed between reducing the consumption taxes
as opposed to cutting income tax rates that yield a short and medium term gain.
Although we welcome all forms of tax relief, the government should not lose sight of the
benefits that a reduction of personal and corporate income taxes may bring to Canada’s
international competitive edge.
5The Certified General Accountants Association of Canada (CGA-Canada)
Response to the Department of Finance Consultation:
Online Pre-Budget Consultations for Budget 2006 and Beyond
Page 6 of 6
4. CONCLUSION
The federal government’s primary responsibility in governing the affairs of Canada is to
provide a basic economic and social framework so that Canadians and Canadian
businesses can partake and prosper in a very competitive world. As we discovered by the
election result on January 23, 2006, the status quo is no longer acceptable to Canadians.
This government needs to look to the future with foresight and ingenuity to ensure
Canada’s position in the world.
We wish to thank you again for the opportunity to participate in your deliberations.
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