Press release The 2003-2004 federal budget: Timid on the Board of Trade's action priorities
Montreal, February 18, 2003 The Board of Trade of Metropolitan Montreal feels that although the budget presented today by Canadian Finance Minister John Manley demonstrates sound fiscal prudence in today's global context, it is still timid regarding the priorities identified by the Board of Trade.
A reading of the Estimates documents reveals that, beyond the large amounts allocated for health care and the gradual elimination of the capital tax sought by the Board of Trade, very few budget measures are likely to have an immediate and significant impact on the competitiveness of Canadian companies. In addition, we deeply regret the relative lack of resources devoted to the country's economic engines - its major urban centers, includingMontreal, declared Benoit Labonté, permanent president of the Board of Trade.
Last December, on behalf of its 7,000 members, the Board of Trade presented its pre-budget submission to the Honourable John Manley. In that document, it identified two vital issues for the metropolis and the Canadian economy: the competitiveness of companies and the funding of major cities. For these two issues, concrete measures applicable over the short term were presented.
The competitiveness of businesses
At a time of stiff international competition and the globalization of trade, companies must be fully competitive if they wish to take their place on the world stage. For this reason, the Board of Trade made the following proposals to Mr. Manley last December:
that the federal government completely and immediately eliminate the large corporations tax or tax on capital given that this tax measure is extremely detrimental to business productivity;
that the federal government adopt budget measures to support exporters, such as the following:
a tax credit for businesses taking steps to develop their export business;
a mechanism to finance salaries for new positions created specifically to develop international markets;
the creation of a government-backed fund aimed specifically at financing the export projects of low- and medium-technology SMBs;
participation in the financing of sector-based consortiums of companies and government organizations focused on international business.
Among the measures announced today, the elimination of the capital tax over five years is undeniably an excellent initiative. Nevertheless, insofar as this tax discourages investment, hinders the competitiveness of our companies, and in some respects stifles job creation, the minister does not seem to share our sense of urgency with regard to the need to catch up quickly to the other OECD countries which, with the exception of Germany and Japan, have no similar tax, stressed Labonté. The Board of Trade, 60% of whose members are SMBs, also notes the gradual reduction of the SMP tax rate.
The absence of specific measures to encourage SMB exports is another great disappointment for the Board of Trade. The success of export support services offered by our branch the World Trade Centre Montréal shows us the relevance of supporting these companies in their efforts to penetrate foreign markets. With 45% of the GDP linked to exports, we believe that additional efforts in this area are essential, he continued.
The funding of cities
Although there is strong agreement concerning the importance of the social and economic vitality of large cities particularly the C5 cities (Canada's five largest cities: Calgary, Montreal, Toronto, Vancouver, and Winnipeg) upper governments have limited investments at the municipal level in recent years due to tighter budget constraints. The needs and challenges facing large urban centers continue to grow, but cities lack sufficient, diversified revenue sources to deal with them. Over the short term, the Board of Trade recommended:
that the federal government either exempt municipalities from paying GST or agree now to refund it fully;
that the compensation in lieu of taxes paid by the federal government and its crown corporations to municipalities equal 100% of the local taxes on the property value of all buildings owned by the government.
The last Speech from the Throne raised many expectations regarding massive investments in cities on the part of the Canadian government. This new budget does not meet those expectations. In no way, on the day after the budget, do cities have additional financial resources in their coffers. Yet with a measure like the full reimbursement of GST, it would have been possible to increase city revenues in a recurring and foreseeable fashion without the federal government encroaching on areas of provincial jurisdiction, declared Labonté.
The injection of just $300 million per year over the next ten years in the construction of infrastructures is clearly insufficient given the obvious needs of Canadian cities. With about 10% of the Canadian population, if Greater Montreal received its relative share of these new amounts, this would represent a mere $30 million annually. The Board of Trade again stresses the urgent need for cities to be able to count on increased, recurring, and foreseeable revenues over the long term, concluded Labonté.
The Board of Trade of Metropolitan Montreal has more than 7,000 members. Its mission is to be the leading group representing the interests of the Greater Montreal business community. Its objectives are to maintain, at all times, relevance to its membership, credibility towards the public and influence towards government and decision-makers.
Vice-president, Strategies and communications
Board of Trade of Metropolitan Montreal
Tel.: (514) 871-4000, ext. 4010