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Canadian Chamber Addresses Budget 2023 Before Senate Committee

Canadian Chamber Addresses Budget 2023 Before Senate Committee

On May 18, 2023, we addressed concerns about Budget 2023 and its lack of a clear strategy to attract investment for sustainable economic growth in Canada before the Standing Senate Committee on National Finance.

During his appearance before the Standing Senate Committee on National Finance on May 18, 2023, the Chamber’s Senior Director of Fiscal and Financial Services Policy Alex Gray voiced concerns about Budget 2023 and its lack of a clear strategy to attract investment for sustainable economic growth in Canada.

Gray highlighted the ongoing disruptions caused by the pandemic, the need for improved trade-enabling infrastructure, streamlined regulatory processes for major projects, and a simplified tax code. He emphasized the importance of addressing these issues to enhance Canada’s economic competitiveness, support job creation, and foster a business-friendly environment. Gray also called for a comprehensive strategy that eliminates investment disincentives, focuses on pro-business policies, and addresses the skills and talent requirements of Canada’s workforce.

His full remarks are available below.

Budget 2023 presented the government with an opportunity to enable and sustain the conditions necessary to grow our economy and raise future generations’ standard of living. Some elements are laudable. Taken as a whole, however, we see Budget 2023’s lack of a decisive strategy to attract the investment required for strong, sustainable growth as a missed opportunity to ensure Canada’s economic competitiveness in perpetuity.

Indeed, the disruptions caused by the pandemic continue to reverberate through the economy. According to Statistics Canada, Canadian real GDP in the fourth quarter of 2022 was 6.5 per cent less than the pre-COVID trend would have indicated. That is more $180 billion per year in lost output – if that lost output were its own industry, it would be Canada’s third largest contributor to GDP behind real estate and manufacturing.  

Additionally, our international competitors continue to outpace us as Canada experiences low growth and weak labour productivity. Indeed, Budget 2022 [sic] noted that labour productivity growth in Canada has slowed from about 2.7 per cent in the 1960s and 1970s to less than 1 per cent today. Correcting this trend requires government to create a strategy that eliminates the disincentives that drive away investment while focussing on pro-business policies for the benefit of all Canadians.

However, strategy without execution is pointless, and there are many obstacles for Canadian businesses to overcome. We cannot hope to attract private sector investment without pragmatic, predictable policies.

Start with our inadequate trade-enabling infrastructure. The status quo impedes our ability to get goods like critical minerals and agriculture products from where they’re produced to the ports of export and beyond. We need several measures, such as twinning rail capacity, increasing industrial lands around airports and ports, and investing in warehousing and bridge capacity. As with much of the Canadian economy, we need to move faster to evaluate and approve projects.

Indeed, the way we regulate major projects is badly broken. Projects for developing and exporting energy and critical minerals take so long and are burdened with so much unpredictability that they die not from government decisions, but from its inability to make and implement them.

Additionally, our convoluted tax code continues to drag on our economic competitiveness. More recently, the introduction of several sector-specific taxes introduces unwelcome volatility and unpredictably to the Canadian business climate.

In BIA 1, we are particularly concerned about the proposition of yet another such tax – the proposal to alter the GST and HST definition of a financial service in the Excise Tax Act to exclude payment card network operator services. First, as with the digital services tax, we oppose the retroactive nature of this proposal, which would allow the CRA to assess taxpayers as far back as 1991. Canadian businesses cannot plan and invest for the future with the ever-looming possibility of retroactive taxation.

Additionally, this new tax will decrease Canadian competitiveness while increasing the costs of doing business in Canada. In general, other jurisdictions exempt their payment card network operators from similar taxes. By defying this best practice, the government would be placing Canada’s financial services sector at a competitive disadvantage relative to its international peers. Further, increasing the cost of card acceptance would force businesses to weigh shouldering a new fee or passing it along to consumers.

Finally, with over 800,000 job vacancies in Canada, we also hoped to see the Budget focus more sharply on the skills and talent our workforce will need now and into the future. Measures such as enhancing the Express Entry program, improving interprovincial and foreign credential recognition practices, and reducing seniors’ disincentives to work would cost little while helping business address a core challenge.

If these exhortations for progress on regulation, taxation, and skills sound familiar, it is perhaps because they were singled out as impediments to growth in the Advisory Council on Economic Growth’s final report in 2017. We had hoped that Budget 2023 would contain several of these low- or no-cost growth measures. Canadian business is eager to partner with government to create a strategy to meet the moment. Given the headwinds we face, that is needed more than ever. Thank you.

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