Budget gets mixed reviews

by Jessica Guenard-Valiquette on March 9, 2010

Thursday’s federal budget has been greeted with enthusiasm, indifference and suspicion, depending on the industry.

Financial Executives International Canada (FEI Canada), says it is appropriate that the government has turned its attention to reducing the deficit, but it is troubled by the lack of a concrete plan.

“While we applaud the government’s move to start curbing the burgeoning deficit, we are concerned with the lack of specificity on how the deficit is going to be reversed,” said Michael Conway, chief executive and national president, FEI Canada. “It is critical that Canada continue to maintain good fiscal management that will help to ensure our ability to withstand future downturns.”

FEI says its members are pleased that the government has confirmed it will continue its schedule of corporate tax reductions and measures to reduce the administrative and compliance burdens of the tax and tariff system.

“In a competitive world beset by economic turmoil, Canada must foster a business environment that encourages investment and capital accumulation to ensure economic growth and increased opportunities for future generations,” said Conway.

The Investment Industry Association of Canada (IIAC) called the budget “prudent”, but is disappointed at the lack of additional incentives to stimulate investor spending, especially in the small business sector.

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  • Federal Budget 2010
  • “The measures in the Extraordinary Financing Framework previously introduced by government were timely and effective and have contributed significantly to improved credit and economic conditions,” said Ian Russell, president and CEO, IIAC. “While the economic recovery continues to take shape, conditions have not yet normalized and additional incentives would be helpful to encourage private sector demand.”

    Banking
    The Canadian Bankers Association had a similar view.

    “On the one hand, we’re pleased to see measures that will help all businesses and contribute to Canada’s long-term economic growth,” said Nancy Hughes Anthony, president and CEO, Canadian Bankers Association. “Unfortunately, there are some proposed new measures that were introduced today that lead us to question whether they will have the intended benefits for consumers and bank customers.”

    In particular, the CBA questions the wisdom of proposed measures such as:

    • reducing the maximum cheque hold period from seven to four days;
    • prohibiting negative option billing in the financial sector; and
    • standardizing the calculation and disclosure of mortgage prepayment penalties.

    Insurance
    The Canadian life and health insurance industry had praise for the budget.

    “We believe this budget reflects a balanced, responsible approach to the road to recovery,” said Frank Swedlove, president of the Canadian Life and Health Insurance Association.

    “The life and health insurance industry is committed to working actively with the government in facilitating a stronger and more efficient retirement system, in reviewing Canada’s payments system and in considering changes to the dispute resolution framework,” added Swedlove.

    Venture Capital
    Canada’s Venture Capital and Private Equity Association (CVCA) was also happy with the budget, particularly with the removal of the Section 116 obstacle to foreign investment in the venture capital and private equity industry.

    “Many CVCA members, as well as a large number of individuals and organizations, have been actively encouraging the federal government to eliminate this section of the Income Tax Act which has had a dampening effect on cross-border venture capital and private equity transactions,” said Gregory Smith, president of the CVCA. “Its removal provides an important signal to foreign investors that Canada welcomes their contributions to growing companies and employment.”

    Public sector
    Despite dodging an apparent bullet regarding defined benefit pension plans, the union representing public servants is threatening to “mobilize” against cuts in public sector programs and operations and will attempt to persuade Parliament to reject the budget.

    “This budget is a clear attack against quality public services,” said John Gordon, the national president of the Public Service Alliance of Canada. “The freeze on public-sector operation budgets, combined with an increase in deregulation and free trade, will further weaken the economy and hurt Canadians.”

    Gordon argues that freezing the operation spending of government departments will mean significant reductions to the quality of public services that Canadians need in an economy that is still undergoing a recovery.

    “This runs counter to the government’s stated goal of job creation and economic growth,” said Gordon. “With this budget, the government is compromising the food we eat, the health of our environment, transportation safety and the public services that the people in Canada rely on everyday.”

    This article is courtesy of www.benefitscanada.com

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