Flaherty Aces Economic Statement

Transcription

1 Flaherty Aces Economic Statement Among Highest Performance Scores Recorded; Main Reservations Not Enough Infrastructure Spending and Debt Repayment; Concern Volunteered about Fate of Manufacturing, Need for Tax Simplification, and Other Issues BDO Dunwoody CEO/Business Leader Poll by COMPAS in Canadian Business Magazine for Publication November 15, 2007 COMPAS Inc. Public Opinion and Customer Research November 15, 2007

2 1.0 Introduction Finance Minister Jim Flaherty earns top scores from the COMPAS business panel for his economic statement or mini-budget. The average school reporttype score given for the mini-budget was 74%. The Harper government has been earning higher performance scores than the previous Liberal government, and the score for the economic statement is among its highest in the 95%tile. 1 It is rare for any politician or government to earn a score higher than 70%, almost never higher than 80%. The only Conservative scores higher than Flaherty s on this mini-budget were Conservative government scores for: the budget in May, %; reducing the debt/gdp ratio in October, %; reducing program spending (same date, same score); and getting a clean opinion on its financial statements from the Auditor-General in (same date, 82%). The only federal Liberal government scores higher than the one for the current economic statement were for Paul Martin s government in respect of a promise to make municipalities GST-exempt (76%), aiding the U.S. after Katrina (76%), and making the Ethics Commissioner independent of government (82%). On specific aspects of the economic statement, top marks went for debt reduction, increasing the personal exemption and reducing the tax rate for small business. The lowest support, albeit moderately positive, was for the further cut 1 Of more 100 performance scores by the panel since the election of the Conservatives, only 5% of these scores were higher. 2

3 in the GST. Some concern was volunteered about the undesirability of the GST cut. Asked about their concerns, the two main ones to emerge were a desire for more infrastructure spending and debt repayment. Some concern was volunteered about the fate of manufacturing, the need for tax simplification, and other matters. These are the key findings from the current web-survey of the panel of CEOs and business leaders undertaken for Canadian Business under sponsorship of BDO Dunwoody LLP. 2.0 Very High Overall Score The COMPAS panel gives the Conservatives an exceptionally high schore for its economic statement, as shown in table 2. Earning a better score than 19 out of 20 scores for various aspects of the performance of the Harper government, this economic statement is bested on only four previous occasions during the Harper period: the budget in May, %; reducing the debt/gdp ratio in October, %; reducing program spending (same date, same score); and getting a clean opinion on its financial statements from the Auditor-General in (same date, 82%). The following verbatims illustrate panelists generally receptive sentiments: [I give] a B+ to the Harper Government for its tax cuts announced last week. Some advice for the next budget [would be] money for infrastructure, particularly in Canadian cities, where existing infrastructure is crumbling and new infrastructure is definitely required. 3

4 [This is] a very appropriate budget based on Canada's economic health and outlook. All tax cuts are good tax cuts! Canada needs to be able to compete globally and this minibudget will help. Corporate tax rate reductions are fine but not if the trend to sell Canadian companies to foreign ownership groups continues. A high Canadian dollar will kill many more manufacturers. [This should have been more central in] government planning. I believe Canadians of all stripes can be happy and thankful that Canada finally has a government who demonstrates care and concern for all Canadians. I think the government is headed in the right direction. Lowering tax rates will help keep our economy strong. The move towards lower taxes is needed, firstly to make us more competitive and secondly to attract talent to make sure we have enough employment as our economy grows. More immigration will make sure wages do not get out of hand while increasing the tax base. The biggest problem would be the greedy provinces which may increase their tax base as the Feds reduce theirs. This is a very short sighted policy, but not all provinces think clearly. Personal tax cuts are moving at a glacial pace and need to be accelerated across the board. The only concern I have with government spending, federal or other, is that there is too much of it. The concept of "not enough" never crosses my mind. The reduction in personal income tax lower rate is just giving back what the Liberal government had already given out. 4

5 This government is returning the excess income tax they have been collecting from its citizens. It is still not enough. They need to address the surplus amounts collecting through the Employment Insurance program. The employer is still being assessed 1.4% of the employee deduction. [The] top marginal rate needs to be substantially reduced and surtax needs to be removed. [There is] still much to be done. Table 2: (Q1) The federal government released a new economic statement or mini-budget. On a 100 point school report card-type scale, what grade would you give the economic statement as a whole? Mean Strong and Weak Elements Panelists were asked to score their agreement with specific elements of the economic statement. All received favourable responses, some far more favourable than others, as shown in tables 3a and b. The GST cut stands out as an element that receives far less favourable reaction than the others. 5

6 Table 3a: (Q2) The government announced that Canada s general federal corporate income tax rate will fall by one-third between 2007 and 2012 and become the lowest among the major industrialized economies. On a 7 point agreement scale where 1 means strongly disagree and 7 strongly agree, how much do you agree with this policy? Mean DNK Table 3b: (Q3) On a 7 point agreement scale where 1 means strongly disagree and 7 strongly agree, how much do you agree with the following announcements by the Minister of Finance? [ROTATE] Additional debt reduction of $10 billion this fiscal year, for a total of $37+ billion since January, 2004 Increasing the basic personal exemption to $ 9,600, effective January 1, 2007 and to $10,100 on January 1, 2009 Reducing the small business tax rate to 11% in 2008, a year ahead of schedule Cutting the lowest personal income tax rate Mean DNK

7 5.9to 15% from 15.5% retroactive to January 1, 2007 Reducing corporate income taxes by an additional 1% in 2008 beyond planned cuts and ending in 2012 with a rate of 15% Additional 1-percentagepoint reduction in the GST Mean DNK Reservations Infrastructure at the Top But Other Concerns Too While panelists embraced very strongly the economic statement as a whole, they nonetheless conveyed concerns about either the statement, the economy, or Canada s future. In guided questioning, concern about insufficient infrastructure spending and debt repayment emerged, as shown in table 4. In verbatim comments, a wide variety of manufacturing, investment, tax simplification, and other themes were voiced: We should not let other countries invest in ours when this is not reciprocated. Harmonization would reduce unfair business advantages of larger companies; We need to do a lot more to encourage the manufacturing sector in order to keep a balanced economy. If we just focus on resources, we are left vulnerable when they go down. 7

8 [The GST cut was unfortunate]. The country can't afford both the tax cuts and the GST cut, given the funds we need for infrastructure, health and support for the armed services. Allowing more money to flow to individuals through income tax reduction would increase the money supply and ultimately benefit the overall economic growth of the country. Decreasing personal income taxes would is a much smarter move. [I] can't figure out what Government is thinking here. The individuals that write our tax policy have a perplexing desire to complicate what could, and should be a simple tax collection system. [The] proposed GST reduction to 5% is a poor policy. Leave it at 6%. GST / VAT in Europe is typically 20%. Much progress has been made to reduce debt; however, more needs to be done so that interest expense becomes available for general funding purposes. It would be nice to have government take a leadership role and state a national objective. For example, that Canada needs 75,000 engineers, doctors and environmentalists by 2018 and tell us that we need to rally round the flag and get there. [The] economic statement was great. [The] only gap is dealing with [the] manufacturing sector crisis relating to dollars. Interest rates should be reduced to limit the climb of the Canadian dollar against the US dollar. Our manufacturing is suffering as a result of energy rich Alberta, a bad deal in the long run for Canada. 8

9 Table 4: (Q4) Which of the following, if any, is of concern to you when you think of federal government spending? Please check any that is of concern. % Not enough spending on infrastructure 50 Not enough pay down of the national debt 37 Not enough spending on health 29 Not enough spending on environmental issues 23 Not enough spending on National Defence/security 18 None of the above Methodology The COMPAS web-survey of CEOs and leaders of small, medium, and large corporations was conducted November 5 7, Respondents constitute an essentially hand-picked panel with a higher numerical representation of small and medium-sized firms. Because of the small population of CEOs and business leaders from which the sample was drawn, the study can be considered more accurate than comparably sized general public studies. In studies of the general public, surveys of 158 are deemed accurate to within approximately 7.8 percentage points 19 times out of 20. The principal and co-investigator on this study are Conrad Winn, Ph.D and Tamara Gottlieb. 9