Meeting ongoing commitments should be key in next federal budget
Meeting targeted immigration levels through 2023 will help alleviate existing skilled labour shortages across many Canadian industries (Getty Images/Teera Konakan)
With this year’s federal budget soon to be released, CPA Canada is drawing attention to its pre-budget recommendations*.
The recommendations, initially released in August, focus on areas such as fiscal responsibility, sustainability, human capital, digital economy, tax and anti-money laundering (AML). The key considerations are outlined below.
ENACT FISCAL ANCHOR
With an expected deficit in fiscal 2020/21 of C$354.2 billion (up from C$39.4 billion in 2019/20), according to the federal budget 2021, CPA Canada recommends the government replace its debt-to-GDP target with a fiscal anchor framework.
This falls in line with the International Monetary Fund’s warning earlier this year that Canada needs a medium-term fiscal anchor to guard against a potential weakening of credibility in the fiscal framework.
“A fiscal anchor framework will provide a series of metrics that ensure sustainability of government finances, while giving confidence to the public, businesses and investors that the deficit and debt will be addressed,” says CPA Canada’s chief economist David-Alexandre Brassard.
Additionally, as economic activity continues to pick up as we move out of the pandemic, a comprehensive spending review (as promised in 2019) should be conducted and an ongoing annual savings target should be set, CPA Canada notes.
KEEP TAX SIMPLE
Though CPA Canada continues to advocate for a multi-phased, comprehensive tax review as a part of Canada’s long-term growth plan, in the short-to-medium term it recommends adhering to a principled approach to tax policy and administration to ride out economic disruption and facilitate the recovery.
Income tax rates, personal or corporate, should not increase, it says. In the event it becomes necessary to increase tax revenue, the government could consider a broadening of the tax base, simplifying the GST systems and rebalancing taxation toward consumption taxes (to align with other G7 countries).
Tax policy adjustments should be designed and implemented in a way that cause minimal disruption to Canadian taxpayers and businesses, with changes carefully reviewed and open to public consultation, says FCPA Bruce Ball, vice-president of taxation at CPA Canada.
Amid an economic downturn like no other, there have been massive changes to tax policy—which include extending the GST/HST to certain foreign-based digital economy businesses and ongoing developments relating to a digital services tax and a global minimum corporate tax. CPA Canada recommends the federal government should also allow corporations to claim losses on a consolidated basis to support economic recovery.
CLARIFY PATH TO NET ZERO
Canada has pledged to achieve a net-zero emissions economy by 2050, a commitment that has been legislated in the Canadian Net-Zero Emissions Accountability Act. The government has also committed to reduce emissions by 40 to 45 per cent below 2005 levels by 2030, something recently reinforced by Prime Minister Justin Trudeau at COP26, the United Nations climate summit held in Glasgow.
CPA Canada is committed to assisting businesses to better understand the challenges and opportunities of the net-zero commitment and to plan for the transition. However, there is clarity needed in how our net-zero goal will be achieved.
“A common understanding of what ‘net zero’ means from a Canadian context and what the transition will look like from sector to sector, as recommended by the Expert Panel on Sustainable Finance, is needed,” says Gord Beal, vice-president of research, guidance and support at CPA Canada.
While the 2021 federal budget unveiled several programs to assist industry to adopt cleaner technologies, more of this type of support will be required to transition to net zero. Research and development, as well as improved regulatory efficiency, are also required to advance emissions reduction technologies in heavy, energy-intensive industry and to make Canada a market leader in clean energy.
“It has never been more important for government policies and investments to be directed toward building the resilient future economy that Canada needs to remain competitive and prosperous,” says Beal.
BLOW THE WHISTLE ON MONEY LAUNDERING
With pan-Canadian efforts underway to enhance beneficial ownership transparency, CPA Canada urges the government to address the lack of a national whistleblowing framework for the reporting and protection of whistleblowers who identify and escalate public interest concerns, including with respect to AML violations. In early 2021, of note, the US enhanced its whistleblower program specific to AML that includes protections and awards.
“Canada must continue its work to strengthen its anti-money laundering regime including with respect to whistleblowing,” says FCPA Michele Wood-Tweel, CPA Canada’s vice-president, regulatory affairs. “We urge the government to address the need for a national whistleblowing framework with protections for escalating public interest concerns that includes AML violations.”
FULFILL IMMIGRATION TARGETS
COVID-19 restrictions brought Canadian immigration to an abrupt halt stalling thousands of in-process applications. According to the Toronto Star, as of July 31, there were more than 748,000 people with pending temporary residence applications; almost 562,000 waiting for permanent residence and the citizenship backlog sat at about 376,000.
Alongside addressing this backlog, CPA Canada encourages the government to uphold its commitment to welcoming up to 421,000 immigrants annually between now and 2023 to make up for this delay and loss of newcomers, while also ensuring the necessary support services and resources are in place to accommodate their entry.
“Immigration plays an invaluable role in growing Canada’s labour force and economy,” says Sarah Anson-Cartwright, director, public affairs for CPA Canada. “It is a key ingredient to addressing the labour shortages that exist across many sectors and to maintaining our workforce in the face of an aging population.”
EYE THE DIGITAL FUTURE
The pandemic has accelerated our digital path, with businesses and consumers alike embracing technologies more readily and enthusiastically than before.
In reaction, Canada must continue to implement the actions identified in its digital charter, says CPA Canada, to keep up and remain globally competitive in the digital economy.
In particular, the Digital Charter Implementation Act or an equivalent piece of legislation, needs to be re-introduced to keep up with provinces already drafting or modernizing, their own privacy acts and the EU’s expected ruling over whether Canada’s privacy legislation meets GDPR requirements.
“Ensuring trust in the digital economy is a critical pre-requisite for Canada to capitalize on its opportunities,” says Beal. “How data is governed, how privacy is protected and how competition is made fair are challenges that need to be addressed with some urgency.”
GET THE DETAILS
Read CPA Canada’s full pre-budget 2022 recommendations here. Learn more about CPA Canada’s commitment to achieve net zero, stay updated on the most pertinent AML rules and developments and, if tax is your focus, keep up to date on the latest developments with CPA Canada’s tax blog.
*This article was updated on March 28, 2022 to include a mention of the upcoming 2022 federal budget.