Montreal, March 18, 2019 – Tomorrow, the federal government will present its last budget before the elections expected in the fall. Contrary to what was included in the government’s fiscal framework during the last election, a substantial deficit is expected again this year. Indeed, according to Finance Canada’s projections, the budget will only be balanced in 2040.
“Unfortunately, the federal government continues to pile up deficits, while Canada has been experiencing good economic growth. It’s important to remember that today’s deficits often become tomorrow’s tax increases,” explains Mathieu Bédard, Economist at the MEI.
While the Canadian government’s financial situation is deteriorating, the American government has implemented policies that are attractive to investors. “The fiscal reforms adopted by the US government have had the effect of making Canada less competitive when it comes time for a company to decide where to develop and invest. In the long run, this risks affecting Ottawa’s tax revenues,” adds Mr. Bédard.
Moreover, media reports indicate that the government is also planning to subsidize the purchase of electric vehicles. “Quebec’s experience shows that this is a costly and totally inefficient way to reduce greenhouse gases, in addition to being a subsidy for the better-off. The federal government should reconsider. It’s really not a good idea,” says the economist.
“At a time of much uncertainty for the Canadian economy, Ottawa has to take note of the situation and restore its competitive advantage. Concretely, this means we have to get our public finances in order, reduce the regulatory burden, and lower corporate taxes—preferably before 2040!” concludes Mr. Bédard.
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