Deloitte

Deloitte

March 22, 2011 20:46 ET

Deloitte Applauds 2011 Federal Budget for Corporate Tax Reductions; Seeks Greater Focus on Personal Tax Competitiveness

Deloitte Urges the Federal Government to Make Canada More Globally Competitive

OTTAWA, ONTARIO--(Marketwire - March 22, 2011) - In reaction to the 2011 Canadian federal budget, Deloitte's tax leaders today commended the federal government for staying the course on scheduled business tax reductions and for laying out plans to balance the budget in three years; both are key to Canada's continued global competitiveness and economic stability. But Deloitte continues to call for increased attention on measures to address the country's productivity gap and foster a thriving knowledge economy, including:

  • A more globally competitive personal tax system
  • A focused immigration strategy
  • Policies that attract world-class research and development
  • Incentives to encourage investment in early stage, innovation-industry development

"The continued support for the federal corporate tax reductions highlighted today send the right signals globally and will help attract businesses and jobs to Canada," said Albert Baker, Deloitte's Tax Policy Leader. "Corporate tax rates will continue to fall in the OECD countries for the foreseeable future, and Canada has taken the appropriate steps to keep pace."

However, Deloitte expressed concern over the lack of attention to Canada's personal tax system in the 2011 federal budget. "Canada also has to be attractive to highly mobile, global workers. That need could have been better addressed in this budget in order to affect our nation's productivity growth," Baker pointed out. "Globalization is driving international mobility, and Canada must ensure that our personal tax system attracts those who can contribute the most to our economy."

In a pre-budget letter to Finance Minister Jim Flaherty last October, Deloitte recommended increasing the threshold at which the top rate of personal tax begins and a reduction of the top rate of personal tax. "Phasing in these measures over the next four to six years would help Canada keep up with the United States, our major competitor for talent," said Baker. "Keep in mind that these tax measures, along with an immigration strategy focused on attracting knowledge-based industry professionals and entrepreneurs would increase the total amount of personal tax collected over time." 

Measures to close gaps in Canada's innovation ecosystem absent in today's budget

In this year's budget, Deloitte was also looking for bold steps to close gaps in Canada's innovation ecosystem, particularly the country's challenge in financing early-stage innovation. "Without adequate investment, Canada is at risk of exporting or stifling a generation of made-in-Canada global companies," said Mark Noonan, Tax partner.

Noonan also said that knowledge-based industries will continue to grow and Canada can capture growth by claiming global leadership in the life sciences, alternate energy, clean technology, digital media and other yet-to-be-discovered sectors. In its pre-budget letter to the finance minister, Deloitte recommended the introduction of an angel investor tax credit aimed at supporting early stages of innovation. "This is the logical starting point for the improvement of Canada's innovation ecosystem and is the incentive that will have the greatest impact on growth," Noonan said. Other measures championed by Deloitte to support the country's innovation are a later-stage credit for corporate venture investors and direct investment, including matching grants. 

Federal budget silence on retirement savings a missed opportunity

While the government has acknowledged the importance of encouraging Canadians to save for retirement in order to prevent an economic crisis in the future, the 2011 federal budget has shied away from introducing policies to affect the desired level of saving. "There are a number of effective policy instruments in the government's tool box that would help the country move in the right direction on retirement savings, such as enhanced up-front income deduction, higher savings plan thresholds, reduced taxation when savings are withdrawn and an increase in the pension credit," said Baker. "We would like to see these policies in legislation soon."

In an April 2010 presentation before the Standing Senate committee on Banking, Trade and Commerce, Deloitte proposed a flow-through of the tax benefit of certain forms of income (dividends and capital gains) when withdrawn from Canadian retirement vehicles. "We also recommend a once-per-lifetime option providing immigrants with an initial year's RRSP contribution so they do not begin paying taxes with zero contribution room," Baker added.

The future of tax

"Deloitte believes that good tax policy can have a significant effect on long-term national prosperity. In the context of a global economy in flux, a future in which Canadians continue to enjoy our high living standard is not certain. Deloitte supports tax measures that help Canada remain globally competitive, and that foster the high-value, high-growth industries at home. We would like to see additional measures that help Canada achieve this."

Deloitte's summary of 2011 federal budget highlights

Deloitte's online budget reaction on Deloitte.ca

Deloitte tax leaders will offer additional views on the budget through videos to be posted to www.thefutureoftax.ca by March 23. As well, Deloitte's highlights and insights into the budget will be published on www.deloitte.ca.

About Deloitte Canada's tax practice

Deloitte works with governments, industry, and clients around the world to contribute to well-functioning markets and economies. As Canada's largest tax practice, we are focused on understanding the key drivers of economic prosperity, including productivity, competitiveness, and innovation. We believe that tax policy is a powerful policy instrument, and as such, we are committed to fostering a public policy discussion with Canadians concerned with improving our nation's global competitiveness. For further information on Deloitte's tax practice, visit www.deloitte.ca and for further information on the firm's tax policy vision visit www.thefutureoftax.ca.

Deloitte provides a full suite of tax services to public and privately owned clients from 44 offices across Canada. Known for its industry-leadership, Deloitte's Canadian tax practice was named a 2011 tier one tax practice by the International Tax Review for the second consecutive year. With an integrated global tax practice operating in more than 150 countries, Deloitte delivers the best of both worlds: World-class capability and deep local knowledge to assist clients wherever they operate.

About Deloitte

Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 7,600 people in 57 offices. Deloitte operates in Québec as Samson Bélair/Deloitte & Touche s.e.n.c.r.l. Deloitte & Touche LLP, an Ontario Limited Liability Partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Contact Information

  • Deloitte
    Jeanne d'Arc Umurungi
    Media Relations Manager
    Direct: 416-874-3518 or Cell: 416-434-8789
    jumurungi@deloitte.ca