Canadian opposition Liberal Party Leader Michael Ignatieff said he may reduce the country’s budget deficits faster than Prime Minister Stephen Harper if he wins the May 2 election, because he won’t be handcuffed by the cost of lowering corporate tax rates.
Ignatieff said he plans to devote a “serious” amount of the savings from reversing income tax cuts for companies such as Suncor Energy Inc. to deficit reduction. Other money would go to investments in education and health, he said.
“All we are saying to corporate Canada is we have a very serious deficit,” Ignatieff, 63, said in an interview with Bloomberg News aboard the campaign plane yesterday. “We have to get this country back to some fiscal discipline.”
Ignatieff and Harper have opened the campaign by trading barbs over who would best manage the economy, which was the fastest growing among Group of Seven nations in the fourth quarter. Ignatieff has said corporate tax reductions, combined with spending on military jets and prisons, shows how Harper’s government has “squandered” the country’s fiscal strength. Harper has said Liberal spending promises would force the government to raise taxes, a move that could undermine the recovery.
Could Be Popular
“They have to show they have a firm grip on the economy,” said David Mills, who teaches Canadian history at the University of Alberta in Edmonton, in a telephone interview. Ignatieff’s plan to boost the tax burden to companies while avoiding increases for families could be popular, he said, adding the pledge is “coming in the middle of tax season” for households who file by the end of April.
Conservative Finance Minister Jim Flaherty earlier legislated reductions in the corporate income tax rate, lowering it by 1.5 percentage points to 16.5 percent at the start of this year, and scheduling a further cut to 15 percent in 2012. Canadian Chamber of Commerce President Perrin Beatty has lobbied lawmakers to keep the cuts to sustain business confidence. The chamber’s board of directors includes executives from Research In Motion Ltd. and Royal Bank of Canada. (RY)
Canada was already competitive on business taxes, Ignatieff said, adding that previous Liberal governments cut the rate to 19 percent from 28. Restoring the previous rate would boost revenue by C$6 billion ($6.2 billion) annually, Ignatieff said, and he has earmarked C$2 billion of that to programs to support education and people who care for sick relatives.
Ignatieff said he may allocate more than C$1 billion of the remainder to lowering the budget shortfall. “It has to be a serious contribution,” he said. “We don’t want to take all of the six billion and then reallocate it, we want to use some of it for deficit reduction.”
Ignatieff, running his first campaign as opposition leader, repeated a pledge not to raise taxes on families or small companies. “We have to make sure the tax system is fair, we have to make sure that everybody is paying.” He said he will present a specific spending cost program within a week.
“We can’t have everything that we want and not pay for it,” Denise Rackus, a 72-year-old retired teacher, said after attending the opening Liberal campaign rally in an Ottawa district held by the New Democratic Party. Harper’s tax cuts are “very popular with some people, not with me,” she said.
James Sharp, a 24-year-old student who was working in a computer lab at a college where Ignatieff announced plans for education funding yesterday, said any money would help with a debt he predicts will be C$52,000 when he finishes a four-year degree.
Sharp plans to vote for the Green Party because he doesn’t want a “two-party system” of Liberals and Conservatives, adding he would consider voting Liberal if he thought other voters in his traditionally Conservative area were preparing to replace the incumbent.
“The Liberals are OK, they are like the lesser of two evils,” he said. Harper is “very interested in concentrating power in his own office” and “I like the idea of more parties spreading the power,” he said.
Canada’s dollar has gained 0.9 percent to 97.23 cents per U.S. dollar since March 24, the day before elections were triggered by the government’s defeat in the House of Commons. Yields on Canada’s two-year bonds have risen 8 basis points to 1.79 percent over that time, while the Standard & Poor’s/TSX Composite Index has fallen 0.1 percent to 14,022.03 in Toronto.
The Liberal leader has spent the opening days of the campaign in some of Canada’s largest cities -- Ottawa, Montreal, Toronto and Vancouver -- where the party’s support is concentrated. In contrast, Harper’s Conservatives draw much of their support from rural areas, particularly in western Canada, including Alberta, Harper’s home province.
Alberta is developing oil sand deposits that hold an estimated 170 billion barrels of recoverable oil, second only to Saudi Arabia’s 265 billion barrels, according to the Canadian Association of Petroleum Producers. Those deposits have spurred investments such as TransCanada Corp.’s proposed pipeline to deliver crude oil to the Gulf Coast.
Ignatieff said oil companies want “clear rules” that “drive them towards environmental sustainability.”
“Let’s work with the provinces to get the rules clear,” Ignatieff said. “We have to create stronger incentives for the oil sands to drive the technology towards CO2 reduction, ponds reclamation, more efficient water use.”
Ignatieff also said the government needs better rules on foreign investment, after Industry Minister Tony Clement started a review following his government’s rejection of BHP Billiton Ltd.’s $40 billion bid for Potash Corp. of Saskatchewan last year.
“We need foreign investment to build the country,” Ignatieff said. Regulations should be transparent and “require foreign companies to make specific undertakings with respect to jobs” and communities, he said. The current law’s requirement for a transaction to bring a “net benefit” to Canada needs “a clear definition” he said.
Regarding London Stock Exchange Group Plc (LSE)’s February bid for the owner of Canada’s main bourse, TMX Group Inc. (X), Ignatieff said it needs a careful review so Canada’s expertise in financing mining and energy companies isn’t lost. “These are assets that create lots of jobs,” he said.
Ignatieff said that Bank of Canada Governor Mark Carney did a good job helping the country out of a recession, and he would accept whatever recommendation the bank makes about potential changes to its mandate for inflation control. Under the agreement that expires at year-end, the central bank runs monetary policy with a 2 percent inflation target.
“I’m a big fan of Mark Carney,” Ignatieff said. “I’m also a big fan that he gets to make the call.”
To contact the reporter on this story: Greg Quinn in Vancouver at email@example.com.