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Advantage Canada: Progress Toward a More Competitive Canada


The global economy has changed significantly since Advantage Canada, the Government’s long-term plan to increase prosperity, was released. As discussed in Chapter 2, liquidity and credit concerns have led to turmoil in global financial markets; the U.S. and world economies have entered recession; oil prices reached historic highs and then plummeted; and the Canadian dollar has endured an unprecedented period of volatility. The need for a clear and strong long-run economic vision for Canada is now more apparent than ever.

With Budget 2009, the Government is providing strong and immediate support to the Canadian economy during the current global downturn. The measures proposed in this budget go well beyond near-term economic support. They also deepen the actions already taken by the Government and further the implementation of Advantage Canada. Budget 2009 also proposes two structural measures—the introduction of a Canadian Securities Regulator, and reforms to Canada’s competition policy—that will deliver lasting benefits to the Canadian economy.

Implementing Advantage Canada: Significant Progress to Date

Over the previous three years the Government has implemented significant elements of Advantage Canada, including:

  • Reducing the federal debt by $37 billion.
  • Reducing taxes in every way the Government collects revenues, and ensuring that Canadian families, students, workers, seniors and businesses large and small continue to keep more of their hard-earned money.
  • Introducing the Working Income Tax Benefit to make work pay for low-income Canadians, and the Tax-Free Savings Account to improve incentives to save.
  • Reducing corporate income taxes so that Canada will have the lowest statutory corporate tax rate in the G7 by 2012 and the lowest overall tax rate on new business investment in the G7 by 2010.
  • Restoring fiscal balance between the federal government and the provinces and territories.
  • Introducing a federal science and technology strategy and new investments in people, equipment and research.
  • Investing in education and training, including long-term support of post-secondary education and a modernized Canada Student Loans Program.
  • Streamlining Canada’s immigration system to better respond to the needs of the Canadian labour market.
  • Enhancing and expediting infrastructure funding.

Deepening Canada’s Five Advantages

In Budget 2009, the Government is acting to support the Canadian economy and Canadian jobs in the near-term. However, the measures in this budget also further advance Canada’s five advantages. Specifically, this budget helps to ensure that Canada maintains its economic advantages that will make it more competitive and help promote long-run economic growth.

Tax Advantage—Further Reducing the Tax Burden on Canadians and Canadian Businesses

Budget 2009 proposes over $20 billion in new tax relief over 2008–09 and the following five fiscal years, increasing the total relief for individuals, families and businesses from measures introduced since 2006 to about $220 billion over this same period.

New personal income tax relief will provide immediate benefits, particularly for low- and middle-income Canadians through increases in the amount of income that all Canadians can earn before paying federal income taxes or before being subject to higher tax rates, and increasing the Age Credit. Effectively doubling the Working Income Tax Benefit will also make work more rewarding for about 1.5 million low-income Canadians, and encourage them to find and retain a job.

The temporary accelerated capital cost allowance rate for investment in manufacturing or processing machinery and equipment, and the temporary 100-per-cent CCA rate for investment in computers will contribute to boosting Canada’s productivity through the faster adoption of newer technology and by encouraging the retooling needed by businesses to emerge even stronger and better equipped to compete globally as the economy recovers.

Additional tax relief for small businesses, through an increase in the amount of small business income eligible for the reduced federal tax rate of 11 per cent to $500,000, will further enhance and foster the growth of this vital part of the Canadian business landscape.

Building on progress in creating a Tax Advantage—establishing a business tax advantage, reducing taxes on saving, supporting low-income workers and generally reducing taxes, particularly for low- to middle-income individuals— a key future priority is to make Canada’s personal income tax system more competitive for highly skilled workers. In a globalized marketplace, taxes influence decisions of where to live and work. A more competitive personal income tax system will help Canada attract and retain these workers, to drive innovation and raise standards of living for all Canadians.

Knowledge Advantage—Fostering Skills, Training and Education

To succeed in the economy of tomorrow, Canada must have the best-educated, most skilled and most flexible workforce in the world. That is why the initiatives launched in this budget are not only about helping Canadians through a difficult economic period—they are also about making more training support available so that Canadian workers can develop the skills and expertise needed to take advantage of the new opportunities that will emerge as the economy recovers.

Budget 2009 launches the Canada Skills and Transition Strategy. This strategy will provide significant financial resources to a range of programs that will help Canadians weather the economic storm, and provide them with the necessary training to prosper in a changing economy. Resources are being provided for short- and long-term skills upgrading, investments to improve the labour market outcomes of under-represented groups, and to allow workers more time to find the right job and get the training they need.

Infrastructure Advantage—Immediate Action to Build Infrastructure

This budget accelerates and expands recent historic federal investments in infrastructure with almost $12 billion in new infrastructure stimulus funding over two years. These investments will provide immediate and effective economic stimulus, and help mitigate the impacts of the global economic recession. But they will also provide long-term benefits to all Canadians. This budget supports Canada’s traditional physical infrastructure capital, including roads, bridges, and public transit facilities, all of which are vital to facilitating the seamless movement of goods, services and people across the country. The budget also dedicates significant new funding to developing Canada’s knowledge infrastructure. These investments will go toward modernizing universities and colleges, building world-class research infrastructure, expanding health information systems, and improving access to broadband services in rural Canada. Together, these investments will enhance Canada’s future by increasing Canada’s productivity and competitiveness, cleaning up the environment and strengthening communities as vibrant centres of commerce, learning and recreation.

Accelerating and expanding planned infrastructure spending means that Canada will have the world-class infrastructure necessary to thrive in the 21st century now rather than later.

Entrepreneurial Advantage—Making Product and Financial Markets More Efficient

Budget 2009 proposes two structural reforms to further the longer-term goals of Advantage Canada. The introduction of a Canadian Securities Regulator will make Canada’s securities regulation system more effective and efficient, thereby better serving the needs of investors. Implementing recommendations from the Competition Review Panel headed by Red Wilson will encourage investment in Canada while protecting consumers and safeguarding Canada’s national interests.

Canada’s First Ministers are also working in cooperation to improve Canada’s business environment. At their recent meeting on January 16, First Ministers agreed to work together to amend the Agreement on Internal Trade to enhance labour mobility within Canada, and to cut red tape on infrastructure projects in order to flow funds as quickly as possible.

Fiscal Advantage—Protecting Canada’s Fiscal Integrity for Future Generations

By reducing debt and carefully managing spending, the Government has been able to put in place measures—both in the October 2007 Economic Statement and this budget—to support the economy without putting at risk the country’s long-run fiscal position.

This is in sharp contrast with many other large industrialized countries where the increases in deficits and debt will require corrective actions—either tax increases or spending reductions over the medium-term.

This country’s strong fiscal position means that Canadians can be assured that the spending measures and the tax reductions announced in this budget are affordable.

It also means that the steps taken by the Government to restore fiscal balance and ensure long-term, growing transfer support to provinces and territories are sustainable. This long-term growing support means that all provinces and territories have the resources they need to provide essential public services, including health care. It also means that all governments are in a position to work together on current economic challenges.

Canada’s fiscal advantage will be preserved and enhanced. The Government will repay the deficits incurred in this budget to put our debt burden firmly on a downward track. Protecting this fiscal advantage will allow Canada to effectively deal with the important demographic changes the country will face in the coming decades.

Heading into the current economic crisis, Canada had the best fiscal track among G7 nations. As Canada emerges from the current crisis, the broadening and deepening of the five advantages in the Government’s long-term economic plan resulting from the measures in this budget mean it will be even better placed among G7 nations to face the future challenge of population aging.


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