Canada’s 2023 Budget Must Address Declining Productivity: Chamber of Commerce

With business confidence in Ontario at a record low, the province’s chamber of commerce says the federal government did not do enough with its proposed budget to spur productivity.

“Following the turbulence of the last few years, now is the time to see measures that provide businesses with predictability and spur productivity,” said Ontario Chamber of Commerce (OCC) President Rocco Rossi in a release on March 27, the day before the new federal budget was tabled.

Although the OCC praised some aspects of the budget once it was announced, the OCC said in a release on March 29, “Budget 2023 lacks a cohesive strategy for economic growth. More than ever, Canada needs a clear framework that will drive productivity and attract business investments in the face of major economic headwinds and competition with global peers.”

It criticized the government for making targeted investments only in key sectors. The 2023 budget focuses heavily on the low-emission energy sector.

Tax System

A more competitive tax system, along with a better regulatory climate, is needed in Canada, said OCC. “Canada continues to lag in its ability to attract foreign direct investment [and] drive domestic business growth and innovation.”

While the budget offers tax incentives to corporations in the low-emission energy sector, it makes little mention of other changes to corporate taxation.

It mentions joining other countries in a push to ensure a global minimum corporate income tax of 15 percent for large multinational corporations. The United Kingdom and European Union countries, among others, have implemented this, the budget plan says. This minimum along, with a domestic “top-up tax,” would be effective in Canada after Dec. 31, 2023.

Loans, Labour, Inventory

Businesses are grappling with labour shortages and debt loads following the pandemic, OCC says. It wanted the new budget to include loan forgiveness for small businesses and to provide them with more supports. Budget 2023 also did not make adequate plans to address the labour shortage, OCC said.

In its 2023 economic outlook report, OCC found 53 percent of organizations surveyed said they had labour shortages. About 68 percent said their respective sectors are facing shortages.

Economic confidence is at a low, with 48 percent of respondents saying they are not confident in the outlook, compared to 39 percent in 2021 and 46 percent in 2020.

In 2020, inventory shortages were the problem (with Ontario businesses at a record low inventory of -$14.6 billion). The problem now, OCC says, is that replenished inventory might become too old to sell or obsolete, with an expected decline in economic activity and consumer spending.