Ottawa to reveal budget on February 18

(February 7, 2003) Federal Finance Minister John Manley will bring down his first federal budget on Tuesday, February 18. Manley made the announcement today in the House of Commons.

Economists predict that the surplus for the current fiscal year should come in ahead of previous forecasts, perhaps as high as $6 billion. That would give Manley some room to manoeuvre as he juggles healthcare spending and debt repayment.

Under the terms of a deal reached between Ottawa and the provinces earlier this week, the federal government will spend $34.8 billion on healthcare over the next five years. The agreement includes an immediate injection of $2.5 billion this year.

“The top priority has been healthcare and continues to be,” Manley said today in Ottawa, adding that defence and foreign aid will also play a part in the budget.

Next year’s surplus could reach $9 billion, experts say, allowing Manley to consider additional spending on social programs and tax reduction.

There are reports that $1 billion will be earmarked to expand the National Child Benefit program.

Investors could also get a break. The House of Commons finance committee has recommended raising the annual RRSP contribution limits to $19,000 from $13,500, indexed to inflation.

Industry associations, including Advocis and the Investment Dealers Association, have been lobbying for increased RRSP limits for years, noting that among the major Western economic powers, Canada has the lowest tax-supported retirement system. In pre-budget submissions, both organizations recommended raising limits to $27,000.

No significant new tax measures are expected, but there are hints Ottawa might consider phasing out the federal capital tax or reducing the capital gains tax to encourage venture capital investment.

In its pre-budget submission, the IDA recommended that Ottawa reduce the capital gains tax from 50% to 25% on shares of small publicly traded companies, a measure the association says would increase small-business funding in public markets at a negligible cost to the government.

Manley may also take a second look at the taxation of resource companies. While the federal corporate income tax is being lowered to 21% from 28%, resource companies were excluded from the rate reduction because of the favourable tax deductions they already enjoy.

Filed by Doug Watt, Advisor.ca, dwatt@advisor.ca