Good morning. Thank you for the opportunity to address your panel.
I am a volunteer member with the Saskatchewan Chamber of Commerce, and my role is co-chair of the investment and growth committee. In my day job, I'm a certified general accountant in public practice, so I live and breathe the things you guys and ladies talk about on a day-to-day basis.
I know you have already heard from the Canadian Chamber of Commerce. What we want to do today is focus on some of the issues that are most important to the members of the Saskatchewan Chamber of Commerce.
First and foremost, the small business corporate tax threshold was originally set at $200,000 years and years ago. The increases to $300,000 and now $400,000 are welcome, but we believe the federal level needs to at least match the $500,000 recently announced by Saskatchewan—and if you can go higher than that, that's good.
The reason is that harmonization between personal, corporate, and dividend tax rates means that companies try to bonus down to the small business limit. Any time that happens, it leaves the door open for those funds to leave the business forever. Small and medium-size enterprises are the drivers for new employment, and profits left in the company translate into new property, plants and equipment, and investment in working capital to fund continued, stable growth.
However, overall we need to recognize the globalization of business and the investment climate. Corporations that pay the top corporate tax rates tend to have the most options as to where to locate their operations, and we have to pay attention to their decisions.
Corporate tax cuts are a proven method of economic growth. The Republic of Ireland is a prime example of a nation that used corporate tax cuts to bolster and diversify its economy. A reduction in corporate tax will translate into increased investment by companies currently in operation in Canada, as well as attracting new business from other parts of the world.
Personal income tax cuts previously announced have been suspended in favour of reducing the GST. While tax cuts are always welcome, reductions in personal income tax would be a preferable focus, more so than a reduction in the GST.
More needs to be done to make sure the income tax system is competitive on the continental and global level, and now is not the time to stop the reductions. Global decisions on where to locate head offices, for example, are frequently based on personal tax rates. In Saskatchewan, we have seen many senior executives or larger organizations relocated to lower tax regimes in the United States. This also means a loss of support staff jobs.
Now is the best time to resume personal tax rate decreases, as we continue to see substantial surpluses in the federal budget. Currently the highest tax bracket starts at $113,000 in Canada. In the United States, the same bracket doesn't start until $159,000 U.S. An increase to $150,000 for the top bracket in Canada, we believe, would help to retain or even bring high-income earners to Canada. And we also need to look at the other tax brackets to ensure we're being competitive. We don't want to just focus on the over-$100,000.
Federal program spending rose at annual average rates far in excess of the inflation rates for the fiscal periods between 2000 and 2004. When there are surpluses, it's very easy to let spending get out of control, but taxpayers expect a better performance from their government. A long-term program spending plan needs to be developed in order to ensure that maximum potential for economic growth is reached. This means investing in areas where productivity and economic growth will result, such as research and development.
And finally, debt reduction must be a priority in the budget process for Canada. The debt-to-GDP ratio has fallen, but Canada needs to continue with the reductions.
As a very final point, we urge the federal government to ensure that the surplus in the employment insurance program is used for the reduction of premiums, not for expanding benefits beyond the original intent. This intent was, of course, to provide insurance against unintended periods of unemployment.
Mr. Chairman, thank you.