Investment Managers Want Reform in the Upcoming Federal Budget
Contact:
Jason Clemens, Director of Fiscal Studies,
The Fraser Institute, (604) 714-4544 Email: jasonc@fraserinstitute.caRelease Date: 7 February 2000
VANCOUVER,BC>>> An overwhelming majority of Canadian senior investment managers say the federal government must undertake meaningful reform in its upcoming budget in order to deal with the economic problems facing the country. The results from The Winter 1999/2000 Survey of Senior Investment Managers, released today by The Fraser Institute, indicate the need for tax cuts, debt reduction, and reduced spending in the upcoming budget.
Fully 100 percent of survey respondents (responsible for over $192 billion in assets under administration) say that complacency in the next federal budget will result in either significantly negative, negative, or moderately negative consequences for productivity, the brain drain, living standards, and long-term unemployment in Canada. Ninety-seven percent of respondents indicate similarly negative consequences for economic growth.
Recommendations: Tax Cuts, Debt Reduction, and Reduced Spending
Fifty-six percent of survey respondents indicate that current and future surpluses should be allocated to debt reduction and tax cuts. Thirty-three percent of respondents prefer tax cuts exclusively.
In addition, 97 percent of survey respondents either strongly agree, agree, or somewhat agree that the federal government should reduce overall spending.
Focus on Personal Income Taxes
Senior investment managers also indicate that reducing and reforming personal income taxes should take priority over corporate income tax reform and reduction. With 10 indicating a score of highest priority, respondents rated personal income tax reduction highest at 9.5, followed by reform of the personal income tax system at 8.2. Corporate income tax reduction followed closely with a score of 8.0. Eliminating capital gains taxes received a score of 7.6, while corporate income tax reform received a score of 7.5.
"The overwhelming emphasis is on reducing the tax burden for both individuals and corporations, as opposed to immediate reform of the tax system itself."
"It is worth noting that the expected surpluses over the next five years, which amount to $95 billion, would enable the federal government to finance many of the proposed reductions and reforms," says Jason Clemens, Director of Fiscal Studies at The Fraser Institute.
Debt Reduction
Ninety-four percent of respondents indicate that they either strongly agree, agree, or somewhat agree with the federal government's policy of allocating unused contingency reserves for debt repayment.
However, eighty percent of respondents would like to see the federal government go further and adopt a more stringent program of debt reduction - along the lines of the Alberta government, which requires a certain amount of each year's surplus to be allocated to debt reduction. "This plan has been extraordinarily successful in reducing the province's debt load," notes Clemens.
Canada Pension Plan: Not Out of the Woods Yet
Only 31 percent of senior investment managers surveyed believe that the reforms implemented in 1997, including one of the largest tax increases in Canadian history, will solve the long-term problems of the Canada Pension Plan. Choice and privatisation dominated the list of further reforms, followed by the option of opting-out of the Canada Pension Plan, and fully 39 percent support complete privatisation of the CPP.
Minister of Finance Approval Plummets
The approval rating for the Minister of Finance, Paul Martin has fallen significantly, almost equalling the all-time low recorded in the 1999 Spring Survey. Fifty-eight percent of respondents rated Mr. Martin's performance in the portfolio of finance as either very good or good. None indicate he is doing an excellent job.
Bank of Canada Approval Drops
The year long upward trajectory of approval ratings for the Bank of Canada were reversed this quarter with overall approval for the Bank of Canada dropping to 86 percent from its previous level of 97 percent. It is interesting to note that the heightened concern with inflation has occurred concurrently with the drop in approval for the Bank of Canada.
About the Survey
Surveys were mailed to senior investment officers at 130 investment management firms across Canada. Thirty-six responses were received between October 8, 1999 and November 26, 1999. Statistical confidence levels were not assigned to the results.
Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.
For further information contact:
Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca
info@fraserinstitute.ca
4th Floor, 1770 Burrard Street, Vancouver, BC, Canada, V6J 3G7
Tel: (604) 688-0221 Fax: (604) 688-8539 Book Orders: 1-800-665-3558 ext. 580
You can contact us at the above email address for any comments or information requests. Please report any dead links or technical problems.