Budget draws mixed reaction from business

Daniel MacEachern
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Jo Mark Zurel, chairman of the St. John's Board of Trade.

The provincial budget got a lukewarm response from business leaders Tuesday afternoon, who criticized the increase in the province’s net debt.

“Overall, we’re disappointed,” said Jo Mark Zurel, chairman of the St. John’s Board of Trade. “These are times when our oil revenues are peaking, and in the budget for 2011-2012, we’re seeing an increase in our debt by about $459 million. There was a small surplus, but when you take into account all the capital spending as well, our debt is rising quite substantially.

“Looking beyond 2012, the forecast for 2013 and ’14 is for revenues to decline and expense to continue to grow, so we’re going back into deficits again, so we expect that debt will continue to grow through those years as well.”

Bradley George, Newfoundland and Labrador director of provincial affairs for the Canadian Federation of Independent Business, said his group is giving the provincial budget a C. He cited a disappointing lack of tax relief, specifically in the payroll tax, which the federation advocates eliminating altogether.

Marshall announced the government will increase the payroll tax exemption from $1 million to $1.2 million, a move it estimates will reduce taxes for 845 businesses and remove 90 businesses from the tax rolls altogether, but George said that’s not enough.

“We were lobbying hard to get the payroll tax cut, and we think what the government has done by increasing the threshold to $1.2 million, it’s a token tax cut.

“It removes only 90 businesses from the tax rolls, and with labour costs going the way they are, it’ll only be a short while before they’re all back on the tax roll.”

Richard Alexander, executive director of the Newfoundland and Labrador Employers’ Council, said there's too much spending growth, adding he’s troubled that the government can’t seem to get debt under control.

But Finance Minister Tom Marshall defended the amount of planned debt repayment in the upcoming budget — $400 million — and said business groups have their own spending demands.

“They want us to pay down the debt. They also want us to eliminate the payroll tax, which would cost $63 million,” he said. “Everybody wants something. I’m the guy who has to balance it all.”

That balancing act was praised by Peter Collens of the Institute of Chartered Accountants of Newfoundland and Labrador.

“We ask them to do three things, basically: we ask them to pay attention to the debt, which they’ve done to the extent they can. “

“We ask them to constrain their expenditures; they’ve done that to a certain extent.

“We’re looking at about five per cent, 4.9 per cent increase in net expenditures. GDP is only increasing by three percent, so whether or not that’s sustainable is something the government has to pay attention to. And we ask them to remain competitive on the tax front, and we’re pleased that they’ve kept the tax measures that they’ve introduced in the past, so overall we’re pleased with it.”

The budget also allocates $15.4 million over the next three years for employer incentives to hire apprentices, particularly from under-represented groups, along with another $7 million to modernize labs and industrial shops at the College of the North Atlantic.

Susan Sullivan, minister of Innovation, Trade and Rural Development, touted an additional $8 million to help improve broadband Internet availability in under-served areas of the province, calling it a “strong investment in the future.”

But details on what that $8 million would be spent on were vague. Sullivan said the government will be seeking partnerships with the federal government as well as the business community to make servicing smaller communities more attractive to Internet service providers, and added the $8 million wouldn’t be used for subsidies.

Still, the move garnered praise from Paula Sheppard, executive director of the Newfoundland and Labrador Organization of Women Entrepreneurs, who said lack of Internet access in some rural areas of Newfoundland means some of their programs are out of the reach of some of the province’s budding businesswomen.

“One of our focuses is to bring regional training out, and you know Newfoundland is such a diverse (place) — hard to get to some of these smaller places that we’re working with,” she said. “We’re doing some online training, and we did find that when we’re offering online training for some of our members, clients, women who want to start businesses, they couldn’t take advantage of some of those opportunities.”



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Highlights For Small- and Medium-Sized Businesses

•    $71 million in tax credits and incentives

•    $29 million to the Business Attraction Fund

•    $12.8 million for investment in the Small and Medium-sized Enterprise Fund

•    $6.1 million for the Ocean Technology Sector Strategy

•    $5 million in the Regional/Sectoral Diversification Fund

•    $2 million in the Oil and Gas Manufacturing and Services Export Development Fund

•    $1.7 million for the Air Access Strategy

•    $1 million for the Business and Market Development Program

Organizations: College of the North Atlantic.Susan Sullivan, Board of Trade, Canadian Federation of Independent Business Newfoundland and Labrador Employers Institute of Chartered Accountants of Newfoundland and Labrador Newfoundland and Labrador Organization of Women Entrepreneurs

Geographic location: Newfoundland and Labrador

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Recent comments

  • EmmaCay
    January 31, 2012 - 12:59

    real estate is the perfect place to be. I love helping families find the perfect place to live and start a fresh life.

  • Bewildered business consultant
    April 21, 2011 - 13:54

    If I knew that my salary could be cut by 30-50% if oil prices go to $70, or if oil production declines sharply, I'd be alot smarter about my investments in infrastructure. And if you think oil won't go down to $70 again, just wait until the China real estate bubble pops. High commodity prices and CHMC kept us out of the financial meltdown...

  • Mount Pearl Guy
    April 20, 2011 - 10:52

    To Oh Boy, Why not look at this in a different way, you have a house that's falling down in disrepair, you have student loans etc, but you get a windfall from an accident. Do you pay off loans or fix your house? Long term your best bet is to invest in your infrasturcture.

  • Oh Boy
    April 20, 2011 - 07:53

    We are so screwed. I knew a person who came into a small fortune because of a car accident, luckily he didn't suffer any serious injuries. His compensation was enough to pay-off all his bills and get himself out of the hole. Instead he blew it on toys. Today, he's on welfare. I can't help but think that's us when the oil jackpot is gone.