Canada's business executives, not usually a tax-friendly bunch, have acknowledged that it may be necessary for Ottawa to boost taxes in order to get rid of the deficit.
Almost three out of five of the senior executives who responded to the latest C-Suite survey agree that in order for the federal government to balance its books, some form of tax increase may be necessary.
While executives are almost unanimous that the recession is over and economic growth is under way, they are worried about how the government is going to deal with the stimulus-induced deficit. Half don't believe Ottawa will be able to balance the books in five years, and that's why so many think a tax increase is necessary.
"I think it is in the country's best interest in the short term to suffer a little bit and perhaps pay some higher taxes in order to try to get things back under control and back on an even keel," said Chad Ulansky, chief executive officer of Metalex Ventures Ltd., a diamond exploration firm based in Kelowna, B.C.
Mr. Ulansky was one of 151 top executives who responded to the C-Suite survey, which was conducted just after federal Finance Minister Jim Flaherty tabled his budget in early March.
The survey was conducted for Report on Business and Business News Network by Toronto research firm Gandalf Group.
While almost two-thirds of the executives surveyed said they had a favourable view of the budget, half of respondents said it did a poor job of reducing the deficit and almost two-thirds oppose running a deficit through 2015.
Mr. Ulansky, who believes consumption levies are the fairest form of taxation, said a temporary boost to the GST might be the best way to get the country out of the red - partly because it would involve the fewest administrative headaches.
Other tax increases would also be acceptable to Mr. Ulansky. "I'd be willing to pay a little more on my income tax" and even a boost in corporate taxes might be palatable for the short term, he said. "If we could somehow have consensus around the country to all suffer through a bit of higher taxes for the next five or 10 years, we'll be a far stronger country on the other side of it."
Philip Deck, executive chairman of Waterloo, Ont.-based software firm MKS Inc., said he, too, feels a tax hike may be necessary, and raising the GST makes the most sense.
Personal and corporate taxes are now at levels that give Canada a valuable competitive advantage, so it would be a mistake to increase them, he said. But boosting the GST would not hurt competitiveness at all, he added.
Mr. Deck acknowledges, however, that Ottawa is very unlikely to bite the bullet and raise the GST because that would be politically unpalatable. Any attempt to get the government to move on this issue "will fall on deaf ears," he said.
Other executives are less in favour of taxes and believe they should be a last resort.
"I'd hope that the government would have the discipline to cut back on their expenditures as the economy improves and pay down the money they spent stimulating the economy," said Bruce Waterman, chief financial officer at Calgary-based fertilizer giant Agrium Inc.
He is sympathetic with Ottawa's go-slow approach to restraint and cutbacks, because there is no certainty yet there won't be a second economic dip.
"I understand why they are being cautious [with spending cuts]," he said. "But there will come a time when they will have to be much more rigorous in terms of the restraint and the cutbacks, as the economy picks up and the recovery becomes quite strong."
Otherwise, he said, "we're going to build ourselves a structural deficit problem that is only going to be solved by higher taxes."
Executives polled in the C-suite survey are torn on the issue of spending cuts. Forty-eight per cent said the proposed freeze on the federal government's departmental spending - which is supposed to save $17-billion over five years - is the right amount of restraint. Forty-one per cent, however, said it is not enough.
Peter Lacey, CEO of Cervus Equipment Corp., a Calgary-based company that owns agriculture equipment dealerships in Western Canada, said he thinks the government is being extra cautious in its projections, and the deficits might not last for five years.
