By Andrew Thomson | UPDATED November 21, 2018 8:06pmET


The federal government plans to offer $14 billion in tax relief for Canadian business investment over the next five years as a response to U.S. corporate tax cuts, part of an economic update that promises a stronger push to diversify Canada’s trade beyond North America, help for the struggling media industry, and higher deficit projections.

Finance Minister Bill Morneau has proposed faster write-offs for capital investments through 2027, with some businesses slated to immediately write off 100 per cent of manufacturing and clean energy equipment.

Other businesses will be able to triple their current first-year write-off rate, according to the fall economic statement.

Combined, those measures would cause the average overall tax rate on new business investment to fall from 17.0 per cent to 13.8 per cent, according to Finance Canada.

WATCH: Finance Minister Bill Morneau with CPAC’s Peter Van Dusen

But is it enough to offset the anxiety in Alberta and Saskatchewan over market access and historically-low prices for crude oil? Should there have been more targeted policies aimed at the energy sector?

Morneau defended his government’s approach, telling reporters this afternoon that the write-off changes will help capital investment in western Canada.

WATCH: Finance Minister Bill Morneau holds news conference ahead of speech on Parliament Hill

The measures also amount to a federal government trying to head off the challenge posed by Trump administration’s corporate tax reform, according to former parliamentary budget officer Kevin Page.

“They’re using their additional fiscal room in a strong economy,” Page told CPAC.

 

TRADE

The government will also inject $1.1 billion over the next six years to increase Canada’s overseas exports by 50 per cent.

As for trade within Canada, the government promises to work with provinces and territories to harmonize rules and regulations for transportation and trucking, alcohol, food regulations, construction, and building code regulations.

 

MEDIA

Meanwhile, the government is pledging nearly $600 million in tax relief for Canada’s struggling media sector over the next five years.

News organizations would be able to set themselves up as non-profit organizations and receive charitable donations. There’s also a new refundable tax credit for news organizations to support labour costs. And a temporary and non-refundable 15-per-cent tax credit for subscribers to Canadian digital news media.

 

THE FISCAL BALANCE

In all, the economic update includes nearly $17.6 billion in new spending or tax cuts over the next six years.

The federal deficit is slated to hit $18.1 billion in 2018-19. That’s lower than the projection in last spring’s budget — but higher shortfalls are now forecast in subsequent years: $19.6 billion in 2019-20, $18.1 billion in 2020-21, $15.1 billion in 2021-22, $12.6 billion in 2022-23, and $11.4 billion in 2023-24.

An austerity program to erase the deficit would also erase Canada’s economic growth, Morneau said, defending the decision to remain in the red after the 2015 Liberal platform promised balance before 2019.

“What we’ve done over the past three years has been positive for Canadians,” Morneau told reporters in Ottawa, pointing to the falling debt-to-GDP ratio as a better indicator of fiscal health.

That number is now expected to fall from 30.9 per cent to 28.5 per cent by 2024.

Here’s how the debate sounded on Parliament Hill this afternoon:

WATCH: Finance Minister Bill Morneau addresses House of Commons

WATCH: Conservative finance critic Pierre Poilievre reacts to update

WATCH: NDP Leader Jagmeet Singh speaks to reporters

 

REGULATION

The update also promises action to reduce red tape and outdated federal regulation. That includes:

  • allowing “the use of personal electronic devices on board aircraft,” to improve the competitiveness of Canadian airlines;
  • giving Canadian beer companies more flexibility with ingredients and brewing processes;
  • allowing more mainstream use of drone technology.

The government would also bring forward annual legislation to clean up outdated regulations.

 

OTHER HIGHLIGHTS

  • Canadian countermeausures to U.S. steel and aluminum tariffs have resulted in $597 million of revenue as of Nov. 1.
  • The Strategic Innovation Fund will receive an extra $800 million over five years, funded in part by that tariff revenue.
  • The Financial Consumer Agency of Canada will review how banks handle consumer complaints.
  • The Social Finance Fund will receive another $755 million over 10 years, with more details expected in early 2019.
  • An additional $62.6 million is being pledged over five years for Nutrition North Canada.
  • Avalanche Canada is receiving a one-time endowment of $25 million to expand services in northern BC, Quebec, Newfoundland and Labrador, and Yukon.
  • $135 million is being promised to support B.C. and Quebec fisheries, including the Pacific salmon population.

WATCH: Bloc Québécois finance critic Gabriel Ste-Marie

WATCH: Green Leader Elizabeth May

WATCH: People’s Party Leader Maxime Bernier


Last month the parliamentary budget officer projected the deficit at $19.4 billion this year, rising to $21.3 billion in 2019-20.

Those numbers were based on accounting changes to the government’s operating expenses and public debt charges. Expenses were higher than expected, the PBO reported. But so too, was personal and corporate income tax revenue.

Notably, the PBO estimated a 10-per-cent chance of a balanced budget or surplus by 2021, versus 30 per cent in 2023.

The opposition Conservatives again hounded Morneau and Prime Minister Justin Trudeau this week over the deficit — and when Canadians could expect a balanced budget.

Here’s howprevious government and PBO forecasts projected the deficit, beginning with the 2015 Liberal pledge to balance the budget before the 2019 election: 

Looking Back

The 2017 fall economic statement promised $7.7 billion in new spending between 2018 and 2023: $5.6 billion to index the Canada Child Benefit to inflation (starting in July 2018), and $2.1 billion to enhance the Working Income Tax Credit.

The 2016 version added $31.8 billion to projected federal deficits over the subsequent five years, pledged the creation of the Canada Infrastructure Bank, and set aside money to attract foreign investment and high-skilled workers.