The Buildings and Skyline of Ottawa

Canada’s investment industry is disappointed with the 2018 federal budget, but insurers and credit unions are pleased with a couple of the proposals.

Commenting on Budget 2018, released on Tuesday, the Investment Industry Association of Canada (IIAC) says the government isn’t doing enough to support economic growth and appears to be underestimating the downside risks.

The government “has not taken sufficient steps to ensure last year’s strong economic rebound and job creation is sustained,” the IIAC warns in a news release.

Ian Russell, president and CEO of the IIAC, says, in a statement, “Despite limited fiscal maneuverability, the government could have signalled positive support for capital formation and business expansion across the country by introducing several specific budget measures. These measures would have bolstered business confidence and increased investment spending.”

In particular, the IIAC is disappointed that, once again, Ottawa is ignoring the association’s call to introduce a tax break to encourage investment in small and medium-size businesses. The IIAC also maintains that a comprehensive review of the Canadian tax system is needed, particularly in light of recent U.S. tax cuts.

The industry trade group also isn’t pleased with Budget 2018’s proposals concerning the treatment of passive income in large private corporations. The proposed measures are unlikely to “address the fundamental concerns the IIAC has with the government’s proposals, nor do they acknowledge these companies as an important source of venture capital and the fairness of their effective tax rates,” the IIAC says.

The one budget item that the IIAC is happy with is the government’s commitment to review the treatment of corporate pension plans in the bankruptcy process — a promise that aims to address a threat to retirement security for certain workers and pensioners.

Private sector pensions a concern for the government

Although the investment industry might not be thrilled with Budget 2018, other parts of the financial services sector are giving a thumbs-up to certain proposals. For one, the insurance sector says it is pleased with the government’s pledge to establish a national advisory council on pharmacare, which will examine the affordability of prescription drugs.

“We support additional efforts by the government to ensure those who currently don’t have supplemental drug coverage benefit from coverage in the future and we look forward to sharing our ideas on how best to do this,” says Stephen Frank, president and CEO of the Canadian Life and Health Insurance Association, in a statement.

“The right solutions will control costs to taxpayers, ensure group health plans are not put at risk, and make sure that patients have the medicines they need, with no affordability barrier,” he adds.

The credit union sector is happy that the use of words such as “bank” and “banking” will not be off limits to it, as federal financial regulators had previously proposed. The Canadian Credit Union Association says it is “obviously pleased” with the government’s pledge to provide flexibility to credit unions in using those terms.