Flaherty calls Ontario 'last place' to invest

Last Updated: Saturday, March 1, 2008 | 2:36 PM ET

The Canadian Press

Federal Finance Minister Jim Flaherty launched a post-budget blitz Friday by lecturing provinces on the need to lower taxes and taking a swipe at Premier Dalton McGuinty for making Ontario "the last place" in Canada to start a business.

In a speech to the Halifax Chamber of Commerce, Flaherty challenged provinces to help him create a Canadian "brand" for business taxes by reducing their take of corporate profits.

"I've challenged the provinces to drive down their business tax rates to 10 per cent by 2012," he said during his speech.

Flaherty said by combining that with a 15 per cent federal rate, he would "brand our country globally as a 25 per cent business tax jurisdiction."

He later praised British Columbia for its recent budget commitment to achieve the lower corporate tax rate, and acknowledged Alberta has already achieved his goal.

However, he had some tough words for his home province of Ontario, where a Harris-Decima poll released Friday suggested the public supports McGuinty's view that Ottawa is giving short shrift to troubled manufacturers.

The poll found that 56 per cent of those surveyed supported the premier's view that Flaherty is too focused on the oil-and-gas industry.

Asked about the poll, Flaherty responded that the Liberal premier "doesn't get ... that you must reduce your business taxes over time."

"Their business taxes are the highest in Canada. If Mr. McGuinty thinks that's good for the manufacturing sector in Ontario, he's wrong."

Flaherty said the policies are doing "long-term" damage to the province's economy.

"It discourages investment in the province of Ontario," he said. "If you're going to make a new business investment in Canada, and you're concerned about taxes, the last place you will go is the province of Ontario."

'Partisan nonsense'

Ontario Finance Minister Dwight Duncan had his own sharp words for Flaherty, who once held the province's purse strings under its previous Tory government.

"My hope is that Mr. Flaherty will stop this partisan nonsense and start acting like a real finance minister, start acting like a leader in this country and try to work with the real engine of the Canadian economy," Duncan said in an interview in Toronto.

"I think he's an embarrassment to his government and I think that we should all try to tone down the rhetoric and start finding ways we can work together."

Ontario and Ottawa have been at each other's throats for weeks over how to manage Ontario's struggling economy. Flaherty has been pushing for more tax breaks for businesses while the McGuinty Liberals have appealed for more direct help to the province's beleaguered manufacturers and unemployed workers.

Steve Erwin, a spokesperson for Duncan, said the province has a corporate income tax rate of 14 per cent, which is in the middle of the pack among Canadian provinces.

He noted that the federal rate of corporate tax is currently at 19.5 per cent.

"We're already lower than the federal income tax rates, even after their rates are phased in over the next four years," he said.

Hard on Atlantic Canada

Alexa McDonough, the NDP critic for Atlantic Canada, said eastern Canadians are getting upset with the federal Conservatives' emphasis on tax cuts that benefit the wealthy.

"If all of the stimulus is going into oil and gas in Alberta, it's a double hit.... It's a huge vacuum cleaner taking resources and dollars away from our area and into Alberta," she said.

Cathy Shaw, a spokeswoman for Nova Scotia's Finance Department, said smaller provinces "would love to reduce corporate taxes" at the rate suggested by Flaherty, but they simply can't afford to without more federal assistance.

"You have to have the fiscal capacity to do that and, in order to balance the budget and meet our debt commitment, we won't have the fiscal capacity to make extensive tax reductions in our upcoming budget," she said.

McDonough also argued that Flaherty's budget is particularly hard on Atlantic Canada because it strips $38 million from the Atlantic Canada Opportunities Agency, the main federal economic development agency in the region.

The federal minister responded that overall, Atlantic Canada will receive millions more in 2008-09 in increased federal spending.

"There's more money for policing, more money for infrastructure, more money for research into carbon storage and recapture, then there's the flow-through tax credit that helps the mining business," he said.

Flaherty disputed assertions that ACOA is receiving less money, saying that some of the agency's budget is now flowing through the Department of Infrastructure, and that $40 million for the restructuring of the Saint John shipyard has been delayed until next year.

"The richest regional development fund in Canada is ACOA. I hear that as I travel throughout Canada," he said.