Article content continued

Meanwhile, rising interest rates and mounting debt have ended a run of windfalls from declining debt service costs, that Morneau and his predecessors have used to cut taxes and boost spending.

Trump Effect

Morneau is delivering his budget with the latest round of NAFTA talks underway in Mexico City. There have been widespread calls from the private sector for Canada to move to increase business competitiveness.

“I would like to see the competitiveness of Canada remain at the forefront,” Royal Bank of Canada Chief Financial Officer Rod Bolger said in a telephone interview last week. “I don’t think tax reform is going to be in there,” he said, adding the federal government should focus on creating a strong economy.

The Business Council of Canada, representing chief executives of many of the country’s biggest firms, warned “Canada must respond now” by, for example, cutting business taxes, allowing business investments to be more easily written off or punting planned changes to taxation of investments held in private corporations.

The Canadian Manufacturers and Exporters industry group also called for a tax cut and a business investment tax credit. “Similar to the U.S., we believe that Canada and its provinces should be looking at a range of tax reforms to boost investment and growth,” Dennis Darby, CME president and chief executive officer, said in a letter on behalf of several manufacturing groups.

Tom Caldwell, chairman of Caldwell Financial Ltd. and CEO of Urbana Corp., said he’d rather see Morneau balance the budget than cut taxes to compete with the U.S. “Less is more,” he said. “As far as governments go my expectations are always fairly low and I’m rarely disappointed.” Morneau said this month he’d “carefully consider” U.S. tax changes, while saying he thinks Canada’s tax system is already competitive.