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Federal Government Budget Essay


Introduction

In Canada, the federal government and other provincial and municipal governments are confronting difficult choices as they face persistent deficits. They are facing tough decisions on the means of raising revenue, balancing the budget, and modes of taxation and taxation regimes.

These issues continue to affect the individuals in authority and those out of power as well as other particular groups. It is a long recognized fact that the existence of deficits in the budgets has implications for future generations through debt accumulation. In the latest budget that was tabled by the finance minister, the challenges mentioned above are evident.

In the budget, Jim Flaherty who is the finance minister forecasted the revenue to be raised in the coming financial year to be at $263.9 billion (Bernier and Thompson 350).

This amount is however not enough to cater for the expected government spending for the same financial year, which is projected to be $282.6 billion dollars (Bernier and Thompson 350) meaning that the budget had a deficit of about 18.7 billion dollars, which will have to be supplemented through other forms.

This essay focuses on the federal government of Canada’s latest budget for the financial year 2013-2014. Specifically, it attempts to evaluate some of the sectors within it. It also provides recommendations on some of the measures that would be taken to improve the areas under focus.

The Budget

As stated above, the federal budget was tabled on a Thursday March 21st 2013 by the finance minister. The major highlights of the budget included the provision of a grant for job training, the elimination of CIDA, financial provision for manufacturers, and the cut of tariff for sport equipment (Smyth and Trofymow 1089).

In the budgetary speech, the finance minister noted that the budget contained the “smallest increase in discretionary spending n nearly 20 years” (Cockrell and Meyer 14). The allocation of funding to the constituent provinces would be maintained in this budget meaning that the respective governments would make almost similar budgetary allocations as in the previous financial years.

In the job training that the budget highlighted, the aim of the federal government was to equip the populace with the required working experience to encourage productivity. In this program, the federal government would not be contributing the whole amount that is required per individual but the regional governments and the employers providing their share of the money.

According to the minister, the grant “could provide $15,000 or more per person for short-term training where only $5,000 would be contributed by the federal government with matching contributions coming from provinces and employers” (Bernier and Thompson 350).

The provision of the budgeted amount of money for job creation met the target set in the year 2006. The Economic Action Plan 2013 that is the budget dedicated to the provision of support for the youth through job creation (Smyth and Trofymow 1089). The aim is also to “generate employment, support development, and maintain a lasting opulence (Bernier and Thompson 350).

The creation of a job grant was just one of the aspects of the budget that was aimed at mitigating the effects of unemployment in the country. Apart from the job creation aspect of the budget, the other component is the doing away with the Canadian International Development Agency (CIDA) in a move that the minister described as worldwide synergy (Bernier and Thompson 350).

The department of foreign affairs and international trade will take up the functions of the CIDA, which are mainly essential, in the developing countries in the east and Africa (Bernier and Thompson 350). These will then form the Department of foreign affairs, Trade and development (Farrar 370).

The main beneficiaries from the budget will be manufacturers who will enjoy a tax relief. According to the minister, the relief will total to $1.4 billion dollars over a period of four years, which will assist in the buying of equipment in these industries and in the acquisition of new machinery (Bernier and Thompson 350).

Reduction of tariffs will also occur on the items perceived to be expensive in the market, and these include baby clothing and sporting equipment. The move to reduce the tariffs is aimed at lowering the retail prices of items such as golf clubs and ice skates so that consumers can afford them and participate more in thee sports.

This move has, however, been widely criticized due to the failure of these cuts to translate to lower commodity prices, which have occurred in the past. Some of the reductions in tariffs have led to minute reductions in the respective trade items. This has not been of benefit to consumers.

Another approach to the budget was the reduction of the tax loopholes that have in the past led to the loss of the expected revenue. According to the minister, “the country will discard unplanned levy benefits, which permit some people to circumvent duties by engaging in the malpractice of taking funds offshore (Farrar 368). The government will put measures such as paying people for the provision of information on tax evaders.

The strategy, according to the minister, will promote payment of tax without evasion and end up increasing the revenue for subsequent budgets. For a critique of the budget, a selection of one of the sections is important. The next section looks at the attempt by the federal government to assist businesses in the country be better in the global market by the provision of several incentives and competitive grounds.

Budget Analysis and Critique

As stated above, the federal budget had a whole section dedicated to helping manufacturers and businesses in the country to be competitive and successful on the global economy (Bernier and Thompson 350). According to the finance minister, some of the measures to be taken include the provision of tax relief for the manufacturers.

The measure requires “$1.4 billion in tax relief for Canada’s manufacturing and processing sector over the 2014–15 to 2017–18 periods through a two-year extension of the temporary accelerated capital cost allowance for new investment in machinery and equipment” (Farrar 368).

The provision of tax reliefs in the manufacturing industries is an effective way of encouraging the output from these areas of the economy. In areas where it has been tried, positive results have been achieved (Cockrell and Meyer 14). However, this move is also accredited with the poor performance of the sectors as the competition leads to the market leaders who are better placed edge out the smaller companies.

Some of the other measures include the provision of “$920 million to renew the Federal Economic Development Agency for Southern Ontario (FedDev Ontario) for five years, starting on April 1, 2014” (Bernier, and Thompson 350).

This move has been widely regarded as a positive outcome of the budget and one that is likely to see investment in the region improve and allow the competition within the trade partners that is the federal government and the regional and provincial government. The creation of integrative trade policies in other areas of the world has resulted in the growth of local economies where these measures are applied in the past and hence a positive characteristic.

In support of this policy, the budget also provided for “$200 million for a new Advanced Manufacturing Fund in Ontario for five years, starting on April 1, 2014, funded from the renewed FedDev Ontario” (Bernier and Thompson 350). The provision means that the central government, through this budget allowed more control of the regional and provincial governments.

This move will easily see the formulation of stronger economies to cater for the growing unemployment in the country. According to Cockrell and Meyer, the basic requirement for the growth of an economy is the availability of readily dispensable cash that may be utilized to develop areas of an economy (14).

The budget allowed a shift in the past where military procurement has been of benefit to individuals and organizations that are not in the country or that are not directly linked to the generation of revenue for the government. The finance minister cited the largely successful National Shipbuilding Procurement Strategy that aimed at providing employment to the Canadians as a priority (Clinton and White 54). Based on this success, the current budget will attempt to employ the same in the military purchases.

The country will make certain that the buying of martial paraphernalia offers financial chances for the citizens by increasing core domestic business capacities to assist in dictating procurement (Bernier and Thompson 350) via the endorsement of export chances and by adjusting the existing procurement method to advance profits (Whittle 42).

This measure of provision of job opportunities through the military procurement serves to increase the productivity of the economy and the creation of an independent population. The only concern with this move is the sustainability that is likely to come along with it based on the previous experiences with the other projects.

The populace that may be entitled to some of the military contracts may not be competent in this kind of contracts, which may lead to poor performance of the industry. According to Bernier and Thompson, the provision of contracts for military and other jobs should be based on merit and competencies associated with the companies and individuals that are bidding (350). This measure is, however, likely to lead to more employment opportunities for the individuals concerned.

Another component of this section of the budget is the section where it would provide “stable funding of close to $1 billion over five years for the permanent Strategic Aerospace and Defense Initiative” (Whittle 45). Though defense is a strategic part of the economy and the federation’s existence, this amount of money would be awarded to the sector, which provides little financial contribution to the overall budget.

As Whittle states, the proportion of money awarded to the defense and security sector is proportional to the strategic defense measures that a country has, and the immediate threats (44). The proportion of the budget that the federal government provided to this sector is significantly large compared to the few defense challenges faced.

Another aspect of the budget that was not proportional and well timed includes the provision of “$110 million over four years, beginning in 2014–15, and $55 million annually thereafter, for the creation of an Aerospace Technology Demonstration Program” (Akindayomi and Hussein 272).

A further $92 million dollars would be available over a period of two years starting 2014-15, and this would be for the unrelenting maintenance of forestry novelty and bazaar progress (Akindayomi and Hussein 272).

This section of the budget is important considering the challenges that the country faces in the forestry and agricultural sector and the reliance on the forestry for generation of revenue. As Kless states, an important aspect of the economy should have adequate financing to strengthen it and allow more money to be generated (41).

Aside from the creation of funding to the large parts of the economies that are stated above, the budget also provides financial incentives for smaller businesses. As recognized in other parts of the world, small businesses contribute a significant part of the economy and are the single largest employers (Kless 41).

It is, therefore, important that the budgetary allocation be based on the supporting of this sector of the economy. A number of measures in the budget point to such support in the federal government budget.

According to the minister, the budget will “provide $225 million to expand and extend the temporary Hiring Credit for Small Business for one year in recognition of the important role that small businesses play as job creators in the Canadian economy” (Kless 40). This amount will go a long way in the creation of more small enterprises and added revenue generated from them.

The budget also provided financial reprieve for small-scale farmers and anglers. In the budget speech, the finance minister indicated that the government would provide $110 million over a period of five years. This money, according to him, would “increase support for small business owners, farmers, and fishermen by increasing the Lifetime Capital Gains Exemption to $800,000 and indexing the new limit to inflation” (Farrar 369).

This strategy is a positive thing in the generation of profit and creation of revenue from these small-scale industries. In the past, the presence of red tape in the provision of services and financial assistance to the small companies and industries has been recognized as one of the reasons for the failure that has riddled this part of the economy (Canadian Economic Observer 3).

Through the lessening of the crimson strip in this sector and the promotion of improved service provision for the miniature enterprises, the economy stands to benefit in income profits. One other provision of this budget is the analysis and upgrading of the policy of performance for the Credit and Debit license commerce in the country to make certain that its doctrines of intelligibility, justice, and antagonism are nurtured in an itinerant expenditure atmosphere (Farrar 368).

The government, through the budget, will also aim at encouraging responsible resource development. Some of the measures to facilitate this include the sustaining subordinate resource investigation by expanding the already existent percentage resource investigation levy credit to the flow-via share businesspersons for an extra period of almost a year (Farrar 368). This allocation will go a long way in improving the output in the mining industry and increasing the revenue thus generated. Mining is a very important industry in Canada.

The benefits that come along with it have always been shared with the regional and provincial governments. The agricultural sector will also receive $57.5 million dollars in addition to the money that is allocated above to be distributed over a period of five years. In addition, a further amount will be set to enlarge the capacity of fishing along the Atlantic zone as a strategy to boost fishing output as well as creating more jobs for any jobless people around the place, which is at par with the country’s core agenda (Farrar 368).

With the recognition of the agricultural sector as being an important industry in the generation of revenue and the creation of employment, the budget has awarded large sums of money. Some of the other measures in this sector include the provision of another amount (approximately $3 billion) for a period of half a decade within the regional and defensive state under the ‘rising frontward scheme to sustain novelty, rivalry in business, and bazaar expansion in cultivation (Whittle 42).

All the above measures have however been in the same industry, and this is not good for the overall performance of the economy since as Whittle states, an economy should be more dependent not on a single sector but on diversified sectors (368). Some of the other measures put in the budget to ensure a strong industry include the aspect of building on the recognized financial sector advantage that the country enjoys (Whittle 42).

The finance minister stated a number of resolutions to this effect touching on the insurance markets, the capital markets and the banking sector. A government must ensure that total control of these sectors is maintained to ensure financial strength and returns (Akindayomi and Hussein 272).

On taxation, the budget addressed important concerns in the economy. The aim is to ensure that businesses that are recognized as significant creators of employment get low taxes to ensure they are successful. This step is decisive and important towards maintaining a strong economy and reducing the unemployment rate that is present in some provinces and the country in general (Christ and Roger 170).

In this measure, the tax preferences would be phased out in the economy and that the tax system will be made simpler with improved compliance (Akindayomi and Hussein 272). These positive measures are bound to have positive outcomes in general. The federal budget in the country though the smallest in a number of years, therefore, represents a very efficient means of addressing the economic situation in the country. However, a number of recommendations are necessary to ensure that the future budgets are near perfect.

Recommendations

A number of recommendations are possible in the budgetary means of creating jobs for the citizens. With the creation of a job grant to assist in the acquisition of necessary skills in the job market, the amount of money provided for this is inadequate. As Farrar states, “the provision of money for the important sectors in a budget is important for the survival of an economy” (368).

The budgetary allocation for the creation of more jobs should have been given more financial allocation as a proportion of the federal budget. The creation of jobs can occur in a budget in a number of ways. In the above budget, the location of financial support without adequate structures on how the money will be utilized is made. A well thought out budget should also propose a policy framework on which the financial support given to the sector on job creation should be spent.

The budget also provides a period over which the financial provision to the job creation should be done. The periods provided in the budget extend from two to five years, which is a relatively short period for the application of these financial measures. A budget that is provided by a federal government should be time-bound and logical (Akindayomi and Hussein 272).

With this in mind, the federal budget should have allowed more time for the application of the measures stipulated within it. The budget also proposes major tax cuts in the various industries in an attempt to encourage the productivity of these sectors. This is bound to deny the government the necessary revenues required to fund the budget, and thus cause a problem in its application.

Another recommendation is that the federal budget should accommodate other industries that already established and a significant source of revenue in the country including the transport sector.

Though this industry continues to be a major source of employment for the youth and the population in general, there are no plans indicated to add to the employment through this avenue. The budget should cater for this through the provision of financial support for projects aimed at diversifying this sector.

One recognized means of creating employment in the public transport sector is through the privatization of some of the service provides (Penny and Barbara 45). The government should therefore come up with measures in the budget to ensure that this takes place in the near future.

The agricultural sector and the forestry industry are also a major source of revenue for the federal government and the provincial governments (Altfest and Primoff 25). Though this case is highly recognized in the country, the industry received significantly lower amounts of funding through the federal government.

It is necessary that the government increases funding to this industry since it provides a significant part of the revenue that is utilized in the country (Akindayomi and Hussein 272). A recommendation to this effect is that the proportion of funding in the industry is proportional to the percentage that it contributes to the federal government.

Conclusion

In conclusion, the subject of budgeting stands out as one that is crucial for all organizations and institutions that wish to utilize their financial resources effectively. It is vital to have all funds well allocated to the various organizational deliverables so that all of them are attended to meet the set goals and objectives.

With this hint in mind, the federal budget submitted by the finance minister in Canada is elaborate providing for the funding of the various projects under the flagship of the federal and other governments at various levels. The major focus of the budget is on job creation, wealth generation and consumer protection.

Some of the measures that the budget proposes include the provision of tax relieve on some of the commodities. The main area that has been discussed in this paper is the creation of jobs. Allocation to the various industries was made based on this objective. A critical review of the aim of job creation in the budget has been discussed with the necessary recommendations being made.

Works Cited

Akindayomi, Akinloye, and Hussein Warsame. “Effects Of Capital Gains Taxation Changes On Stock Prices: Evidence From The February 2000 Canadian Budget.” Accounting Perspectives 6.4 (2007): 369-387. Print.

Altfest, Lewis, and Walter Primoff. “A Wealth Of Opportunity.” Journal Of Accountancy 1.1(2012): 22-26. Print.

Bernier, Nickson, and Keith Thompson. “Tide And Surge Energy Budgets For Eastern Canadian And Northeast US Waters.” Continental Shelf Research 30.3/4 (2010): 353-364. Print.

Canadian Economic Observer. “Section 1: Current Economic Conditions.” Canadian Economic Observer 1.1(2012): 3. Print.

Christ, Katherine, and Burritt Roger. “Environmental Management Accounting: The Significance Of Contingent Variables For Adoption.” Journal Of Cleaner Production 41.1(2013): 163-173. Print.

Clinton, Douglas, and Larry White. “The Role Of The Management Accountant: 2003-2012.” Management Accounting Quarterly 14.1 (2012): 40-74. Print.

Cockrell, Susan, and Dan Meyer. “The Role Of The Management Accountant In Total Quality Management.” Franklin Business & Law Journal 2012.4 (2012): 1-18. Print.

Farrar, Jonathan. “Tax Fairness In Canadian Government Budgets: How Fair Is ‘Fair’?.” Critical Perspectives On Accounting 22.4 (2011): 365-375. Print.

Kless, Edwin. “Project Management For Accountants.” Journal Of Accountancy 209.4 (2010): 38-42. Print.

Penny, Kathleen, and Mazur Barbara. “Canada: Canadian Budget 2012: Changes To Foreign Affiliate And Thin Capitalization Rules.” International Tax Review 23.6 (2012): 45. Print.

Smyth, Castro, and Jim Trofymow. “Including The Effects Of Water Stress On Decomposition In The Carbon Budget Model Of The Canadian Forest Sector CBM-CFS3.” Ecological Modeling 222.5(2011): 1080-1091. Print.

Whittle, Norwood. “Performance Management.” Financial Management (14719185) 1.1(2012): 41-44. Print.

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IvyPanda. 2019. "Federal Government Budget." December 12, 2019. https://ivypanda.com/essays/federal-government-budget/.

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IvyPanda. (2019) 'Federal Government Budget'. 12 December.

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