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Newsletter. Issue 2005-21. Oct. 15, 2005
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Newsline Canada

Prime Minister Paul Martin says
"Canada must prepare for what he calls the two “megadrivers” of the future: an aging and shrinking population in Canada,
and the economic rise of China and India.
Oct. 8, 2005. 10:26 AM

OTTAWA—It was former New York state governor Mario Cuomo who once said: "You campaign in poetry. You govern in prose." Some might argue that Canadians, through two major speeches in Ottawa over the past few weeks, have been able to glimpse a little of both.

New Governor General Michaëlle Jean, though not campaigning, waxed toward the poetic at her installation in late September with her talk of no more solitudes in Canada.

It was left to Prime Minister Paul Martin, meanwhile, to articulate the more prosaic, with his so-called "vision" speech for this fall, outlining the main challenges for his minority government. For more than an hour, Martin explained to senior federal public servants why every action of government had to be seized with two big "megadrivers," in the parlance of the bureaucrats. They are:

The aging and shrinking population in Canada.

The rise of India and China as economic superpowers in the years ahead.

"Fifteen years from now, our older, increasingly multi-ethnic population will have altered the face of our nation. Canada will look very different. Fifteen years from now, China and India will have altered the face of global power, politically and economically. The world will look very different," Martin said. "Canada is certainly not alone in facing these changes. But what matters — what will distinguish us — is how we respond."

Immigration Minister Joe Volpe, naturally, is right in the thick of things, after Martin specifically described how the shrinking Canadian population underlines the needs for new immigrants. Within days, Volpe was talking to national reporters about the need to dramatically increase Canada' s intake of immigrants by 100,000 a year to 320,000 annually five years down the road.

And in advance of the speech, Martin delivered a frank message to Volpe about the role he expects the department to play over the coming years in transforming Canada.

"He said we have to be a lot more proactive. He was pretty blunt — `fix the ruddy system' — so we can be efficient in the way that we present ourselves to the world and potential newcomers," Volpe told the Star's Bruce Campion-Smith.

"This is the challenge he threw out: We want to grow the country, we want this place to be a land of opportunity ... but we've got to go out and recruit our own people. We've got to fix the system so we can process people quickly," Volpe said.

"If we're talking about people with skills, we can't be having them wait forever for us to make a decision when opportunity is knocking everywhere else," Volpe said.

'Fifteen years from now, China and India will have altered the face of global power'

Toward 2025: Assessing Ontario's Long-Term Outlook
Toward 2025 is the first ever long-range assessment of Ontario's fiscal and economic environment produced by the Ontario government. The Fiscal Transparency and Accountability Act requires a long-range assessment of Ontario's fiscal environment within two years of each general election.

Toward 2025 examines a number of economic and fiscal scenarios. Past trends were examined and used to make reasonable assumptions about the future.

Ontario will face five important demographic trends over the next 20 years:

Ontario is expected to have ongoing population growth of 3.1 million - for a total population of 15.7 million by 2025;

population growth is projected to come primarily from immigration;

population growth is expected to be concentrated in the GTA, which is projected to be home to almost 7.7 million people by 2025;

the population is expected to have an older age structure - the share of seniors in the population will rise rapidly from 12.9 per cent in 2005 to 19.4 per cent in 2025; and

the growth of the core working-age population (ages 15-64) is projected to slow down considerably from 1.6 per cent in 2005-06 to 0.2 per cent in 2024-25.

A Long-Term Projection for Ontario's Economic Growth

The two fundamental internal factors affecting Ontario's economic growth are: total labour-force growth and growth in productivity. External factors discussed include the U.S. economy, oil prices, exchange rate, inflation and interest rates.

Toward 2025 includes a discussion of structural forces that could affect Ontario's economy - including the shift from goods to services employment and rapid change within sectors.

* Annual real GDP growth is projected to decline slightly (to 2.3 per cent per year by 2020-25).

* GDP per person is projected to rise from $38,000 in 2004 to $52,000 by 2025 (after adjusting for inflation), due to positive productivity growth.

* The unemployment rate, now 6.6 per cent, is projected to drop to 4.1 per cent by 2025.

Strengthening Productivity Growth

* As set out in the 2005 Ontario Budget, the government projects a budget balance in 2008-09 - or in 2007-08 if the reserve is not needed. The base-case projection indicates that the Province is expected to be on course for a series of surpluses in the following decade.

* After 2018, according to projections and absent of any policy change, there is a potential of returning to deficit, largely due to health care spending growing faster than revenues.
Reform Canada's Public Pensions to Reward Longer Working Lives: C.D. Howe Institute

TORONTO, Oct. 6 /CNW/ - Canada's public pension system discourages modest-income seniors and near-seniors from working and saving for retirement, says aC.D. Howe Institute Commentary released today.

The study, Making It Pay to Work: Improving the Work Incentives in Canada's Public Pension System, by Kevin Milligan, Assistant Professor at theUniversity of British Columbia and a Research Fellow with the C.D. HoweInstitute, focuses on the extraordinarily high tax rates created by theGuaranteed Income Supplement (GIS), which claws extra income back by 50 centson the dollar. These high tax rates encourage many seniors to save less andretire earlier than they otherwise would, with pensions that are smaller thanthey could be. Among the reforms Milligan proposes is a change to the GIS that would xempt the bonus the Canada and Quebec Pension Plan pay to those who delay receipt of their pensions. The paper is available at http://www.cdhowe.org

New editions of Canada's foremost tax guides now available

The Annotated Federal Income Tax Act and the Complete Guide to the GST are written and edited by Ernst & Young tax professionals and published by the Canadian Institute of Chartered Accountants

TORONTO, Oct. 4 /CNW/ - Few things are more complex or more prone to change than the rules and regulations surrounding taxation. However, two new publications help make it easier for Canadian financial executives and tax professionals to stay ahead in today's complicated tax environment. Updated editions of the country's most comprehensive and trusted tax guides--the Complete Guide to the GST (13th Edition) and the Annotated Federal Income Tax Act, 2005 (3rd Edition)--are now available from Ernst & Young LLP and the Canadian Institute of Chartered Accountants (CICA).

Irene David, head of Ernst & Young's commodity tax group and co-editor of the Complete Guide to the GST, says that while the GST was introduced in 1990,the tax has not stood still. "New legislation, regulations and other policy and practice changes continue to be introduced. Our new guide covers all amendments and newly released materials right up to mid-June of this year, and does so in a practical way so that users can effectively apply GST in their daily business activities," she says.

Canada's income tax rules get longer every year--in 2005 alone an additional 800 pages of legislative changes and explanatory notes were added to the mix. "In response to that complexity Ernst & Young and CICA decided to split the Income Tax Act and its regulations into a much more manageable two-volume set," says Peter Wood, president of Ernst & Young Electronic Publishing Services. "The resulting Annotated Federal Income Tax Act is a practical, portable guide which embeds Ernst & Young's knowledge and experience into a clear, logical design and format. Our goal is to simplify the lives of tax professionals with a comprehensive and useable income tax guide--it's the guide our own people at Ernst & Young use," he says.

For more information or to order Ernst & Young tax publications, please visit CICA's Knotia.ca Web site or phone 1-800-268-3793.


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