Rx: Canadianization

With visions of sugar plums, Canadians eagerly awaited Finance Minister Donald Fleming's appearance before Parliament to present the government's antirecession midterm budget. EXPECT FLEMING TO CUT TAXES, the Toronto Globe and Mail headlined. PREHOLIDAY BABY BUDGET BEARS GIFTS, predicted the Ottawa Citizen. One night last week Donald Fleming stood before Commons, and in his firm baritone voice spoke for 96 minutes. The news was mostly bad. The nation will end fiscal 1960 about $300 million in the red--bringing the Diefenbaker government's deficit to $1.3 billion in 3 1/2 years. Instead of the predicted 6% jump in gross national product this year, recession has held the gain to 2%, which means that revenues are not enough to cover expenses, particularly the $100 million winter works program to relieve unemployment.

Nothing for Taxpayers. Taxpayers can expect no reductions in personal income tax, excise or sales levies, said Fleming. But the Tories had plenty of long-range ideas about how to help Canada's economy at the expense of U.S. investors. Domestic companies, said Fleming, will get faster tax write-offs and lower income taxes. To nonresidents went notification that the government intends to sock them much harder. U.S. holders of Canadian stocks will pay a new 15% withholding tax on dividends; so will the holders of federal and provincial bonds. There will also be a tax jump from 5% to 15% on dividends transferred from Canadian subsidiaries to U.S. parent corporations. Unincorporated Canadian branches of U.S. companies will pay the same 15% tax.

Fleming made it abundantly clear that the primary aim of the levies is not so much to earn revenue (only some $50 million next year) as to put a For Canadians Only stamp on the nation's economy. Led by Economist James Coyne of the Bank of Canada, government experts have long been upset over the way Canadians go to the U.S. for capital funds. They argue that continued heavy borrowing in the U.S. not only erodes Canada's interest in her own natural resources, but increases the already serious outflow of interest and dividend payments. Thus, by penalizing U.S. investors they hope to force Canadians to finance their own basic developments.

No Election. The absence of emergency unemployment measures in Fleming's baby budget brought noisy protests from the opposition Liberals--possibly because it indicated that Tory Prime Minister John Diefenbaker is in no hurry to call a general election. But the criticism was more in the nature of a traditional raspberry. The climate of opinion in Canada is such that anyone who proposes Cana-dianization as a cure-all for the nation's ills is on solid political ground.

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