montreal

Several influential business groups are urging Canada's federal government to cut income taxes in an attempt to dissuade Canadian scientists and technologists from emigrating to greener pastures, notably the United States.

The groups argue that action is needed urgently. Nick Cercone, chairman of the University of Waterloo's computer sciences department, says about 100 of spring's 240 graduates would be taking jobs in the United States. It has also been reported that about half of this year's 80 computer-graphics graduates from Sheridan College near Toronto have already moved across the border.

The business groups are supporting the Liberal government's controversial policy of financing tax cuts from a billion-dollar surplus in the national unemployment benefit scheme (UI).

The UI has produced annual surpluses for the past five years that currently total about Can$20 billion (US$13 billion). Legislation requires that such surpluses are used to reduce premiums or increase benefits.

In recent years, however, the government has cut benefits and increased premiums, and has dipped into the surplus to reduce its overall budget deficit. It has also proposed changing the UI legislation to avoid having to reduce premiums or increase benefits.

This has provoked an unusual display of unity among opposition parties, which say they will resort to extreme tactics to block the Liberals' plans. They are proposing a commission made up of labour and business representatives to run the UI plan, and want the government to be prohibited by law from using the funds for any other purpose.

But the Business Council on National Issues (BCNI), made up of the chief executive officers of 150 companies, said last week that UI premiums should be left basically intact, and surplus money should be used to help lower taxes next year.

Acccording to Thomas d'Aquino, the group's president, the size of the UI premium cut sought by some other groups and political parties is so big — about Can$7 billion — that it would wipe out the surplus next year.

In contrast, argues d'Aquino, cutting income tax would both encourage economic competition and help persuade Canada's best graduates to stay at home.

Support for the government also comes from Sharon Glover, vice-president of the Canadian Chamber of Commerce (COC), which represents 170,000 businesses. She agrees with the BCNI that tax cuts are a greater priority, and that her organization's members are increasingly worried about a ‘brain drain’ from Canada.

The extent of the exodus is expected to be revealed in a publication to be produced soon by the C. D. Howe Institute, a think tank.

Finance minister Paul Martin said recently that, although tax reduction is a government priority, it would not completely stem the flow of skilled workers out of the country.

Canada has to compete not only with higher pre-tax salary packages in the United States, but also with greater opportunities for premiums and stock options. Once Canadian tax levels are reduced, the government will turn its attention to these other issues, said Martin.