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Canada Likely To Introduce Better Depreciation Rules

by Mike Godfrey, Tax-News.com, Washington

12 March 2004

The Canadian government is lining up changes to the Income Tax Act that will allow companies to accelerate the rate at which they can depreciate capital equipment, in a move likely to be welcomed by business, the Globe and Mail reported this week.

Citing a Finance Ministry source, the paper reported that the measure is already included in the government’s budget, due to be announced on March 23. However, it is unclear as yet whether it will be applied across the board, or at specifically targeted industries.

The changes will mean that machinery and technological equipment can be depreciated over a period of four years, rather than the usual six year period under the current rules.

The business sector has welcomed the measures, and experts suggest that faster rates of depreciation will offer firms an effective corporate tax cut, as well as closing the competitive gap with the United States, where depreciation rules have traditionally been more generous than in Canada.

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