Canada To Cut Corporate Income Tax

by Mike Godfrey, Tax-News.com, Washington

25 February 2005

In a move welcomed by the country’s business groups, Finance Minister Ralph Goodale announced in the 2005 Canadian budget that some of the government’s fiscal surplus is to be shared out in corporate and personal income tax cuts.

Under the proposals contained in the budget, corporate income tax will be reduced by 2% to 19% by 2010. This will be done in steps, beginning with a cut to 20.5% in 2008, to 20% on 2009 and finally to 19% in 2010.

The corporate surtax will also be eliminated in 2008, Goodale announced.

In addition, the budget took action to cut the personal income tax burden, including an increase in the tax-free income limit for all Canadians to $10,000 in 2008, while the 30% limit on foreign property held in pension and registered retirement savings plan investments was also eliminated.

A wide range of other tax and spending measures were also announced by Goodale, including a commitment to share federal gas excise and spend several billion dollars on child care, defence and environmental schemes.

It is thought that the Finance Minister’s budget is an attempt to appeal to as broad a range of interests as possible, given the Liberal government’s parliamentary minority. Should the budget fail to win approval in parliament, then the government could well be ousted in an early general election.

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