Canada's Corporate And Personal Tax Burden To Ease In 2004

by Mike Godfrey, Tax-News.com, Washington

05 January 2004

Both business and individual taxpayers could find themselves paying less tax in 2004 under plans to be carried out by the Canadian Federal government this year.

Under the system introduced by the government in the year 2000 linking income tax margins with inflation, all tax brackets will be increased in line with the index in order to prevent ‘bracket creep’ eating a larger chunk of people’s income.

This means the tax-free portion of a taxpayer’s income will increase from $7,756 to $8,012 whilst the three main tax thresholds will be increased from $32, 000, $63,300 and $104,648 to $35,000, 70,000 and 113,804 respectively as of January 1 2004.

Meanwhile, also effective from January 1st, the general rate of corporate tax has been reduced from 23% to 21%, part of a larger program of cuts begun in 2000 when the corporate tax rate was 28%. In addition, the earnings threshold for entitlement to the small business rate of 12% has been raised from $225,000 to $250,000 and will be increased to $300,000 by 2006.

Also, the corporate tax rate on resource income will be eased to 26% from 27% and the federal capital tax reduced for medium-sized firms before it is eventually phased out in 2008.

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