Canadian Finance Minister Jim Flaherty has released details of amendments to the 2008 budget draft including tax reductions for businesses and exemptions on paying tax on investment income, including capital gains.
Flaherty claims the draft will reduce federal debt and reduce the tax burden, especially on those who are struggling as a result of the financial crisis.
“Our government is meeting the challenge of global economic uncertainty with a plan that is real, a plan that is responsible, a plan that is working,” said Minister Flaherty. “In the weeks to come, Canadians will see CAD2.9bn in retroactive personal tax relief."
One of Flaherty’s most prominent pledges is to ‘strengthen Canada’s tax advantage’. According to the government they have delivered almost CAD200bn in tax relief over the last five years up to 2007. Flaherty said he would build upon achievements made in the past years, and in 2008 has pledged to:
Help Canadians save with a new Tax-Free Savings Account: a flexible savings vehicle that allows Canadians to contribute up to CAD5,000 a year to the account. The government has also announced that investment income, including capital gains, earned within the account will not be taxed and withdrawals will be tax-free.
Provide further assistance for Canada’s manufacturing and processing sector by extending accelerated capital cost allowance (CCA) treatment for investment in machinery and equipment for three years. Specifically, the 50% straight-line accelerated CCA treatment will apply for one additional year, and the accelerated treatment will then be provided on a declining basis over a two-year period.
Support small- and medium-sized enterprises (SMEs) by improving the scientific research and experimental development tax incentive program and easing the tax compliance burden by reducing the record-keeping requirements for automobile expense deductions and taxable benefits.
And, enhance cross-border business and investment environment by streamlining cross-border tax-withholding and return-filing rules, and broadening Canada’s double tax avoidance agreement network.
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