Canadian Government To Cancel Corporate Tax Cuts

by Mike Godfrey, Tax-News.com, Washington

27 September 2005

The minority Liberal government of Prime Minister Paul Martin has scrapped plans to cut corporate tax until after the next election, in an attempt to head off a bid by opposition parties to topple the government from its precarious position in power.

According to a report in the Globe and Mail on Monday, sources confirmed to the paper that, facing a possible defeat in the House of Commons, the government has cancelled its tax cut plans.

Under proposals presented in the 2005 budget, Prime Minister Martin's government had hoped to cut corporate tax to 19% from 21% by 2010 and remove the corporate surtax by 2008. However, the government was forced to remove the tax cut in the face of opposition from the New Democratic Party, which demanded that an additional C$4.6 billion, (US$3.7 billion) be spent on low-income housing, the environment and foreign aid. Instead, the Martin administration proposed that the tax cuts would be presented in a new bill, separate from the budget proposals.

But, with the present government desperately clinging on to power, and with little hope that the budget will be passed before an election is called, Finance Minister Ralph Goodale is set to reintroduce the tax proposals in a new budget in February, should the Liberal government win another electoral mandate.

"Under no circumstances will my government attempt this autumn in any way, shape or form to precipitate our own defeat to force an early election," Mr. Martin told business leaders at the annual general meeting of the Canadian Chamber of Commerce.

"Nor will we seek to delay the election beyond the existing timetable," he added.

The Prime Minister has promised to call an election within one month of the release of the second and final report by Mr. Justice John Gomery into abuses of the federal sponsorship program, which is expected to be published on February 1, 2006.

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