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Canadian Liberals Call For Tax Cuts As Election Looms

by Mike Godfrey, Tax-News.com, Washington

16 November 2005

In what many commentators are interpreting as a last ditch bid by Canada's minority Liberal government to cling onto power, Finance Minister Ralph Goodale has attempted to woo the electorate by announcing a supplementary budget that restores a previous pledge to cut corporate taxes and promises to lower the tax burden on the individual.

Presenting what the government dubbed an "economic and fiscal update" to parliament on Monday, Mr Goodale pledged to:

  • Immediately reduce the lowest personal income tax rate from 16 per cent to 15 per cent, effective January 1, 2005, with subsequent reductions of 1 percentage point to each of the two middle rates by 2010;
  • Immediately increase the basic personal amount — the amount of income that all Canadians can earn tax-free — by $500, effective January 1, 2005;
  • Restore the 2-percentage-point reduction in the general corporate tax rate to 19 per cent by 2010;
  • Eliminate the corporate surtax and the federal capital tax for all corporations by 2006, two years earlier than originally planned and;
  • Design and implement with the provinces and territories a Working Income Tax Benefit to help encourage low-income Canadians to join the workforce.

The Finance Minister also committed himself to a number of spending pledges designed to boost the nation's overall competitiveness. These included: C$2.75 billion additional funding for tertiary education over a five year period, a C$1 billion higher education innovation fund and C$2.1 billion more for university research funding; C$3.5 billion more for workplace training programs; C$1.3 billion more over five years to help immigrants settle in Canada; more than C$1 billion over five years for trade supports; and an extra C$100 million over five years to help bring broadband internet service to remote communities across Canada.

However, while these pledges will undoubtedly be popular with the business community and the electorate at large, whether the government of Prime Minister Paul Martin actually survives to see them through is another matter. All the measures announced by Mr Goodale must be approved by a parliamentary vote, and reports from Canada suggest that both the main conservative and left wing opposition parties are poised to bring down the government at the earliest opportunity.

Nonetheless, the Liberals' precarious political situation did not weigh on Mr Goodale, who predicted that Canada can look into the future with "tremendous confidence" under a Liberal government. He reminded the House that the Liberals had turned 25 years of deficits into successive surpluses since 1993, and had transformed Canada from an economic "laggard".

"The road from 1994 to 2005 has been difficult at times, but the achievements remarkable," Mr Goodale said.

The electorate may be given a chance to judge the government's record as early as next month, according to the Canadian Broadcasting Corporation, which has indicated that a no-confidence motion could be scheduled for a vote as early as this week. If so, this could lead to the calling of a general election in either late December or early January.

The full text of Raplh Goodale's 2005 Economic And Fiscal Update can be found in the Tax News Resources section.

 

 






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