Canadian Liberals Unveil Tax Cut Platform

by Mike Godfrey, Tax-News.com, Washington

25 September 2008

Canada's opposition Liberal Party is hoping to steal a march on the incumbent Conservatives ahead of the October 14 general election by pledging to cut taxes for both business and individuals when in government.

“A Liberal government will get the fundamentals of the economy right,” announced Liberal leader Stephane Dion on Monday.

“We will build a richer Canada by cutting taxes for all Canadian families and businesses, making them more competitive; we will build a fairer Canada by directing significant tax benefits to families with children, increasing benefits to the disabled, seniors and families struggling to achieve success; and we will build a greener Canada by targeting tax cuts to Canadians and businesses to invest in renewable, energy efficient technologies,” he claimed.

Dion outlined an ambitious plan to drive Canada's business competitiveness in the years to come with a proposal to cut corporate tax to 14% by the year 2013, and a 1% cut in the small business tax rate, which he claims will in reality represent a 9% tax cut for small firms.

Currently, the federal rate of corporate tax (after a 10% federal abatement and a 8.5% rate reduction are deducted) in Canada stands at 19.5%. This is due to fall to 19% in 2009, 18% in 2010, 16.5% in 2011, and 15% in 2012.

There will also be considerable tax benefits for Canadian firms investing in green technologies under a Liberal government, including an accelerated capital cost allowance. Dion also pledges to improve the Research & Experimental Development tax credit system to promote innovation.

Dion has also committed to the Liberals to reversing the unpopular decision by the Conservatives to impose a special tax on income trusts, which was instigated by Finance Minister Jim Flaherty in October 2006 in order to stem what he perceived was a "growing trend toward corporate tax avoidance" caused by the vehicle's more favourable tax treatment compared with the conventional company structure.

On the individual side, the Liberals would lower the lowest- and middle-income tax rates, introduce a new CAD350 refundable child tax credit, improve the employment credit for low and middle-income Canadians, and provide up to CAD10,000 in refundable tax benefits to Canadian families for investments in energy-saving retrofits to their homes.

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