Canadian Tax Cuts Under Threat From Liberals

by Mike Godfrey, Tax-News.com, Washington

08 November 2010

The Canadian Chamber of Commerce is urging the opposition Liberal Party to reconsider its plans to defer scheduled cuts in corporate tax if it wins the next general election.

The Chamber recently launched a national advertising campaign which argues that deferring or cancelling the planned cuts in the corporate tax rate would be "disastrous" for the Canadian economy by acting as a brake on investment and job growth.

“Parliament voted for this,” Chamber President Perrin Beatty commented. “Some people are proposing they reverse course and rescind it; we’re saying it’s the wrong thing to do if you want to create jobs and growth in the economy and that Parliament should keep its word.”

Since entering into power in 2006, Conservative Prime Minister Stephen Harper has championed the previous Liberal government’s five-year plan to cut the corporate income tax rate, and it would appear he is unlikely to reconsider his stance. Canada’s federal corporate income tax rate is set to drop from 18% currently, to 16.5% in 2011 and to 15% in 2012.

Last month, the Liberal economic team presented a plan in which they proposed to freeze the corporate tax rate at its current level and divert additional revenues towards paying down the budget deficit and "strategic investments in health and family care, pensions, learning and jobs, and global leadership."

Deputy Liberal Leader Ralph Goodale accused the Conservatives in a speech to the Economic Club of Canada of spending "Canada into deficit before the recession" and of wasting billions of dollars on "tax breaks for the largest corporations."

Of the G8 economies however, Canada has emerged from the financial and economic crisis in the strongest position, a fact recognized by the Organization for Economic Cooperation and Development in its recent report on the Canadian economy.

“The report commends Canada for adopting structural reforms during the crisis, including the elimination of capital taxes, the relaxing of restrictions on foreign ownership, the introduction of the Tax-Free Savings Account, and the elimination of all remaining tariffs on imported capital goods,” said Finance Minister Jim Flaherty.

Recommended