Flaherty Discusses Corporate Tax Cut Ambitions

by Mike Godfrey, Tax-News.com, Washington

04 June 2008

Canada will strive in the coming years to lower its overall corporate tax burden and harmonize GST rates, to ensure that the country becomes one of the most competitive in the industrialised world in terms of business taxation, according to Finance Minister Jim Flaherty.

Flaherty made his assertion at the conclusion of two days of meetings in Montreal with his provincial and territorial counterparts, pledging to lower Canada's corporate tax rate to the lowest statutory rate in the G7 by 2010, and reduce Canada's overall tax rate on new investment to the lowest level in the G7 by 2012 - part of the government's long term economic plan known as 'Advantage Canada'.

"The provinces and territories are helping us meet our Advantage Canada objectives — by reducing their taxes, lowering their debt burdens, and further investing in skills, education and infrastructure," Flaherty explained.

"I am optimistic that collectively we will eventually achieve a combined federal-provincial-territorial general corporate income tax rate of 25%. Canada’s low business taxes will be a powerful brand globally," he added.

The Finance Minister went on to state that more must be done to create a stronger economic union between the federal government and the provinces and territories.

"I therefore continued to encourage those provinces that have not already done so to harmonize their sales taxes with the federal goods and services tax."

"Harmonization would make businesses more competitive by providing relief on exports and business inputs whether a firm is profitable or not," he noted.

Flaherty also urged provincial and territorial governments to once again consider the benefits of a single securities regulator.

"This approach would help us improve the efficiency and integrity of our capital markets, provide better protection for investors and allow us to attract further investment and jobs," he argued.

In addition, Flaherty put the case for increased labor market flexibility and the removal of internal investment barriers as key to improving Canada’s competitive performance.

"I left the meetings confident that my colleagues from the provinces and territories will work with us to achieve the goals set out in Advantage Canada. In this challenging economic period, we all have a stake in ensuring Canada’s collective prosperity," the Finance Minister concluded.

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