Flaherty Highlights Canadian Tax Relief

by Mike Godfrey, Tax-News.com, Washington

19 June 2009

Canadian Finance Minister Jim Flaherty has told the House of Commons that tax relief delivered by the Conservative government in recent budgets is having a positive impact on the national economy.

Flaherty said that the government’s Economic Action Plan is providing “the critical tax relief necessary to help encourage the growth required to restore confidence in the economy and help create jobs for Canadians.”

"The relief in the plan builds upon and reaffirms our commitment to lower taxes,” he told MPs. “Measures introduced by this government since 2006 will provide CAD220bn in relief to individuals, families and business over 2008-2009 and the following five fiscal years. Of this amount, tax relief proposed in the Economic Action Plan totals more than CAD20bn."

Flaherty highlighted several measures under the plan aimed at stimulating business investment, including the increase in the amount of small business income eligible for the reduced federal income tax rate of 11% to CAD500,000 in 2009 from CAD400,000; a two-year 100% capital cost allowance (CCA) rate for investments in computers; the extension of the temporary 50% straight-line accelerated CCA rate to manufacturing or processing machinery and equipment acquired in 2010 and 2011; and the one-year extension of the temporary 15% Mineral Exploration Tax Credit.

Measures aimed at putting more money into the pockets of individual taxpayers include a home renovation tax credit worth up to CAD1,350. According to Flaherty, the Canadian Revenue Agency has received more than 700,000 enquiries about this particular credit alone.

"The tax reductions in the plan reinforce the government's ambitious agenda of tax relief aimed at creating a tax system that improves standards of living and investment in Canada," said Flaherty. “Even in today's global recession, we have provided tax relief that has left more money in the hands of families and businesses across Canada.”

However, while the Harper government’s tax policies are to be lauded, the recession has also helped to drag the government’s budget from a series of healthy surpluses into a rare and potentially prolonged deficit.

Tax revenues fell by more than CAD3bn (USD2.77bn), or 14.4%, in March 2009 compared with the same month in 2008, dragging the government budget further into the red, the Canadian Department of Finance reported on May 29.

For the April 2008 to March 2009 period, there was a budgetary deficit of CAD2.2bn, compared to a surplus of CAD11.4bn reported in the same period of 2007–08. Budgetary revenues decreased by CAD9.2bn, or 3.8%, primarily reflecting declines in corporate income tax and goods and services tax revenues.

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