NDP Sets Out Tax Agenda For Canada

by Mike Godfrey, Tax-News.com, Washington

13 April 2011

The New Democratic Party (NDP), one of Canada's main federal opposition parties, has laid out its election platform, which includes incentives for small businesses, but also, like those of its rivals, targets the middle class family vote.

The NDP, led by Jack Layton, has released its platform ahead of the impending Canadian federal election. The NDP possessed the fewest number of seats among the main opposition parties in the recently dissolved parliament, but it is possible that the party could play a key part in a coalition should the May 2 election result produce an inconclusive result.

In the platform, published on April 10, Layton pledges to alter the priorities of the federal government in Ottawa, readjusting the focus from an alleged concentration on the well-connected to the priorities of family. To this end, Layton says he will improve health services, reward job creators, strengthen pensions and make life more affordable for Canadians.

The family oriented measures include a promise to work on bringing about increases in the Pension Plan Benefit, the provision of a more flexible and generous Employment Insurance Compassionate Care Benefit for those coping with elderly relatives, and the combination of existing supports such as the Child Tax Benefit to create a non-taxable Child Benefit, which would also increase the support receivable by up to CAD700 per child over the next four years. In addition, the party would establish a new Caregiver Benefit, modelled after the Child Tax Benefit, providing up to CAD1,500 per annum to low and middle income families caring for dependent relatives.

In order to bolster employment and business growth, Layton would continue Employment Insurance (EI) stimulus measures until unemployment reaches pre-recession levels, extend the accelerated capital cost allowance for manufacturing or processing machinery to 2016, and retain eligibility for mineral exploration tax for an additional three years beyond March 2012.

If successfully elected to government, the NDP also intends to establish a Job Creation Tax Credit, providing up to CAD4,500 per new hire. This would include a one year rebate on employer contributions to both the Canada Pension Plan and EI premiums, for each new employee hired, and make those companies keeping a new employee on for a year or more eligible for a non-refundable tax credit of CAD1,000.

On the subject of corporation tax rates, the NDP propose changes in both the small business and headline rates. In the case of small businesses, the rate would be reduced from 11% to 9%, whereas existing planned reductions in the headline rate would be scrapped, and the level reverted to 19.5%. This would represent a substantial increase in the levy, which currently sits at 16.5%, and is scheduled to decrease still further to 15% in 2012.

The Conservative party, which, until its dismissal by a vote of no confidence, was the governing party, intends to push ahead with the reductions, whereas the main opposition party, the Liberals, would return the rate to its 2010 level of 18%. The 19.5% suggested by the NDP was last applicable in Canada during 2008. Nonetheless, the NDP's platform argues that corporation tax will remain competitive provided the combined federal/provincial rate always remains below the rate imposed in the US, which averages more than 40%.

Many of the NDP's business-related measures are comparable to those proposed by both the Conservatives and the Liberals. The Conservative platform offers a Hiring Credit for small businesses, providing businesses with a one year EI break, and the extension of the accelerated Capital Credit Allowance rate for manufacturing or processing machinery by an additional two years. A minor contrast in the Liberal platform is its targeting of the youth job market, arguing for a Youth Hiring Incentive, which would allow small- and medium-sized businesses to pay no EI premiums for any Canadian youths they hire. The Liberals, in addition, propose an Innovation and Productivity Tax Credit which would grant Canadian investors a 15% tax credit for investments in small, early stage start ups.

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