Time To Address Personal Income Tax Says Canadian Chamber

by Mike Godfrey, Tax-News.com, Washington

17 September 2003

The Canadian Chamber of Commerce has urged the federal government to begin reducing personal income tax rates in order to make the country more competitive compared to United States. A significant difference in taxation levels currently exists between the two neighbours, despite Canada's favorable fiscal situation.

In a statement on Canada’s fiscal policies presented to the Canadian Chamber Annual General Meeting in Quebec, Gerry Protti, volunteer Chair of the Board of Directors, made reference to the disparity in taxation between Canada and the US and declared: “It is time for tax relief for all taxpayers, regardless of income.”

The CoC has revealed that marginal rates for many families on low and modest incomes are effectively more than 60%, higher than the top rate paid by the country's highest earners. Also, the Chamber highlighted the fact that the average top rate in Canada stands at 45.4% (based on a combination of federal and provincial taxes) compared to 38.2% in the United States. Moreover, the top rate kicks in at a much lower level of income than in the US.

Consequently, the Chamber of Commerce recommends that the federal government raise the threshold at which the top rate becomes payable from the current $104,469 to $150,000. “By making our tax rates more competitive, Canada can attract and retain more high-tech skilled workers, upper management, entrepreneurs and professionals,” Nancy Hughes Anthony, President and CEO of the Canadian Chamber observed.

The government's fiscal surpluses in recent years were also attacked by the Canadian Chamber, which suggested that this represents over-taxation and that more effort should be made by the government to rein in spending, and allow room for cuts in taxation. “Large federal budget surpluses – which really represent over-taxation – in recent years have increased the temptation to spend without good planning. Unfortunately, the temptation was not resisted,” Mr. Protti announced, supported by Ms Hughes Anthony, who suggested that:

"There should be a thorough review of all programs this year and at least every three years to determine where the payoffs are the greatest and to identify areas where spending can be reduced or eliminated."

According to the Fraser Institute, the average Canadian family paid an extra $1,263 in taxes between 2002 and 2003. “Recent strong economic growth should have paved the way for reductions in both personal and business taxes to ensure lasting competitiveness," the FI suggested on publication of its 'tax freedom day' report in June. "Unfortunately, the majority of tax gains were dedicated to increases in government spending."

This year the Fraser Institute calculated that Canada's Tax Freedom Day arrived on June 28, meaning Canadians worked almost half of the year just to pay off their taxes. This highlights the gulf in taxation levels between Canada and the United States, where tax freedom day fell on April 19 this year.

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