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Canada Federal Budget Gives Modest Tax Breaks For Business

by Mike Godfrey,, New York

12 December 2001

Canadian Finance Minister Paul Martin presented the Federal Budget, 10 December, with the aim of tackling the immediate impact on the country from the financial downturn that is reverberating around the world as well as building on the government's long-term plan for a stronger economy.

'This budget is about resolving to work together as never before, renewed in purpose, confident of our course and guided through changing times by unchanging values ... Managing an economy through tough times means striking the right balance. This budget does that. It builds on the strong fundamentals Canadians have worked so hard to achieve,' claimed the Minister.

The Budget measures comprises four key features: to provide a boost to the economy enabling Canadians to take full advantage of the recovery expected next year; to build personal and economic security by keeping Canadians safe, terrorists out and borders open and efficient; to balance the budget this year and for the next two years; to protect the $100-billion tax cut and the $23.4 billion in increased support for health care and early childhood development.

Paul Martin has decided against any new tax cuts for individual taxpayers and there is no reduction in the company tax rate as suggested by the House Finance Commitee. Instead he reiterated the government's pledge to continue with the tax breaks worth $100 billion announced in the February 2000 Budget.

However, he did make one tax concession in a bid to help small businesses meet immediate cash-flow needs by deferring their corporate tax instalments for January, February and March 2002 for six months. Overall this will defer $2 billion in taxes for small businesses until next year.

In response to the federal Budget, the Retail Council of Canada (RCC) said retailers had a mixed reaction and claimed that while the industry is pleased that steps are to be taken to protect Canada's security, retailers are disappointed that the Minister failed to include any new tax-cutting measures to help Canadians weather the effects of the softening economy.

'In our pre-budget submission, Retail Council of Canada told the government they had two tasks,' said Peter Woolford, Vice President of Policy Development and Government Relations with RCC. 'Job one was to sustain the confidence of Canadians, which is so vital to the health of the domestic economy. The second priority was to backstop that confidence with tax-cutting measures to put money back in the pockets of ordinary Canadians. It is our belief that Canadians want the government to return any surplus revenues to them through tax cuts.'

'Confidence levels cannot be sustained when consumers are under financial pressure. This is exactly the time when Canadians should be able to look to their government for income support through tax reductions,' he added.

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