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Canada Legislates For Middle Income Tax Cuts

by Mike Godfrey, Tax-News.com, Washington

08 December 2015


Canada's new Finance Minister, Bill Morneau, has tabled a Notice of Ways and Means Motion to cut the 22 percent income tax rate and introduce a new rate for incomes over CAD200,000 (USD148,028).

Under the current system, tax is paid at 15 percent on the first CAD44,700 of taxable income, 22 percent on the portion between CAD44,701 and CAD89,401, and 26 percent on the portion between CAD89,401 and CAD138,586. Income over CAD138,586 is taxed at 29 percent.

Morneau's motion provides for the implementation of key Liberal Party election pledges. If passed, the 22 percent rate will be cut to 20.5 percent, and a new rate of 33 percent will apply to individual taxable income in excess of CAD200,000. In addition, the motion reduces the Tax-Free Savings Account annual contribution limit from CAD10,000 to CAD5,500. The measures are intended to apply from January 1, 2016.

According to the Government, the income tax cuts will save a single individual an average of CAD330 a year, and couples will benefit to the tune of CAD540.

The Government also intends to introduce a single, tax-free Canada Child Benefit as part of next year's Budget. It plans to repeal the income splitting rules introduced by the previous Conservative Government, with effect from the 2016 taxation year.

Morneau said: "Our Government made a commitment to invest in growing our economy, strengthening the middle class, and helping those working hard to join it. We committed to provide more direct help to those who need it. Today marks an important first step towards meeting these commitments. We will continue to work together with Canadians to implement our platform for real change, which includes investing in our economy, our communities, and in Canadians themselves. That means transformative investments in infrastructure and a new plan for a strong middle class."

TAGS: tax | investment | tax thresholds | ministry of finance | tax rates | Canada | tax reform | individual income tax

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