The federal government is accelerating and deepening its corporate tax cuts, in an attempt to make Canada the most competitive tax regime in the Group of Seven rich countries.
In a surprise move, Finance Minister Jim Flaherty is proposing an immediate reduction of the corporate tax rate, to be followed by further cuts in coming years, to bring the federal corporate tax rate down to 15 per cent by 2012.
The existing rate for 2007 is 22.12 per cent. That will drop to 19.5 per cent in 2008 under the new plan. Mr. Flaherty had originally planned to reduce it more gradually, to 18.5 per cent by 2012.
The cuts amount to $14.3-billion in savings for business over six years.
Personally, I'd think it is better for a company to pay higher income taxes than get dinged with higher royalties but what the heck.
I really hope the feds don't do as they did in 1974; where they dropped the deductibility of royalties as a business expense after Lougheed raised royalties. This was the first battle of the Alberta/Ottawa energy wars.
I hope we don't see those again. I have a fear that if the province sees 40% royalty rates on bitumen production they will be looking for their "fair share" too. No doubt and as in the past, the companies will be the ones to suffer in future provincial/federal energy wars should they happen.
On the provincial front; there should also be serious thought to cutting personal and corporate income taxes as well. Personally, I'd sooner have a provincial sales tax and ultra low personal income taxes. That'd be a boost for the whole economy, and those guys driving the Porsches would pay their fair share.
Maybe the lesson of Iceland is being learned?
I thought that with the runup in the Canadian dollar, governments had better be doing something to help out beleaguered businesses, manufacturers in particular. I thought a tax cut would be a great step towards that end and can hardly believe that it has happened.
Doesn't entirely make up for the trust fiasco, but it is some help.
Bloomberg says exactly what I'm thinking:
Canadian Tax Cuts May Help Shield Economy From U.S. Slump
By Theophilos Argitis and Greg Quinn
Oct. 31 (Bloomberg) -- Canadian Finance Minister Jim Flaherty's C$60 billion ($63 billion) tax-cut package announced yesterday will help protect the world's eighth-largest economy from a U.S. slowdown and a surging currency, economists said.
1 comment:
Lowering the cost of living in Alberta - particularly the tax rate - will result in additional individual immigration from other provinces. Is this what Albertans desire?
Better that the windfall be used to seed diverse economic growth, while the cost of living remains relatively uniform with the rest of the country.
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