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Taxation

Canada gets a variety of tax cuts

Canadian coinsThe Canadian government released a mini-budget this past week that featured serious tax cuts. The GST goes down another point to 5% and the lowest bracket of personal tax is lowered back down to 15%. Corporate taxes continued their downward trajectory.

The CICA focused first on the reduction to corporate taxes:

“The government’s commitment to reduce the general corporate tax to a rate of 15% by 2012 is a positive step toward making Canadian companies more competitive,” said Kevin Dancey, FCA, President and CEO of the CICA.

Their media release about the announcement actually doesn’t even mention the GST or personal tax. That’s a little strange. I hope they’re just working on something really special and it’s taking longer than expected, because they would be remiss to miss out on commenting on these topics as well.

Clearly we as a profession should have something official to say about personal and consumption taxes. I know I do, as an individual member.

The Basic Personal tax credit amount was raised to $9,600 in 2007 and is scheduled to rise further to $10,100 in 2009. This is a positive step and smart policy, as a strong argument can be made to increase the limit to the poverty line. Any increase here is progressive and ought to be well received.

The cut to the GST from 6 to 5% as of January 1, 2008 is essentially regressive and rewards increased consumption. Shifting the savings here to the Basic Personal credit or lowering the general rate on income tax would have been better and greener.

Canada is riding high on a wave of prosperity, the loonie has reached levels not seen since before the 20th century, and unemployment is reaching all-time lows. It is only fitting that the Federal government return some of its surplus to Canadians.

4 replies on “Canada gets a variety of tax cuts”

Hi Nick, great blog!

I have a question, what is the current general corporate tax rate? (That is going to be lowered to 15% by 2012?)

I thought the current general corporate tax rate was 50%, so I had a hard time seeing how they’d lower that to 15% :)

Ah, reviewing this PDF: http://www.kpmg.ca/en/services/tax/documents/FPT_2006_07_CCPC.pdf

It looks to me like the current federal general tax rate is 38%, with a federal abatemen of 10%, man this stuff is confusing!

thx

– Alex

Alex,

Yeah, corp tax is kind of confusing, but the bottom line is that “regular” corp income has a federal tax rate of about 22% right now, which will eventually go down to 15%. Note that when I say regular, I mean a big corp doing regular business – this excludes small Canadian corps, where the first 400K gets a lower rate, and any corp earning income from investments.

You get the 22% as follows:

– start with a ‘base’ rate of 38%
– deduct 10% from that; in theory this allows the provinces to tax corps at 10%, in practice they do a bit more
– add a small surtax, but this will be gone next year
– have a 7% rate reduction, which basically everyone gets

You know, if you’re going to spam-vertise in blog comments, can you at least be honest about it and not pretend that you “found” something that you appear to be the creator of? For shame Lorne S. Marr.

And if that comment was someone just pretending to be LSM, then I apologize to Lorne. :)

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