The Government’s 2007 Economic Statement announced broad-based tax relief for all Canadians. This includes a further reduction of the goods and services tax (GST). Minister Flaherty boasted that Canada’s strong fiscal position provides a great opportunity to make broad-based tax reductions that will strengthen the economy and leave more money in the pockets of ordinary Canadians. According to the government press release, this move will bring taxes to the lowest level it has been in nearly 50 years.
The government has proposed an additional 1-percentage-point reduction in the GST, effective January 1, 2008. This, it is argued, represents significant savings for the consumer. For example, a family purchasing a new $300,000 home is expected to save $3,840 in GST; a family spending $10,000 on home renovations will save $200 in GST; and a family spending $30,000 on a new minivan will save $600 in GST.
As the GST credit will be maintained at its current level, this will translate into savings of more than $1.1 billion in benefits annually for low- and modest-income Canadians.
The Government is proposing additional tax relief measure for individuals and families, including:
1. Increasing the basic personal amount to $9,600 retroactive to January 1, 2007. The basic personal amount will be increased to $10,100 on January 1, 2009. This proposal will provide Canadians with an additional $2.5 billion in tax relief in 2007 and 2008;
2. Reducing the lowest personal income tax rate to 15 per cent from 15.5 percent retroactive to January 1, 2007;
3. Families earning between $45,000 and $60,000 will pay on average almost $400 less in tax in 2008 as a direct result of the tax measures announced in the Fall Economic Statement;
4. Families earning between $80,000 and $100,000 will pay on average $602 less in tax in 2008 as a direct result of the tax measures announced in the Fall Economic Statement.
For Canadian businesses, the Government will be:
1. Reducing the general corporate income tax rate to 15 per cent by 2012, starting with a 1-percentage-point reduction in the rate in 2008 beyond the already scheduled reductions.
2. Reducing the small business income tax rate to 11 per cent in 2008, one year earlier than scheduled.
With these reductions, Canada’s general federal corporate income tax rate will fall by one-third between 2007 and 2012, and Canada’s corporate tax rate will become the lowest among the major industrialized economies.
The 2007 Economic Statement is available on the Department of Finance website.