The Budget and Economic Statement Implementation Act was tabled on November 21, 2007. The Act is expected to facilitate a decrease in taxes of approximately $190 billion over the next five years. That will bring it to the lowest level since the early 1960s.
Effective, January 1, 2008, the Government proposes to reduce the GST to 5%. This is in addition to the already 1% reduction that was introduced earlier in the government’s term. It is anticipated that consumers will save approximately $12 billion next year as a result of the adjustment to the GST rate. The GST credit will remain the same.
Additional proposed tax relief for individuals and families include:
1. Increasing the basic personal amount to $9,600 retroactive to January 1, 2007, with a further increase to $10,100 on January 1, 2009.
2. Reducing the lowest personal income tax rate to 15 per cent from 15.5 per cent, retroactive to January 1, 2007.
3. Introducing a new Working Income Tax Benefit.
4. Eliminating income tax on elementary and secondary school scholarships.
5. Enhancing the children’s fitness tax credit.
6. Expanding the scope of the public transit tax credit.
Business taxes are also expected to decrease. Minister Flaherty expects that by 2012, Canada’s corporate income tax rate will be the lowest among the major industrialized economies. The proposed measures to reduce business taxes include:
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 legislated reductions.
2. Reduce the small business income tax rate to 11 per cent in 2008, one year earlier than scheduled.
3. Increase the lifetime capital gains exemption for small business owners, farmers and fishers to $750,000.
4. Increase the deductible percentage of meal expenses for long-haul truck drivers.
5. Extend the mineral exploration tax credit.
6. Ease tax remittance and filing requirements for small business.
The legislation also proposes to eliminate withholding tax on arm’s length outbound interest payments to residents of all countries effective January 1, 2008. This change is expected to increase access to foreign capital markets and reduce costs for Canadians and Canadian businesses that borrow from foreign lenders.