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| Flaherty Outlines Progress Toward Enhancing Canadian Tax Regime |
by Mike Godfrey, Tax-News.com, Washington
Wednesday, January 06, 2010
Jim Flaherty, Canada's Minister of Finance, in a January 2 statement highlighted the
fact that in 2010 Canada will have the lowest overall tax rate on new business
investment in the Group of Seven (G7) industrialized countries.
"As a result of federal and provincial business tax changes and bold tax
reductions, Canada has created an internationally competitive tax climate for
new business investment,” Flaherty stated.
"Early actions taken by our government, as well as the measures included
in Canada’s Economic Action Plan, are positioning Canadian businesses
to emerge stronger and better equipped to compete globally as the economy recovers," he added.
In addition to the lowest overall tax rate on new business investment in the
G7, he reported that Canada is on track to having the lowest statutory corporate
income tax rate in the G7 by 2012.
According to Flaherty, Canada will also have
an overall tax rate on new business investment that is lower than the average
of the Organisation for Economic Co-operation and Development by 2012.
Key tax measures to support competitiveness include:
- A cut in the corporate income tax rate from 22.12% (including the corporate surtax) in
2007 to 15% in 2012. These tax reductions will include the elimination of the corporate
surtax in 2008 for all corporations and a reduction in the federal general
corporate income tax rate to 18% as of January 1, 2010.
- A reduction of the federal income tax rate applying to qualifying small
business income to 11% in 2008, and an increase in the amount of income eligible
for this rate to CAD500,000 in 2009.
- Alignment of capital cost allowance rates for a number of assets to better
reflect their useful life. According to the government, this both reduces the tax burden on investment
and ensures neutral tax treatment of different capital assets, encouraging
investment to flow to its most productive uses.
- Elimination in 2006 of the federal capital tax, and the introduction in
2007 of a temporary financial incentive to encourage provinces to eliminate
their general capital taxes and to eliminate or replace their capital taxes
on financial institutions with a minimum tax. All provincial general capital
taxes will be eliminated by 2012.
"The competitiveness of our business tax system encourages new investment
in Canada, including direct investment from abroad," Flaherty explained.
"A competitive business tax system is essential for encouraging new investment,
growth and job creation," he concluded.
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