Capitalism and Freedom: TAX CUT APPROACH PRINCIPLED FOR 2007 CANADIAN BUDGET

Monday, February 26, 2007

TAX CUT APPROACH PRINCIPLED FOR 2007 CANADIAN BUDGET

Tax-news.com reports that in this year's budget Canada's conservative administration under the leadership of Stephen Harper intends to take a fair and principled approach to fiscal balance as proposed in a discussion document called 'Restoring fiscal balance in Canada'. In 2006, Canadian government claimed to have reduced taxes by almost $20 billion over the next two years. Key reduction measures include a very long promised 1 percent cut in Goods and Services tax to 6 percent and a 2 percent cut on all corporation companies by 2010. In addition, corporation surtax on all corporations is said to be eliminated by 2008. There are some changes in the structure of taxation for small businesses. By 2009, the bottom corporate tax rate for small business is intended to be slashed by 1 percent to 11 percent.

Fiscal balance has improved significantly over the last decade. Prior to the late 1990s, both orders of government went through a sustained period of running fiscal deficits, resulting in rising debt-to-GDP ratios. The deficits were clearly unsustainable, and both orders of government significantly reduced program spending in order to bring their respective finances under control.