October 29, 2007 16:27 ET

The Canadian Chamber of Commerce Outlines its priorities for the Federal Government's Fiscal and Economic Update

OTTAWA, ONTARIO--(Marketwire - Oct. 29, 2007) - The federal government announced will unveil its fall Economic and Fiscal Update on Tuesday, October 30 at 4 p.m. The fall update normally provides a revised forecast for the budget surplus and updates revenue and expenditure figures. There has been speculation in Ottawa that Finance Minister Flaherty will include some tax cuts in the report. The Minister has neither denied nor confirmed the speculation.

While the government has taken positive steps in recent years to provide tax relief to individuals and businesses, progress has lagged that of many other countries around the world. This growing gap between Canada and our competitors threatens the well-being of Canadian families and hinders business competitiveness. Moreover, with the Canadian dollar reaching a 47-year high versus the U.S. dollar today, the urgency of ensuring that Canada has a competitive tax environment is paramount.

The Canadian Chamber of Commerce was pleased to hear in the recent Speech from the Throne that the government "will bring forward a long-term plan of broad-based tax relief for individuals, businesses and families". The Canadian Chamber believes the tax base should be as broad as possible, allowing tax rates to be as low as possible at all points so that everyone benefits. This practice leads to fewer economic distortions, improved fairness and efficiency, lower administration and compliance costs, and results in less tax avoidance.

In sharp contrast, ad hoc changes to tax legislation - like the constant addition of special provisions and targeted tax benefits - only serve to undermine the internal consistency of our tax system, introduce unnecessary complexity, and may not achieve their intended purpose.

Canadians deserve a tax system that is simple, efficient and fair. Personal income tax rates should be reduced to internationally acceptable levels and the tax base broadened to increase labour participation, particularly in light of coming demographic changes. Reducing personal income tax rates would also reduce taxes on interest, dividends and capital gains income helping to stimulate investment, productivity and economic growth. Corporate income tax rates should also be reduced to internationally acceptable levels to make Canada the location of choice for business, and the tax base broadened to improve efficiency and fairness.

In this regard, the Canadian Chamber of Commerce recommends that the federal government in tomorrow's Economic and Fiscal Update:

- Reduce the lowest personal income tax rate from 15.5% to 15% (cost: $1.4 billion) and the 22% rate to 21% effective January 1, 2008 (cost: an additional $1.6 billion) to encourage individuals to work, save, and upgrade their skills.

- Reduce the general federal corporate income tax rate from 21% to 20% effective January 1, 2008 to strengthen Canada's ability to attract and retain business and compete effectively.

We also look to the federal government to continue to improve tax competitiveness in Budget 2008. In this regard, the Canadian Chamber of Commerce recommends that the federal government:

- Make greater headway in 2008 towards increasing the Basic Personal Amount to $10,000. (cost: $0.3 billion per $100 increase)

- Raise the threshold at which the top marginal personal income tax rate applies to $150,000 in 2008 (cost: $0.3 billion) and to $200,000 as fiscal conditions permit. (cost: an additional $0.4 billion)

- Adjust any Capital Cost Allowance rates that do not line up with the true economic life of the relevant asset.

- Work with the provinces that levy retail sales taxes to switch to a value-added tax with the same base as the GST.

- Continue to look at ways to reduce the compliance burden for all taxpayers.

"As global competitive pressures intensify, they underscore the need for international tax competitiveness. We must implement the needed reforms urgently to keep ahead of the competition. We must also use our tax system in the best way possible to stimulate work effort, saving, investment, risk taking and entrepreneurship - all of which have a direct bearing on our nation's productivity, competitiveness and prosperity", said Perrin Beatty, President and CEO of the Canadian Chamber of Commerce.

Contact Information

  • Michel Barsalou