Taxes Dispute Could Incite Canadian Election

January 27, 2011 Taxation in Canada

LoonieThe escalating dispute over the future of Canada’s corporate tax rate could cause an early general election, if the ruling Conservative Party is not able to drum up support for its tax plans, and pass the upcoming budget.

During a press conference in Oshawa, Ontario on January 26th, the Finance Minister of Canada Jim Flaherty discussed potential changes to Canada’s corporate tax rates, and revealed the government’s intention to instate personal income and corporate income tax rate cuts in the near future. Explaining the need for lowered corporate rates he said, “If we want more jobs, higher wages, an improved standard of living for all of us, Canada needs to be an attractive place for job-creators to do business and invest.”

As of January 2011 the federal corporate tax rate has stood at 16.5 percent, and the Minister has expressed the government’s intentions to see it lowered to 15 percent in January 2012. He added that he is pleased to see several provinces also lowering their corporate tax rate in line with the federal rate. Elaborated, the Minister said, “What does that mean for our country? It means that as of 2012-13, we will have a brand in our country. A very attractive brand of a combined 25 per cent business tax rate for most of the country.”

For the planned 15 percent corporate tax rate to be instated, the intentions must be approved through the Conservative Party’s national budget, which is scheduled to be released in March. However the Conservatives will need to support of at least one of the three major opposition parties. If all three parties opt not to support the budget, legislation requires that an election be called.

The Liberal Party of Canada, the primary opposition party in parliament, has come forward arguing strongly against the latest tax cuts and any potential cuts in the near future. Leader of the Liberal Party Michael Ignatieff gave a speech to Liberal Party MPs on January 25th saying that he will resolutely oppose tax cuts, and instead call for job creation through higher investments in education. The Liberal leader added that by rolling back the latest corporate tax rate changes, the government would be able to fund extra day-care facilities for children and homecare for the elderly. He also hinted that the Liberal Party would investigate the option of tax system changes that would specifically benefit small businesses.

Both, the Liberal and Conservative parties, are now set to escalate their campaigns to recruit the support of the two remaining primary opposition parties, while country prepares for the possibility of an election as early as the second half of 2011.

Photo by bgilliard