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November 8, 2010

Taxpayer relief deadline: December 31, 2010

In a news release on its website, the Canada Revenue Agency (CRA) reminds taxpayers and all tax registrants that they have until December 31, 2010 to file requests under the taxpayer relief provisions for the 2000 tax year and any reporting period that ended during the 2000 calendar year.

According to the CRA news release, "taxpayer relief provisions of the Income Tax Act limit the discretion of the Minister of National Revenue to cancel or waive penalties and interest, accept certain late-filed, amended, or revoked income tax elections; and issue income tax refunds beyond the normal three-year period (for individuals and testamentary trusts only). This only applies to tax years that ended within the 10 calendar years immediately preceding the calendar year in which a request is made."

Taxpayers and registrants or their authorized representatives can make a taxpayer relief request by completing Form RC4288, Request for Taxpayer Relief, or by writing to their tax services office. For more information, please see:

Posted by Editorial Team [permalink]

October 21, 2010

CRA promotes tax relief for businesses

The Canada Revenue Agency (CRA) has announced the launch of the Government of Canada's advertising campaign promoting the 100% capital cost allowance rate for computers.

According to this announcement Canadian business owners now have until January 31, 2011, to acquire new eligible computer hardware, including systems software, in order to claim 100% of the capital cost allowance.

This temporary tax relief measure was previously announced in Canada's Economic Action Plan. It allows Canadian businesses to claim a 100% capital cost allowance deduction for eligible computer hardware, including systems software, acquired after January 27, 2009, and before midnight, January 31, 2011.

For more information on tax relief for businesses, please see the CRA website at:

Posted by Editorial Team [permalink]

January 15, 2010

Scientific Research and Experimental Development: Changes

The following news release regarding Scientific Research and Experimental Development (SR&ED) is available on the Canada Revenue Agency web site.

"Changes will be made to improve the program," declares Minister Blackburn

Hamilton, Ontario, January 13, 2010... Today, while addressing the 13th Annual Tax Practitioner Information Session, the Honourable Jean-Pierre Blackburn, Minister of National Revenue and Minister of State (Agriculture and Agri-Food), announced improvements to the Scientific Research and Experimental Development (SR&ED) Tax Incentive Program.

"Our Government understands the importance of research and innovation to our country's present and future economic prosperity. By offering generous investment tax credits, we are encouraging Canadian corporations to invest in innovation and to develop new products, services, and technologies," said Minister Blackburn.

"I am pleased to announce that the Canada Revenue Agency (CRA) will soon be implementing a number of improvements to the program. This July, the CRA will begin to report quarterly, through its Web site, on the time it takes to review an SR&ED claim from start to finish. It will improve on accuracy and on the mutual goal of achieving the timely resolution of a claim," indicated Minister Blackburn.

"CRA officials will also spend more time better explaining the SR&ED program requirements, process, and decisions to the claimants and their representatives. The emphasis on working with claimants is reflected in the new manual, which will become effective on April 1, 2010.

In addition, I am pleased to announce that when, in the course of their review, CRA officials discover that a company has not claimed work that appears to be eligible for the credit, they will now inform the claimant of their finding so that companies can resubmit their claim if within the reporting deadline. This is also reflected in the SR&ED claim review manual and will be effective as of April 1, 2010.

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The issue of consistency in our decisions has often been raised by claimants and tax practitioners. I want to assure you that I have listened carefully to these concerns, and I have asked CRA officials to continue working in this area and to propose additional solutions. I will be soon be announcing further enhancements to the SR&ED program as a result," added Minister Blackburn.

The Government of Canada is building on its tradition of excellence through the SR&ED program. By investing in research and development, we are creating a stronger economy, future job opportunities, and a better quality of life for all Canadians.

The program is the largest single source of federal government support for industrial research and development. It encourages businesses to conduct research and development that may lead to new, improved, or technologically advanced processes or products. The program represents approximately 4 billion dollars distributed annually to over 18,000 Canadian businesses.

Posted by Editorial Team [permalink]

January 23, 2008

Toward a single tax rate

By John Williamson & Mark Milke

Don't believe the nattering nabobs who say Ottawa can't lower taxes. The Conservative government can – and should – table significant personal income tax relief in the federal budget.

According to the Organization for Economic Co-operation and Development (OECD) and even the federal finance department, Canada's personal income tax burden is the highest of all G7 nations. Canadians pay more income tax than the French and Italians, despite being neighbours with the lower-taxed United States. Income taxes in Canada are complex, relatively high and create significant economic distortions. There is an alternative.

Imagine a personal income tax form that could be easily completed without help from professional accountants or computer software. One that, in April of every year, allowed taxpayers to list their income; subtract basic, spousal and child deductions, and RRSP contributions, to calculate taxable income; apply a single rate to calculate tax owing; subtract the tax already paid; and pay the balance or collect any refund.

If Canadian taxpayers like the simplicity and fairness of this idea, they are not alone. Since the fall of the Berlin Wall in 1989, 15 eastern and central European countries have adopted variations of a flat-or single-tax model. In 2007, Iceland was the first western European nation to move to a single rate of income tax.

There are several reasons why Canada should aim for a single rate of tax. First, a single rate of tax if combined with vastly fewer deductions and credits would end complexity and thereby reduce compliance costs for taxpayers and administration costs for the federal government.

Second, the reality of fewer credits and deductions would allow for a lower overall single rate. Third, a single rate of tax is effectively progressive in a way that a multi-bracket system with multiple credits and deductions is not. The proponents of a multi-bracket system ignore the litany of exemptions that come with it. Those exemptions and deductions help to lower tax rates, especially for wealthy individuals.

In contrast, single-rate systems are progressive because the existence of a basic personal exemption means the higher one's income, the higher the proportion of one's income paid in tax. Consider Alberta, where the basic personal exemption was $15,435 in 2007 and where the provincial single-rate tax is 10%. At $20,000, the taxpayer paid out $456 in provincial income tax, representing 2.3% of income. At $100,000 of income, the tax paid was $8,456 and 8.5% of all income.

Two other benefits include reduced tax avoidance and superior incentives to work, save and invest under a flatter system.

To achieve such a model, the federal government will need to move in two steps. First, in stages between 2009 and 2012, the federal government should collapse the number of brackets from four to two rates of 15%, and 25% on income above $80,000. Canada currently has four income tax rates of 29%, 26%, 22% and 15%.

Over that same period, the basic personal and spousal exemptions should be raised to $15,000 each with the per child credit raised to $2,200. Concurrent with such a reform, most other deductions and tax credits should be eliminated with the exception of universal deductions and credits that pertain to charitable giving, RRSPs, seniors and a handful of disability amounts.

The tax relief is substantial. Adopting this two-rate plan will deliver $68.8-billion in personal income tax relief over four years. It is based on prudent assumptions and is achievable without running budgetary deficits.

And according to the Toronto-based C.D. Howe Institute, the federal government can accommodate such a tax regime merely by restraining federal spending to 2.5% growth per year starting in 2008. If it can slow annual spending increases, Ottawa could deliver the two-rate tax cut plan, run a surplus in 2012 and still have an additional $3-billion available for debt reduction that year.

It makes sense for Canadians to eventually pay one federal rate of tax. So the second stage, post-2012, would involve moving to a single rate as budgetary conditions allow. This cannot be done overnight, but we should begin implementation as soon as possible. A fairer tax and a healthier economy will be the result when we do.

John Williamson is the federal director for the Canadian Taxpayers Federation. Mark Milke, a former provincial director with the CTF, lectures in political science at the University of Calgary. They are the authors of Lower, Simpler & Flatter – Towards a Single Tax Rate for Canada, available at:

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

January 17, 2008

Two federal income tax rates of 15% & 25%

- Slow Ottawa’s annual spending growth to 2.5% and it is possible by 2012
- A pro-growth plan that will deliver nearly $70-B in personal tax relief

Budget impact costed by the C.D. Howe Institute

OTTAWA – The Canadian Taxpayers Federation (CTF) today released a groundbreaking study urging the federal government to enact a multi-year tax reform/relief plan. The report calls on Ottawa to reduce personal income taxes and cut the number of tax brackets from four to two while maintaining only a handful of deductions like RRSP, spousal and child allowances. The goal is to both simplify the tax code while lowering the personal income tax burden in a manner that strengthens the Canadian economy. The report does not deal with corporate tax reform, nor does it redefine how investment income is taxed.

The study, entitled Lower, Simpler & Flatter – Towards a Single Tax Rate for Canada, authored by Mark Milke and John Williamson, argues the federal government should embark on comprehensive tax reform with the ambition of adopting a single personal tax rate. As an immediate first step, the authors recommend that Canada move to two federal income tax rates of 15% and 25% by 2012. There are currently four tax rates of 29%, 26%, 22% and 15%.

“Our immediate objective is to usher in two tax rates on personal income so no taxpayer will pay more tax and most will pay less,” CTF federal director John Williamson said today at a news conference on Parliament Hill. “The tax relief is substantial. If this two rate plan is implemented by the federal government it will mean a $25-billion annual personal income tax cut as of 2012.”

The C.D. Howe Institute conducted an independent analysis of this plan’s fiscal impact on government revenues and its affordability by 2012. The think tank also calculated the positive tax relief generated on households that result from adopting two income tax rates while eliminating many tax credits.

Finn Poschmann, the Institute’s director of research, concluded, “The tax relief proposed by the CTF is readily affordable by 2012, provided modest spending restraint is undertaken by the federal government … Restraining federal spending to 2.5% nominal growth per year, beginning in 2008, would produce planning surpluses of $21.9-billion and $28.1-billion [in fiscal 2011/12 and 2012/13]. This implies that personal tax relief of $25-billion per year is possible by 2012, while setting aside $3.0-billion annually for debt reduction and without running a fiscal deficit.” (The C.D. Howe’s Impact of Fiscal Measures is included in the report.)

“The decisions Finance Minister Jim Flaherty makes in the upcoming budget will determine the size of tomorrow’s income tax cut,” noted Williamson. “If the Conservatives exercise modest spending restraint they will finally be able to deliver meaningful personal income tax relief. We must not forget that Canada has the highest personal income tax burden of G7 nations, yes even higher than the French.”

Under the two rate model proposed by the CTF, by 2012:

Approximately 1.4 million low-income Canadians will be removed from the tax rolls as a result of all individuals earning $15,000 or less not paying any federal income tax. Income over $9,600 is currently subject to federal income tax under Ottawa’s existing tax system;

Every category of taxpayers – one-earner and two-earner households, married people with or without children, unattached singles with or without children, and seniors – representing 30 million Canadians, will pay less income tax or the same amount;

The basic and spousal exemptions are each $15,000 and there is also a per child exemption of $2,200. As such, two-parent families with two kids will not pay any federal income tax until their combined income exceeds $34,400. Today, this household is subject to tax on income at $23,200. A single parent with three children will pay no federal tax on the household’s first $21,600 of income. Federal tax is currently applied to this family’s income above $15,600;

To ensure low- and moderate-income senior citizens pay no additional income tax there is an age credit; and

RRSP deductions remain intact along with those for charitable giving.

“This tax relief is proportional. The more an individual or household earns the higher the tax savings will be. This is welcome because the middle class and high earners pay the majority of tax in Canada,” said Mr. Williamson. “Ottawa should stop punishing people for working hard.”

According to Statistics Canada, in 2002, the top 10% of taxpayers paid 52.6% of total federal income tax, up from 46% in 1990. Entrance to the “Elite 10% Club” began at $64,500 a year.

“The system also remains progressive as a result of generous personal and family exemptions. As a result, an individual’s or household’s share of taxes rises as more income is earned,” noted Williamson. “A common economic fallacy is that only tax systems with steep multi-tax rates are progressive when a single-rate tax with generous allowances can accomplish the same objective.”

Williamson concluded, “Lowering tax rates sends the important signal that entrepreneurialism, risk taking and hard work are positive endeavours to be encouraged. This is something Canada’s current income system with punitive tax rates fails to do. This two rate tax proposal is a pro-growth plan that will deliver nearly $70-billion in personal income tax relief over the next four years. It is based on prudent assumptions and is achievable without running budgetary deficits.”

An electronic copy of Lower, Simpler & Flatter – Towards a Single Tax Rate for Canada is available at:

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

January 3, 2008

Tax Savings in ’07 (Especially for Families) and Dips Down Again in ’08

Taxpayers Hope Next Budget will Cut Rates

Provincial Winners: Newfoundland, Quebec & B.C. The Loser: New Brunswick

Ottawa: The Canadian Taxpayers Federation (CTF) today released projected income, payroll and sales tax changes kicking in on January 1st, 2008. Also calculated are retroactive personal income tax changes – which apply to the 2007 tax year – announced by the finance minister in the fall economic statement that saw the bottom income tax rate fall to 15% from 15.5% and the basic personal exemption – the amount a person can earn before they pay federal income tax – increase by $671, from $8,929 to $9,600.

“Due to retroactive tax changes announced in the fall, coupled with changes that take effect in the New Year, almost all taxpaying Canadians will pay the Taxman less in 2007 and 2008. The exception is in New Brunswick,” stated CTF federal director John Williamson. “Thanks to the broad-based tax relief announced in the economic statement, the average taxpayer’s retroactive tax savings this year will be $223. This will climb to $272 after factoring in changes that take place next year. Families will save even more thanks to a new child credit worth $300 per child and a higher spousal exemption, which were also enacted for the ’07 tax year. Plus let’s not forget the January 1st GST reduction. While harder to quantify, it will save the typical Canadian household between $150 and $200 annually.”

“But taxpayers shouldn’t clap too loudly as Ottawa’s ‘new’ 15% rate simply restores the lowest income tax rate to what it was in 2005 before the Conservative finance minister raised it in his first budget. Jim Flaherty should be working to cut personal income tax rates, not patting himself on the back for returning them to the level they were when he came into office.”

To see the income and payroll tax changes in 2007 and 2008 for various income levels, households and for all 10 provinces go to Chart #1 at:

Tax Relief in 2008 – Only Modest Gains due to Indexation

Additional tax reductions next year are due mostly to the indexation of the personal income tax brackets. Other specific tax changes include:

Payroll Taxes: Minuscule EI Reduction and Bigger CPP Bite

Effective January 1, 2008, the employee rate per $100 of insurable earnings will be adjusted to $1.73, a reduction of 7 cents from its current level of $1.80. The corresponding employer rate will be adjusted to $2.42, a reduction of 10 cents from its current level of $2.52. The maximum insurable earnings will rise from $40,000 to $41,100 which is the ceiling up to which EI premiums are collected. Employees will therefore pay a maximum of $711.03 and employers $994.62 for a total EI payment of $1,705.65.

“With a $3.3-billion surplus in the EI fund last year, Ottawa should cut rates and match EI revenues to EI payments, allowing for only a modest reserve, and harmonize the employer rate with those of employees,” said Williamson. “Cutting this tax will help job creation and give manufacturers a break at a time when they are struggling with dollar parity.”

Under the Canada Pension Plan, the maximum pensionable earnings for 2008 will be $44,900 (up from $43,700 in 2007) and the basic exemption amount will remain unchanged at $3,500. The employee and employer contribution rates will each remain unchanged at 4.95%. Because the contribution rate is staying the same while the threshold (ceiling) increases, most taxpayers will pay slightly more in CPP payments in 2008. Employees and employers will each pay a maximum of $2,049.30 for a total CPP payment of $4,098.60.

See Chart #2 for EI and CPP tax payments and increases:

“The net payroll tax bill on workers will increase because the EI tax reductions will be gobbled up by a higher EI threshold and rising CPP payments. Average worker will pay $50.43 more in payroll taxes and employers $46.02 more,” said Williamson. “Ottawa is wrong to increase the EI tax ceiling when the program continues to amass surpluses. It is another example of giving a tax break with one hand, by lowering the EI tax rate, and taking it away with the other, by raising the threshold.”

A 5% GST is a $5-billion Annual Tax Savings

The GST will be reduced by a further one percentage point on January 1, fulfilling the Conservatives’ marquee pledge to reduce the tax by two points. This additional cut will save the average household between $150 and $200 annually. “While some have criticized cutting the GST, it is a broad-based tax cut that puts $5-billion back in the pockets of over-taxed Canadians,” observed Williamson. “And given that this is the second point cut, the total household savings will be between $300 and $400 each year. This is good news particularly since $10-billion in the pockets of Canadian consumers is preferable to Ottawa hoarding the cash.”

Provincial Income Tax Changes

Three provinces have additional relief coming to its taxpayers in the New Year. Newfoundland and Labrador reduced all provincial income tax rates and has eliminated its provincial surtax altogether. The typical taxpayer will save $420 in provincial and federal taxes next year (plus GST savings). Quebec rates remain the same although the thresholds have increased substantially which will result in the largest tax savings in the country as of January 1st. The average Quebecer will pay $500 less next year (plus any GST savings). The tax savings will increase in each province as incomes rise above $45,000. Meanwhile, British Columbia has cut all of its provincial income tax rates except the top one which also results in additional savings. As such, average taxpayers in Lotus Land save $223 (again, plus GST savings).

New Brunswick’s provincial income tax increase in 2007 means all individuals earning more than $52,700 paid more income tax this year. Individuals with incomes below $52,700 paid less thanks to federal tax reductions, but their savings were smaller than other Canadian taxpayers because of the province’s tax hike.

See Chart #3 for provincial tax rates/comparisons:

More Relief Needed to Eliminate Structural Over-taxation

While the tax relief announced in Ottawa’s annual economic statement was a good start, Canadians remain over-taxed. “More must be done to reduce personal income taxes. It is not sufficient for parliamentarians to only discuss cutting taxes for low-income Canadians. According to the OECD and even Canada’s finance department, our personal income tax burden remains the highest of the G-7 nations. This standing has not changed in almost a decade and means the French and Italians pay less personal income tax than Canadians,” noted Williamson.

“Broad-based tax relief is necessary to ensure all income levels benefit from lower taxes. Ottawa must focus on further reducing personal income taxes in the 2008 budget and we can suggest several options. At a minimum the Conservative government could chop the two middle rates of 26% and 22% a point each and raise the income threshold at which the top rate of 29% begins to apply to $200,000,” Williamson said. “This proposal can hardly be called radical as it was the tax relief model the Liberals campaigned on in the last election.

“Liberal leader Stephane Dion would have a hard time voting against his party’s own tax proposal if Minister Flaherty were to enact it in the next budget. While the Liberal caucus might squirm, it would be a good tax cut for overburdened Canadians. The goal is to lower income taxes and very few taxpayers will complain if it means implementing the Liberal’s old plan under a Conservative banner.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

Cut Taxes to Strengthen the Economy

By Adam Taylor and John Williamson

NEWS ALERT: Finance Minister Jim Flaherty will not table a budget in 2008. At a campaign-style event to draw attention to the Jan. 1 GST cut, Prime Minister Stephen Harper dashed hopes for additional tax relief. “We’re not going to undertake any long-run spending or tax-reduction initiatives unless we feel they are affordable,” he said. Budget reporters zeroed in on the dark economic clouds south of the border and concluded tax relief and spending initiatives are off the government’s agenda. Mr. Flaherty it seems can rest easy, his services are not needed.

Or are they? With a looming spring election, the unreported paradox is why would Messrs. Harper and Flaherty be publicly promoting their tax relief agenda as an economic tonic while simultaneously downplaying the likelihood of additional tax cuts when they will be most needed? That is, in either an economic slowdown or election battle. Are we to believe the Conservative government will throw away its fiscal card and instead fight the election on medicare, climate change and government integrity while financial conditions worsen? That is hardly sound policy-making or, for that matter, a wise re-election strategy.

It is probably too much to hope the next round of tax reductions will match Mr. Flaherty’s fall economic update. It cut taxes an impressive $60-billion by substantially lowering business taxes, reducing the GST to 5%, and reversing the personal income tax increase the government enacted in its first budget in 2006.

Those recent changes are a step in the right direction, but hardly taxpayer nirvana. As a result of the bottom income tax rate returning to 15% from 15.5% and a higher basic personal exemption (what a person can earn before paying federal income tax), an individual’s average income tax bill will fall by $223 in the ’07 tax year. The savings will repeat in 2008.

Families with children fare better. Thanks to a new child credit worth $300 per child and a higher spousal exemption – both enacted in the 2007 tax year – families with two kids, including single parents, save between $800 and $900 a year in income taxes (and keep adding $300 for every additional child under 18 years old).

Lowering the GST by two points will save the average household an additional $300 to $400 annually. Most economists criticized cutting the GST. Globe and Mail columnist Jeffrey Simpson went overboard, calling it “the worst piece of fiscal policy in a quarter of a century.” Worse, readers are to presume, than government policy of carelessly racking up $467-billion in debt over the past 25 years!

There is no reason why the GST cannot be reduced along with other federal levies as Ottawa lessens the tax burden on Canadians. Now that the government has fulfilled its GST promise, the Conservatives should turn to cutting the taxes that matter most – personal income rates.

Over the next six fiscal years, the federal surplus will exceed $50-billion. As such, there is ample room for the government to continue cutting taxes. There is no need for additional spending beyond inflation and population growth. According to the fall economic update, at the end of the 2008/09 fiscal year the three-year spending increase will exceed $32-billion. That is a cumulative increase of 18.5% in the size of the federal government since the Conservatives came to office.

Canadians remain over-taxed: Mr. Flaherty has said so himself, repeatedly. More needs to be done to ease this country’s heavy tax load. According to the Organization for Economic Cooperation and Development (OECD) Canada has the highest personal income tax burden of G-7 nations. Despite the location of a low-tax jurisdiction south of the 49th parallel, Canadians pay more income tax than the French and Italians do!

To correct this problem, Minister Flaherty needs to reduce Canada’s high marginal income tax rates. He should begin by cutting the two middle tax rates of 22% and 26% by one point each and raise the income threshold at which the top rate of 29% begins to apply to $200,000. If this plan sounds familiar it is because the previous Liberal government proposed it in its dying days and campaigned on it in the last federal election.

Politically, the Grits might squirm if forced to vote for or against a tax proposal they authored. But that should not be the primary reason for enacting it. Rather, it is a good tax cut for Canadians and will help the economy. The goal is to lower tax rates and very few taxpayers will complain if it means implementing the Liberal’s old plan under a Conservative banner.

Budget 2008 is the time to offer personal income tax relief. If the economy slows – as experts predict – taxpayers and businesses will be better able to cope paying less tax. The Conservatives should put the economy ahead of government spending and take care to ensure Canada’s wealth creators continue to generate jobs. A federal bureaucracy that has become 50% more costly since 1997 will not keep the economy afloat but the taxes needed to sustain it are an economic drag. In the same vein, Ottawa can do with fewer handouts to businesses and special interest groups.

With or without a slump, the government needs to spend less, spend more wisely and cut income taxes to ensure the country remains strong and our prosperity continues. Mr. Flaherty has his work cut out for him – the next budget will be the government’s most important fiscal test yet.

Adam Taylor is research director and John Williamson is federal director of the Canadian Taxpayers Federation.

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

December 17, 2007

CRA informs Canadians on tax relief measures

The Canada Revenue Agency has provided a news release informing Canadians on tax relief measures.

According to the CRA, the Minister of National Revenue Gordon O'Connor assured Canadians that the CRA "is ready to support taxpayers to ensure that they understand the new tax measures passed by Parliament [Friday December 14, 2007] and are able to take full advantage of them."

"Canadians will start to see the impact of these tax cuts on January 1, 2008 because of the proactive steps being taken by the Canada Revenue Agency to implement rate reductions", said Minister O'Connor. “The CRA is taking action to ensure all businesses have the information they need to implement the rate reductions so that Canadians can start benefiting from the GST/HST tax cut on January 1, 2008."

The CRA has set up a toll-free GST/HST rate reduction line for businesses and consumers at 1-866-959-7797 (1-866-959-7798 in French), which is available from 8:15 a.m. to 8:00 p.m. (local time), Monday to Friday, across Canada.

For more information on this news release, see:

Posted by Editorial Team [permalink]

October 23, 2007

Shopping for lower taxes and less government regulation

There was a time, not very long ago, when finance ministers were known for challenging wooly economic thinking to improve the economic wellbeing of Canadians. Paul Martin successfully battled the deficit by rallying Canadians to support the Liberal government’s cost cutting measures. Michael Wilson was even more daring: as Conservative finance minister he abolished the old and highly inefficient manufacturers’ sales tax (MST) and replaced it with the – albeit hated – GST.

And Jim Flaherty? Well, he is hoping a meeting with the Retail Council of Canada will pressure merchants to lower prices to reflect our strong loonie. There is nothing wrong with a finance minister looking out for consumers. Yet, Mr. Flaherty has a much larger responsibility to Canadians than suggesting, as he has done, the reason domestic prices for goods and services do not match those in the United States is retailer gouging.

Minister Flaherty is well aware the strength of a currency is only one factor that determines price. Others include the tax bite, government regulations, minimum wages, tariff barriers and labour laws. The Canadian economy has more costly regulations and higher taxes and until this is changed Canadians cannot expect price parity with the U.S., which has a more dynamic, lower taxed, less regulated and therefore less costly market.

And yet for many years proponents of higher taxes and more red tape have argued the Canadian economy can absorb these costs without any economic pain. Today, dollar parity reveals the truth – somebody pays an economic price and it is the Canadian consumer.

Since finance ministers have no direct control over the dollar – or for that matter retail prices – Mr. Flaherty should concentrate on the policies he can influence as a way to help businesses adjust to Canada’s new economic environment. As such, the finance minister ought to explain the country cannot have radically higher minimum wages, higher business taxes and more costly regulations and expect prices to be the same on both sides of the border. It is simply an economic impossibility. After that is said, he should go about tackling these problems.

In order for our domestic market to offer the prices consumers obviously want, the federal government must take the lead to make the economy more productive. Of course, Ottawa cannot do it alone. It is a job for the federal government as well as provincial governments, which set minimum wages and determine labour laws, taxes and regulations. Even so, the federal finance minister can act to improve market efficiency with tax reform and lower taxes.

Mr. Flaherty’s demand for lower retail prices would be strengthened if he were to first lead by example. A good place to start is reforming Employment Insurance (EI) payroll taxes in the November budget update. Like other business inputs, payroll taxes are paid by manufacturers and retailers but they are passed on to, and paid, by consumers. Lower EI taxes will help retailers cut their costs and also benefit the exporting manufacturing sector, which is facing tough international competition. The Conservative government should act quickly to lower and harmonize employer premiums with those of employees. The tax savings will flow to consumers.

Thankfully, the Conservative government’s recent throne speech signaled its focus on targeting tax relief is over and Ottawa will soon enact broad-based tax cuts. Given the size of the federal surplus, which was $13.2-billion in 2005, $14.2-billion in 2006 and is on track to top $20-billion this year, Finance Minister Flaherty has an opportunity to combine intelligent and dramatic tax reform with significant tax relief.

Fat surpluses mean tax reform need not feed Canadians an unwanted new tax as former finance minister Wilson did when the MST was replaced. But it is the finance minister’s job to help retailers adjust when weaknesses are found in the economy. The Canadian market is not as vibrant or as competitive as it could or should be and government policy is part of the problem. Let’s get on with fixing it. For this to happen, Mr. Flaherty will first need to propose solutions. If he does, he will find taxpayers and retailers listening.

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

October 17, 2007

Get Ready for Lower Taxes – Government Listening to Canadians

Conservative Government Outlines Fresh New Priorities

EDMONTON: The Canadian Taxpayers Federation (CTF) reacted to today’s speech from the throne, opening the Second session of the 39th Parliament.

“Today’s throne speech marks a significant step by the government towards lower taxes. Canadians can look forward to another one point cut to the GST as well as broad, multi-year tax relief for individuals, families and businesses,” said CTF federal director John Williamson. “The Conservative government has heard the demands of Canadians for tax relief and signaled today it will act accordingly by reducing its tax bite.”

“They must be serious given the throne speech announcement was made on primetime national television. We call on government MPs to ensure income taxes come down in short order,” said Mr. Williamson. “It’s pretty simple really: surplus dollars should be returned to taxpayers.”

On the Kyoto Protocol – Some Clearheaded Thinking:

“It’s fitting it was in the Senate, Canada’s place of sober second thought, that the federal government announced it will not meet its Kyoto targets,” observed Williamson. “Implementing the international agreement requires Canada to reduce average carbon dioxide emissions to 6 per cent below 1990 levels starting in 2008. Because the country’s output of greenhouse gases has increased by nearly 33 per cent above its target, draconian cuts in energy output are needed in short order. It cannot be done and Ottawa has finally acknowledged that fact. The Conservatives should be commended for being forthright with Canadian taxpayers. Moreover, they should be applauded for not wasting tax dollars on this scheme.”

This is What Democracy Looks Like – Elected Senator Appointed to the Red Chamber:

Senate reform advocate Bert Brown was finally appointed to the Senate, becoming its second ever elected member. Senator Brown won his second provincial Senate election in 2004 in the province of Alberta. “The Conservative government’s decision to appoint Bert Brown is a message to provincial governments. If provinces want their citizens to be fully represented in the upper chamber they need simply to consult voters in province-wide elections,” concluded Williamson. “Senator Brown’s appointment makes it clear Prime Minister Harper is prepared to heed the advice of voters by appointing their pick to the Senate.”

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

September 28, 2007

Will Ottawa Now Reduce Income Taxes?!?

· Structural over-taxation results in $14.2-billion surplus in 2006/07.

· Interest savings of $725-million go to future tax relief, but broad-based income tax reductions not on Conservative agenda.

OTTAWA: The Canadian Taxpayers Federation (CTF) reacted today to the announcement the federal government posted a $14.2-billion surplus in the 2006 fiscal year, considerably higher than its two earlier projections. The 2006 Budget (tabled in May, 2006) originally low-balled the surplus at $3.6-billion and the 2007 Budget (tabled March, 2007) increased that estimate to $9.2-billion. Ottawa missed its original target by almost 400% and its second estimate by more than 50%.

The surplus of $14.2-billion will be used to reduce Canada’s debt, bringing it down to $467.3-billion. Today’s debt reduction payment will save approximately $725-million in annual interest savings. Under the federal government’s new tax-back guarantee law the savings will be used to reduce personal income taxes. To date, the Conservative government has not lowered personal income tax rates, instead it has targeted income tax relief with a number of “boutique” tax reductions that favour some, but not all taxpayers.

“Canadians prefer that governments pass surplus budgets rather than deficit budgets, but this level of surplus is ridiculous. A $14.2-billion surplus means Ottawa is over-taxing Canadians by $14.2-billion. There is no excuse left, except political rhetoric, for Ottawa not to provide personal and business tax relief,” said CTF federal director John Williamson. “Annual surpluses represent over-taxation by government and the money should go back to taxpayers by way of income tax relief.”

For the Record – Surprise, Surprise:

Last year, when the Conservative government reported the 2005/06 surplus was $13.2-billion, Finance Minister Jim Flaherty said, “We’re going to budget much closer to the line … No more so-called surprise surpluses at the end of the fiscal year.”

“The government has shot its credibility on the surplus and is budgeting like the former Liberal government,” concluded Williamson. “The Conservatives downplay their ability to cut taxes, like the Liberals did. They sell massive surpluses as good news, just like the Liberals did. Canadians aren’t buying it any more and they recognize they are being gouged by Ottawa.”

Fiscal Outlook:

The CTF anticipates the surplus for the current fiscal year (2007/08) will again exceed $12-billion. The 2007 budget estimated it will be $3.3-billion.

John Williamson
Federal Director
Canadian Taxpayers Federation

Posted by John Williamson, Canadian Taxpayers Federation [permalink]

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