On October 30th, Jim Flaherty presented the Federal Economic Statement, which included details of broad-based tax relief for corporations and individuals over the next five years.
Corporate Tax Measures
The small business tax rate was reduced to 11%, starting in 2008. This tax rate cut was originally scheduled for 2009. Along with the previously announced elimination of the corporate surtax, the effective small business tax rate in Ontario will be 16.50% in 2008.
For business income not eligible for the small business deduction, the federal general tax rate is to be reduced as follows:
The government’s stated goal is to work with the provinces to achieve a combined federal/provincial corporate income tax rate of 25%, which if accomplished, would make Canada’s general corporate income tax rate the lowest among the G7.
Personal Tax Measures
The lowest personal income tax rate, which in 2007 applies to income up to $37,178, is reduced from 15.5% to 15%, retroactive to January 1, 2007.
The basic personal amount, as well as the spouse or equivalent to spouse amount, is increased from $8,929 to $9,600 retroactive to January 1, 2007. This credit will increase to $10,100 in 2009.
The goods and services tax (GST) rate will drop from 6% to 5% on January 1, 2008. Transitional measures are provided in the release. The GST credit for qualifying Canadians will be maintained at its current level, providing a net benefit to Canadians with low or modest incomes. Excise duties for tobacco products will be increased to offset the GST reduction.
We are available at your convenience to discuss the impact of these new provisions on your business or personal affairs. Your local DJB professionals can help you develop a plan to implement any changes that may be warranted to minimize your income taxes.