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2007 Federal Economic Statement Promises $60 Billion in Tax Cuts Over Six Years

Minister of Finance Jim Flaherty presented the minority government's 2007 federal Economic Statement on October 30, 2007. The Economic Statement presents a number of tax measures that will save corporate and individual taxpayers almost $60 billion over six years.

Corporate Tax Measures

General income tax rates
The general and manufacturing and processing income tax rates will be reduced in steps from 22.12 % in 2007 to 15% in 2012.

The Economic Statement presents objectives to the provinces and territories to reduce their corporate income tax rates to 10% by 2012.

The government's goal is to achieve a combined federal/provincial and federal/territorial corporate income tax rate of 25%, which would make Canada's general corporate income tax rate the lowest among the G7.

The reductions also apply to the distribution tax on publicly traded income trusts and partnerships. In addition, the government will consider adjusting the dividend tax credit for eligible dividends to take into account the general rate reductions.

Small business rates
The small business threshold will remain $400,000, but the small business rate reduction to 11% is accelerated to 2008.

Personal Tax Measures

The measures to reduce personal income taxes announced will save each personal taxpayer earning taxable income over $37,178 roughly $200 per year, commencing in 2007.

Lowest personal tax rate
The lowest personal income tax rate (which applies to income up to $37,178) is reduced to 15% (from 15.5%) retroactive to January 1, 2007.

Personal amounts
The basic personal amount, as well as the spouse/equivalent to spouse (or wholly dependent relative) personal amount, is increased in 2007 to $9,600 (from $8,929).

Goods and Services Tax
The goods and services tax (GST) is reduced from 6% to 5% on January 1, 2008.

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