Canada Needs Faster Tax Reforms

Date: Friday, September 12, 2008
Author: Emii.com

Canadian federal and provincial governments must accelerate business tax reforms to help Canadian firms be more productive and to deal with the strong dollar, the Conference Board of Canada argues.

"Broad business tax reform would help Canadian firms invest in productivity-enhancing machinery and equipment, give companies a competitive advantage in global competition, and encourage investment in leading-edge environmental technologies," said Glen Hodgson, the think-tank's chief economist.

Hodgson called for the introduction of controversial carbon taxes, along the lines of those already in place in British Columbia and similar to what the federal opposition Liberals have proposed, which would not only help reduce greenhouse gases, but provide additional revenues to cover costs of accelerating tax cuts in other areas, such as corporate income taxes.

The board wants accelerated corporate income tax rate cuts, to put Canada in the low end of the range in the G7 major industrialised nations and meet the federal government's target of a combined federal-provincial corporate income tax rate of 25%.

Another change to encourage firms to invest and expand is a smoothing of corporate tax rate increases facing small businesses when they expand beyond a certain size, the board said.

The board also urged governments to introduce an environmental technology investment tax credit and for provinces that haven't yet done so, to eliminate any remaining capital taxes, which are a tax on the assets of a firm and applied whether a company is profitable or not.

Politicians will have the opportunity to convince voters of their tax plans during the run up to the general election on October 14.