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Depending
on how Ottawa slices the pie, this could mean hundreds of
dollars in breaks for individual Canadians: relief
expected to come either in the looming fall fiscal update
or an early 2008 budget.
These
predictions come as the federal Finance Department
revealed yesterday that it's running an $8.7-billion
budget surplus five months into the fiscal year,
$1.5-billion ahead of where it stood one year ago.
Canadian
Taxpayers Federation head John Williamson said if Ottawa
keeps accumulating revenue at this pace, the surplus could
hit $20-billion, which would break the record of
$19.9-billion in 2000-2001.
Mr.
Drummond expects the federal government is headed for a
surplus of at least $12-billion to $15-billion, although
he said it's not improbable it could be higher.
Surging
corporate tax revenue is swelling Ottawa's coffers. It's
up $2.8-billion or 23.2 per cent in the first five months
of this fiscal year over the previous April to August.
Ottawa
is still benefiting from red-hot prices for many resource
commodities that Canadian companies sell, including oil,
which recently hit record highs. It's also reaping more
because tax-loss pools that allowed the oil patch to
reduce taxes paid are drying up in the face of rising
crude prices.
The
strengthened Canadian dollar - up more than 17 per cent
this year against its U.S. counterpart - has actually
prevented Ottawa's tax revenue take from being even fatter
because it has made exports more expensive and crimped
sales for manufacturers.
All
this excess cash could embarrass the Conservatives, who
vowed to end such massive windfalls, and forecast a
surplus of only $3.3-billion this year.
But
it also gives federal Finance Minister Jim Flaherty more
fiscal room to offer the tax relief the Tories have been
promising for weeks, possibly as early as the imminent
fall economic statement.
The
Conservatives have been debating internally whether to
dole out tax relief in the update, expected as early as
next week, or roll all reductions into a big 2008 budget
package.
Senior
economists, who met Mr. Flaherty privately yesterday,
urged him to reduce personal and corporate income taxes,
but warned him off the Conservative promise to cut the
goods and services tax by another percentage point.
The
Tories cut the GST by one point to 6 per cent in mid-2006
and this month renewed a vow to reduce it to 5 per cent as
promised in the last election campaign.
But
economists say the cut would be wasted. They consider
consumption taxes, such as the GST, the least evil among
taxes because they're the least damaging to economic
growth.
Global
Insight (Canada) chief economist Dale Orr said Mr.
Flaherty should delay a GST cut until he gets a deal with
provinces that have yet to harmonize their sales taxes
with the federal levy. Harmonization would mean those
provincial taxes no longer cover capital goods such as
machinery and tools and would be a break for business.
A
tax cut of $10-billion would not go as far as it might
seem in terms of guaranteed relief to Canadians,
especially if the Tories cut the GST.
If
every one of the 15.8 million tax filers who pays taxes
received an equal share of the $10-billion in relief, it
would work out to $632 each.
But
a GST cut would cost Ottawa about $5.5-billion, leaving
$4.5-billion for income tax cuts. And the relief felt by a
GST cut would depend on how much a person purchased.
Plus,
the Tories have promised corporate tax relief, and
economists estimate that a meaningful break for business
would cost at least $1-billion.
This
further shrinks the available pool of tax relief for
taxpayers to $3.5-billion, which would work out to $221
each.
Mr.
Flaherty is also weighing a plea to extend a temporary tax
break for manufacturers hit hard by the rising dollar that
has driven up the price of their exports. Canadian
Manufacturers and Exporters president Jay Myers said he's
expecting action in the fall update on the measure, which
allows rapid writeoffs of investments in manufacturing and
processing equipment.
Source
:
Globe and
Mail - Canada, dated 27/10/2007
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