Canada - Wait for budget for tax cuts, Flaherty says

The federal government is collecting taxes at a prodigious rate and will have significant room to bring in broad-based tax relief for all Canadians, Finance Minister Jim Flaherty said today.

Speaking the day following the throne speech, Flaherty said the Conservative government is preparing several tax measures that will help individuals, families and businesses, but that Canadians will have to wait until the budget, likely in February, before they see how much they stand to benefit.

"Quite frankly, revenues are good so this is an opportunity (to reduce taxes)," Flaherty said.

"It's possible to take some tax measures in the fall update, but I'm not anticipating that right now because we're not far from the budget, fairly early in the new year."

Later in the day, Prime Minister Stephen Harper added his voice to the tax reduction pledge, telling the House: "Let me assure you, we will reduce taxes for all businesses, as well as for all individuals and families in this country."

There will be a clearer picture of the government's finances in November, when Flaherty delivers his fall fiscal update.

But the government has so far reported a $7.8-billion surplus in the first four months of the 2007-8 financial year, on top of the $13.8 billion surplus it reported for the previous financial year, which ended in March.

"I believe if trends continue and the government maintains its budget target on spending, the surplus could top $20 billion, which would be a record," said John Williamson of the Canadian Taxpayers Federation.

"I know the Finance department keeps telling everyone to be prudent, that revenues ebb and flow. But they've been saying that each year for at least the last five years and each year, they've been wrong. I'm prepared to bet I'll be closer to the mark than the department is."

With so much money to divvy up, the government may have enough room for both a general cut in the general income tax, and an early fulfillment of an election promise to cut the goods and services tax (GST) another percentage point to five per cent, a measure that will cut revenues by $5-billion.

Also on the table is extension of the tax writeoff on the purchase of new equipment to help the beleaguered manufacturing sector, and deeper and faster cuts to the corporate tax.

Flaherty would not tip his hand today, but he made clear that he was about through with the targeted tax cuts of the past two budgets – which included the significant, such as a tax benefit for low income earners, and the esoteric, such as benefits for children in sports programs.

"We've fulfilled most of our tax obligations that were in the platform, so now we can move to more broad-based tax reform," Flaherty said.