Finance Minister Jim Flaherty has announced a reduction of the GST to five per cent, and major cuts to personal income taxes and corporate tax rates, in a fiscal fall update that resembled a full-fledged budget.
The total tax cuts represent about $60 billion in savings over the next five years, taking advantage of a federal surplus expected to reach $11.6 billion this fiscal year.
The Conservatives had promised to lower the consumption tax to five per cent in their 2006 election platform. The GST cut will be effective Jan. 1, 2008.
Other highlights include:
* An increase in the basic personal amount exemption to $9,600 from $8,929, retroactive to Jan. 1, 2007;
* Two years later, on Jan. 1, 2009, the basic personal amount exemption will be increased to $10,100;
* Reducing small business income tax to 11 per cent by 2008;
* $10 billion in federal debt relief; and
* The lowest personal income tax rate moves to 15 per cent from 15.5 per cent, effective Jan. 1 2007, undoing a change made in the first Conservative budget.
The government will also cut corporate tax rates by one percentage point in 2008. Further cuts will occur each year at a rate of one percentage point per year, bringing corporate tax rates down to 15 per cent by 2012 from 22 per cent today.
Corporate taxes will fall by one third between 2007 and 2012. According to the government, this will make Canada's corporate taxes the lowest among major industrialized nations.
The plan will be put to a confidence vote on Wednesday, putting an election trigger in the hands of the opposition parties.
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