'Canadians are taxed too much,' says Flaherty

STEVEN CHASE,  Globe and Mail Update

OTTAWA — Ottawa is eyeing personal and corporate tax cuts to help make Canada more competitive, federal Finance Minister Jim Flaherty said Monday.

“I can assure you that our government is by no means finished in our efforts to improve our tax system for the benefit of Canadian families and businesses,” the Conservative cabinet minister said in a speech to the Canadian Institute of Chartered Accounts in Ottawa today.

“In the months to come we intend to go even further to provide tax relief to deserving Canadian businesses and to the workers who make these businesses thrive.”

As The Globe and Mail first reported Oct. 2, the Tories are assembling a pro-growth agenda to be discussed in the fall fiscal update that goes beyond their five-priority election platform to address broader economic concerns such as clogged highways and border crossings, skill shortages and the Canada's high tax burden.

Mr. Flaherty said his fall fiscal update would elaborate on his economic agenda, a plan he said will give pride of place to tax cut proposals. “Absolutely. Canadians are taxed too much,” the finance minister said.

“I'm going to talk more about that in the fall economic update ... then we'll make choices for the next federal budget.”

The Tories cut corporate and personal taxes in the 2006 budget, enacting proposals first advanced by the former Liberal government.

But Mr. Flaherty said Canada's tax advantage still needs work.

“We must establish a meaningful, marginal effective tax rate advantage ... one that goes beyond the statutory tax rate itself and takes the overall impact of the business tax system on investment decisions into account,” he said.

He said Finance is looking at incentives to help low-income Canadians enter the work force, a concern especially now when there are labour shortages in some parts of the country. “We discourage people in Canada, by our income tax system, from entering the work force when they're on social assistance, quite frankly,” Mr. Flaherty said. “[When] you enter the work force, you lose benefits and you pay a relatively high marginal [tax] rate.”

Mr. Flaherty also urged provinces to give tax breaks to business by eliminating capital taxes and harmonizing their sales taxes with the goods and services tax so that capital goods are no longer charged PST. “Canada stands out as one of four OECD countries that still impose capital taxes and one of three that impose retail sales taxes on investment. If provincial governments eliminated these taxes and harmonized their sales taxes with the GST, Canada would actually have the lowest marginal effective tax rate among G-7 nations,” he said.