IDA calls for tax cuts

(November 4, 2005) In what has become something of an end-of-year tradition, the IDA is calling on the federal government to cut taxes in the next budget.

According to a report by the IDA, Canada’s productivity has essentially flat-lined over the past five years, lagging growth in the U.S. and other members of the Organization for Economic Co-operation and Development.

“There is clearly a link between levels of capital investment and productivity growth and Canada has reached a point where measures are needed to reinvigorate business capital spending,” said IDA president and CEO Joe Oliver in a pre-budget submission.

The report says Canada’s marginal effective tax rate on corporate income is one of the highest in the world and that it stifles investment. The report points to Ireland’s recent economic turnaround, in which the Emerald Isle used a low-tax environment to surpass the Canadian standard of living.

The IDA is calling for Ottawa to follow through on budget promises made in February 2005 to eliminate the corporate surtax and reduce the general corporate tax rate from 21% to 19%. These plans were scuppered following the election of a minority Liberal government that relied on the NDP for its survival.

The IDA also wants the dividend tax credit boosted to 18% from 13% to reduce the impact of double taxation — once as a corporate profit and again in the hands of the shareholders.

The submission also floats the suggestions that the capital gains inclusion rate be slashed to 25% from its current 50%, saying the move would promote investment in small publicly-traded companies, which are often the fount of innovation.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com