Canadian government announces major tax reductions

Canadian Finance Minister Jim Flaherty announced a five-year program that could reduce taxes by a total C$60 billion.

The planned tax reduction measures include:

Low-end personal income tax rates would be reduced from 15.5% to 15%, taking retroactive effect to the start of 2007;

The basic personal exemption, the amount at which income is taxable, is raised from C$8,929 to C$9,600, also backdated to January 2007;

Business tax rates are expected regularly drop from the current 20.5% to 15% in 2012;

The Goods and Services Tax that applies to most purchases would be reduced from 6% to 5% as 2008 begins. This rate was previously reduced from 7% July 2006, shortly after Prime Minister Stephen Harper took office.

These measures will be brought before the House of Commons in Ottawa on Wednesday as a confidence motion. In Canada's minority government situation, opposition parties could defeat these measures and likely prompt an election. However, opposition leader Stéphane Dion has expressed an unwillingness to defeat the government on this matter.