September 6, 2006

M*. **

Dear M*. *:
Thank you for your correspondence of May 17, June 29, July 15 and
August 19, 2006 and your correspondence of June 2, 2006, which was referred
by the Office of the Prime Minister, the Right Honourable Stephen
Harper, regarding taxation. Please excuse the delay in replying.

Canada's new Government believes that lower taxes for businesses are
essential if Canada is to remain competitive. Lower taxes encourage the
investment necessary to create jobs and improve the living standards of
Canadians. For example, capital investment in new machinery and more
efficient technology makes workers more productive and leads to economic
growth, more jobs and higher wages. In an increasingly globalized
economy where capital is highly mobile, a competitive business tax system
is crucial.

To make Canada's tax system more competitive, Budget 2006 sets out a
significant business tax relief plan that will:

* Reduce the general corporate income tax rate from 21 percent to 19
percent by January 1, 2010;
* Eliminate the corporate surtax for all corporations in 2008; and
* Eliminate the federal capital tax as of January 1, 2006 - two years
ahead of schedule.

The tax reductions proposed in Budget 2006 will allow Canada to regain
an advantage of 5.1 percentage points for manufacturing income in 2010.
This will make Canada a more attractive destination for investment.

A statutory tax rate advantage is not enough. That is why our Budget
takes steps to create a marginal effective tax rate (METR) advantage for
Canada over the U.S. By 2010, when the measures proposed in Budget
2006 are fully in place, Canada's overall METR will be slightly lower than
that of the U.S. Budget 2006 establishes a clear commitment to improve
the international competitiveness of Canada's corporate tax system.

In Budget 2006, the Government of Canada proposed tax relief measures
that will leave significantly more money in the pockets of Canadians.
With these measures, we are not only keeping our word to Canadians on
reducing the Goods and Services Tax (GST), we are going much further in
delivering immediate, real, and continuing results for people across the
As I mentioned in my correspondence of July 13, 2006, our tax relief
plan provides almost $20 billion in tax relief for individuals over the
2006-07 and 2007­08 fiscal years ? more than the preceding four budgets
combined. Our tax relief plan will also remove some 655,000 people
from the income tax rolls. As a result, Canadians across all income
groups can expect to be better off.
Thank you for communicating your concerns.

James M. Flaherty

Blanks says,
That's alot of tax relief but I believe the original question was, why
is the lowest income tax rate increasing while all these others are being reduced?

September 6, 2006 - Posted by | Canadian Politics

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