INDEPTH: BUDGET 2005 Business CBC News Online | Updated April 27, 2005
[Note: On April 26, the Liberals and New Democrats reached an agreement-in-principle that the Liberal minority government will make changes to its 2005 budget in exchange for NDP support. The changes can be found here.]
Budget plan: reduce general corporate tax rate, starting in 2008
Corporate tax rates trimmed
Businesses in Canada received a surprise in Ralph Goodale's latest budget a reduction in their tax rate, although the cuts are still several years away.
The finance minister pledged to reduce the general corporate tax rate from the current 21 per cent to 20.5 per cent in 2008, 20 per cent in 2009 and 19 per cent by 2010.
[Note : Under the Liberal-NDP deal, the tax cuts will be deferred. A summary of the changes can be found here.]
The move will cost Ottawa slightly more than $3 billion by the time it is fully implemented.
Goodale's second budget also calls for the elimination by 2008 of the corporate surtax, which was originally brought in as a deficit-cutting measure in 1987.
Cutting the surtax will be the equivalent of 1.12 percentage point cut in the corporate tax rate.
Ottawa said eliminating the surtax will cost it $440 million in tax revenue in 2009 and $920 million in 2010.
The government said the cuts mean the country's manufacturing sector, which has been hit in recent months by the rise in the loonie against the U.S dollar, will enjoy a tax advantage of 4.5 percentage points over its U.S competition.
Some businesses will also see changes in how much of the cost of a capital asset they can deduct from year to year.
Goodale said Ottawa will increase the rate at which capital cost allowances can be claimed each year on some environmental technologies from 30 per cent to 50 per cent for equipment acquired over the next seven years.
Capital cost allowance rates on combustion turbines for electricity generation, electricity transmission assets, oil and gas pipelines, and telecommunications cable are also all going up.