October 31, 2006
Ottawa, Ontario
Check against delivery
Good evening:
I am here tonight to announce our new Tax Fairness Plan for
Canadians. It's a plan designed to level the playing field between income
trusts and corporations.
The measures I am bringing forward today are necessary to
restore balance and fairness to Canada's Tax System. They are necessary to
ensure our economy continues to grow and prosper. They are necessary to
bring Canada in line with other jurisdictions throughout the world.
Our plan is the result of months of careful consideration
and evaluation. Our actions are clear, decisive and in the best interest of
all Canadians.
Despite the provisions in Budget 2006 to reduce the level of
taxation on corporate dividends, the landscape has changed dramatically in
the short time I have been Minister of Finance. This year alone there has
been almost $70 billion in new trust announcements.
We have seen a growing trend towards corporate tax
avoidance. Top Canadian corporations, operating within the current rules,
have announced their intention to convert to income trusts. They feel
compelled to seek more favourable tax treatment by capitalizing on an
available tax rule.
This trend has now moved into the core of our industrial and
knowledge-based economy. It is a trend that has caused me growing concern.
If corporations don't pay their share of taxes, this tax burden will shift
onto the shoulders of hardworking individuals and families.
This is simply not fair.
This trend towards income trusts is also creating an
economic distortion that is threatening Canada's long-term economic
growth. It is limiting the ability of Canadian capital-intensive
corporations to invest, to grow and compete in this highly competitive
global economy.
If we continue down this road the implications for Canadians
are significant. We will find ourselves with a tax system that is less fair
and an economy that is less productive and competitive. Left unchecked such
corporate decisions would result in billions of dollars in less revenue for
the federal government to invest in the priorities of Canadians, including
more personal income tax relief. These decisions would also mean less
revenue for the provinces and territories, several of which have made
representations to me on this matter.
Clearly, Canada is out of step in its treatment of income
trusts. The structure being used in this country was shut down in the United
States and Australia.
This situation is not right and it is not fair. It is the
responsibility of the Government of Canada to set our nation's tax policy,
not corporate tax planners.
In response, I am putting forward our government's Tax
Fairness Plan:
First of all, the government is proposing to apply a
Distribution Tax on distributions from publicly traded income trusts. This
will level the playing field between trusts and corporations.
For income trusts that begin trading after today, these
measures will apply beginning with their 2007 taxation year. For existing
income trusts the government is proposing to provide a four-year transition
period. They will not be subject to the new measures until their 2011
taxation year.
Secondly, as part of our Tax Fairness Plan we will be
reducing the general corporate income tax rate one-half percentage point as
of January 1, 2011. As a result of this measure, there will not be more
government revenue generated from the corporate sector.
Thirdly, we are increasing the Age Credit Amount by $ 1,000
from $4,066 to $5,066 effective January 1, 2006. This measure will provide
tax relief for low and middle-income seniors.
Finally, we are introducing a major positive change in tax
policy for pensioners. We will permit income splitting for pensioners
beginning in 2007. This will significantly enhance the incentives to save
and invest for family retirement security.
We recognize that pensioners and seniors have made important
investments over the years and may be receiving benefits from the current
income trust structure. These two measures will allow them to retain more of
their income in their retirement years. This is a significant step forward
in the strengthening of our social security system for pensioners and
seniors.
These measures will enhance the seniors' initiative we
introduced in Budget 2006. At that time we doubled the amount of eligible
pension income that can be claimed under the pension income credit from
$1,000 dollars to $2,000 starting in the 2006 tax year.
Our government firmly believes tax relief is one of the keys
to ensuring the Canadian economy remains strong and competitive. I will have
more to say about our competitiveness when I present the government's Fall
Economic Statement and release our Economic Plan for Canada in the next few
weeks.
These measures represent a major tax reduction. Our Tax
Fairness Plan will deliver over a billion dollars of new tax relief annually
for Canadians. The initiatives I am announcing today clearly build on our
tax relief package outlined in Budget 2006. We delivered significant tax
relief for Canadians with 29 tax cuts amounting to $20 billion in tax relief
over the next two years.
But more needs to be done.
Families and businesses still pay too much tax in this
country, and our government will continue to reduce the tax burden on
Canadians. At the same time, we must ensure that no one gains an unfair tax
advantage at the expense of others. It's a responsibility we cannot and
will not abdicate.
Each and every day Canadians across the country get up and
go to work, pay their taxes and set aside a few dollars for retirement. They
trust that their government is watching out for them and upholding the
values that make our country great. The values that define us as Canadians,
like fairness.
The Tax Fairness Plan I am announcing today will uphold the
value of fairness.
It will level the playing field between income trusts and
corporations;
It will ensure that taxes are not unfairly shifted onto the shoulders
of Canadian families and taxpayers;
It will strengthen Canada's social security system for pensioners
and seniors;
It will help corporations make choices that are consistent with
economic growth and competitiveness; and
It will bring Canada's approach to income trusts back in-line with
other jurisdictions.
Canada's New Government understands that good government
and good policy are about being focused, determined and decisive. Our Tax
Fairness Plan is not only the right thing to do, it is in the best interest
of all Canadians from coast to coast to coast.
Thank you.
