6 January 2009

Flaherty hints personal tax cuts may be in budget

The following is excerpted from the 6 January 2009 edition of “Toronto Star”.

Federal Finance Minister Jim Flaherty hinted Tuesday that personal tax cuts could be included in this month's budget as a way to help stimulate the country's economy…

There have been reports that U.S. president-elect Barack Obama's administration will bring in tax cuts as part of its economic stimulus package when he takes office later this month.

Asked if any Canadian tax cuts could also eventually mean reductions in services, Mr. Flaherty insisted the main goal is to keep the economy strong in the face of a worsening situation.

“We need to take some steps in the short term to provide stimulus in the economy but we also have to, during this time of economic turbulence, take steps to build capacity in the economy so we come out of the slowness in a position of strength.

“This is very important and tax reductions are one way of encouraging investment leaving more money in people's pocket so that they spend it, so that they help strengthen the economy.”

Mr. Flaherty also announced the government and the country's banks have agreed to form a group to work on ensuring adequate availability of credit and financing in Canada.

Mr. Flaherty, who met with the Canadian Bankers Association on Monday, says the group will meet immediately.

“We all have responsibilities to ensure that the financial system functions properly in support of the Canadian economy,” he said. “I encourage the heads of the banks, the CEOs, to work with the government.”

The Canadian Taxpayers Federation was expected to urge Mr. Flaherty to balance the 2009-10 budget and provide tax relief. Mr. Flaherty was also to meet with other business leaders and Montreal Mayor Gerald Tremblay.

Mr. Flaherty also said he is taking seriously the concerns expressed by bankers that other lenders in the current tight credit environment need to be explored.

“Yes, we have had discussions about the ways in which we can accomplish the goal of making sure the commercial paper market functions. There are a number of policy options there,” Mr. Flaherty said at Tuesday's news conference.

Canadians are concerned about the tight credit situation, he said.

“The number one issue I have heard so far across Canada has been access to credit, access to financing,” he said, adding that commercial paper is an important element in that…