Canada finance minister favors broad tax cuts over targeting sectors

OTTAWA Thu May 1, 2014 12:19pm EDT

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OTTAWA May 1 (Reuters) - Canada's Conservative government prefers broad business tax cuts rather than targeting cuts to help specific sectors lower their costs, Finance Minister Joe Oliver said on Thursday.

Appearing before the Senate banking committee, Oliver was asked how the government would tackle Canada's poor productivity growth, which lags that of the United States.

"Our approach in general is not to target specific sectors," Oliver replied. "We think the general manner is to improve the costs of businesses, especially by lowering the tax level."

The Conservative government, in power since 2006, has cut the general federal corporate tax rate to 15 percent from 22 percent in 2007. So far, it has given no hint that another round of corporate tax cuts is coming.

Instead, the government has promised to focus on personal income taxes once its budget returns to surplus, which is expected in 2015. One proposal made by the Conservatives during the 2011 election campaign would allow couples with children to split their income for tax purposes, effectively lowering the tax rate on the higher-income parent.

Canada's sagging productivity, which measures real gross domestic product per hour worked, has been a sore point for the government for years and economic theories on the cause of the poor performance abound, with some experts even questioning whether Canada measures the indicator properly.

Bank of Canada Governor Stephen Poloz, appearing before the Senate committee on Wednesday, said Canada's productivity growth could be partially explained by the large energy sector because a heavy initial investment is typically required to develop an oil field before anything is produced, leading to less output per hour worked. (Reporting by Louise Egan; editing by Peter Galloway)

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