OTTAWA - The federal government is collecting taxes at a prodigious rate and will have significant room to bring in broad-based tax relief for all Canadians, Finance Minister Jim Flaherty said Wednesday.
Speaking the day following the throne speech, Flaherty said the Conservative government is preparing several tax measures that will help individuals, families and businesses, but added that Canadians will have to wait until the budget, likely in February, before they see how much they stand to benefit.
"Quite frankly, revenues are good so this is an opportunity (to reduce taxes)," Flaherty said.
"It's possible to take some tax measures in the fall update, but I'm not anticipating that right now because we're not far from the budget, fairly early in the new year."
Later in the day, Prime Minister Stephen Harper added his voice to the tax reduction pledge, telling the House: "Let me assure you, we will reduce taxes for all businesses, as well as for all individuals and families in this country."
There will be a clearer picture of the government's finances in November, when Flaherty delivers his fall fiscal update.
But the government has so far reported a $7.8-billion surplus in the first four months of the 2007-8 financial year, on top of the $13.8 billion surplus it reported for the previous financial year, which ended in March.
"I believe if trends continue and the government maintains its budget target on spending, the surplus could top $20 billion, which would be a record," said John Williamson of the Canadian Taxpayers Federation.
"I know the Finance department keeps telling everyone to be prudent, that revenues ebb and flow. But they've been saying that each year for at least the last five years and each year, they've been wrong. I'm prepared to bet I'll be closer to the mark than the department is."
With so much money to divvy up, the government may have enough room for both a general cut in the general income tax, and an early fulfillment of an election promise to cut the goods and services tax (GST) another percentage point to five per cent, a measure that will cut revenues by $5-billion.
Also on the table is extension of the tax writeoff on the purchase of new equipment to help the beleaguered manufacturing sector, and deeper and faster cuts to the corporate tax.
Flaherty would not tip his hand Wednesday, but he made clear that he was about through with the targeted tax cuts of the past two budgets -- which included the significant, such as a tax benefit for low income earners, and the esoteric, such as benefits for children in sports programs.
"We've fulfilled most of our tax obligations that were in the platform, so now we can move to more broad-based tax reform," Flaherty said.
One fly in the ointment in the rosy fiscal picture is the Bank of Canada's warning this week that the economy is likely to slow significantly in the second half of this year and in 2008. That could cut into tax revenues.
As well, Flaherty has repeatedly warned that Canada's long-term economic future is being undermined by poor productivity and inter-provincial trade barriers that impinge on commerce, business development and labour mobility.
The minister repeated Wednesday that he will push ahead with creation of a common securities regulator despite a unanimous vote in Quebec's national assembly telling Ottawa to back off the initiative.
Flaherty said a panel to prepare legislation will be struck soon, after which the proposal will be presented to the provinces. An official said Ottawa would prefer all provinces sign on board, but was prepared to go ahead with a partial deal that would see only a few provinces sign on.
And Industry Minister Jim Prentice reiterated the throne speech pledge to consider using the federal trade and commerce power to bring down inter-provincial trade barriers.
"The constitutional power is clear," Prentice said. "We live in a globally competitive market place and yet have barriers right here in Canada that don't make any sense."
Such an initiative would be welcomed by the business community, said Jack Mintz, professor of economics at the Rotman School of Management in Toronto. But he noted that for Ottawa to act unilaterally, it would likely need to put the question before the courts, which he said have historically tended to side with the provinces on the issue.
Flaherty said the government has no intention to take the issue of defining federal powers to the Supreme Court, but he would not say how the government intends to move forward.
