“DEVOLIN SUPPORTS GOVERNMENT’S TAX FAIRNESS PLAN”

November 1, 2006

OTTAWA – Local MP Barry Devolin supports yesterday’s announcement by Finance Minister Jim Flaherty to bring tax fairness to Canadian taxpayers – especially to pensioners.

There are three components in this plan: pension income splitting for couples; a new tax on distributions from income trusts; and a $1,000 increase in the special age tax credit for seniors. Collectively, these measures will result in a lower tax burden for individual tax-payers, especially seniors.

“After months of consideration, the Harper government is introducing a major change in tax policy for pensioners,” said Devolin. “If passed by Parliament, Canada’s new government will allow pension income to be split beginning in 2007. This will result in a major tax savings for many middle-income retired couples.”

“Currently, each individual taxpayer must report and pay tax on all of the income they earn. As such, couples with unequal incomes were disadvantaged relative to couples with equivalent incomes,” explained Devolin. “Now, couples will be able, in effect, to transfer some of the highly taxed income of the higher earner to the lower-earning spouse.”

Jonathan Chevreau offers the following example in today’s National Post involving two retired couples with equal household incomes of $62,000. One couple has incomes of $51,000 and $11,000, while the other has incomes of $31,000 each. Until now, the first couple paid $2,400 more in income tax each year. Beginning in 2007, that penalty will disappear and each couple will pay the lower amount.”

The second part of Flaherty’s announcement dealt with the current and growing rush of major Canadian corporations to change their corporate structures into income trusts to gain huge tax advantages.

“The Tax Fairness Plan will, beginning in 2011, place a tax on distributions from existing income trusts to bring their tax treatment more in line with corporate taxes. For income trusts coming into existence after January 1 2007, these provisions will begin immediately. This move is being deliberately made to curtail a trend that threatens to cause a massive shift in the tax burden from corporations to individuals,” explained Devolin, who also noted that the NDP support this action for these same reasons.

Flaherty justified his decision by saying that, “The move was necessary to restore balance and fairness to Canada’s Tax System to ensure our economy continues to grow and prosper. Prior to this, corporations were starting to create an economic distortion that was threatening Canada’s long term economic growth.”

“If corporations are able to avoid paying their fair share of taxes, then that tax burden would inevitably be shifted onto the shoulders of hardworking individuals and families which is simply not fair.”

According to Eric Reguly of the Globe and Mail, “Jim Flaherty is exceedingly brave. He may also be politically suicidal. But the man did the right thing.”

The third part of the announcement was more good news for Canadian seniors – another tax cut that is retroactive to the beginning of 2006.

Devolin explained that, “The special age tax credit for Canadians 65 years of age or older will be increased by $1,000 to $5,066,” said Devolin. “This will help low and middle income seniors by providing up to a further $155 of federal income tax relief each year for those eligible to receive the credit”

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For more information contact:

Barry Devolin, MP
(705) 324-2400 
(866) 688-9881