Flaherty unveils plan to eliminate net government debt

Federal finance minister Jim Flaherty today released a long-term, economic plan designed to eliminate Canada’s total government net debt in less than a generation and further reduce taxes.

The plan, Advantage Canada: Building a Strong Economy for Canadians, was unveiled along with minister’s economic and fiscal update.

The plan builds on Canada’s strengths and seeks to gain a global competitive advantage in five key areas:

• reducing taxes for all Canadians and establishing the lowest tax rate on new business investment in the G7;
• eliminating Canada’s total government net debt in less than a generation;
• reducing unnecessary regulation and red tape and increasing competition in the Canadian marketplace;
• creating the best-educated, most-skilled and most flexible workforce in the world; and
• building needed infrastructure.

“Advantage Canada is a long-term plan that will create the right conditions and opportunities for families and businesses to succeed,” said Flaherty. “And our tax back guarantee will give Canadian taxpayers a real stake in reducing debt by dedicating the interest savings each year to reducing personal income taxes even further.”

The government pledged to: deliver on its commitment to reduce the GST to 5%; implement a Working Income Tax Benefit; reduce personal income taxes to make the tax system fairer; reduce taxes on savings, including capital gains, to make them more competitive with the tax treatment of savings in other countries; and, to increase participation in the labour market.

On the corporate side, it pledged to: establish the lowest tax rate on new business investment in the G7; reduce the administrative burden on business by cutting paperwork by 20%, and consider a principle-based legislative framework to guide regulatory departments and agencies; improve the framework for competition through effective rules and regulations and modern competition policies; and to be open to trade and foreign investment.

In presenting his economic and fiscal update before the Standing Committee on Finance, Flaherty highlighted Canada’s strong economic fundamentals.

The economic outlook is encouraging, he said with private sector economists forecasting a growth rate of about 2.75% for 2006 and 2007.

Flaherty also presented the government’s fiscal forecast for the current year and the following five years. After accounting for the cost of measures announced in the May 2006 budget and the minimum debt and tax reduction commitments, the Government’s fiscal forecasts are as follows: