November 27, 2018

Trudeau Quietly Approves $10.5 Billion Corporate Tax Cut To Compete With Trump

In their recent fiscal update, the Liberals introduced new corporate tax breaks to help stimulate investment in Canada. The move was largely seen as a response to U.S. tax breaks given to U.S. businesses by the Trump administration. Instead of focusing only on Alberta’s struggling energy sector, the Liberals decided to help improve the competitiveness of Canadian businesses across all industries. Some people are concerned about the rising budget deficit, but even with the cuts, the 2018 budget deficit is expected to be lower than the projected C$18.1 billion. Time will tell if this strategy is the right one.

Key Takeaways:

  • New corporate tax breaks, which will be worth some C$14 billion over the next six years, were introduced in a fiscal update on November 21, 2018.
  • By allowing businesses to write off capital investments more quickly (particularly in manufacturing), businesses will be further incentivized to invest in expansion, which in turn should help improve competitiveness.
  • While the cuts effectively hand more money back to Canadian companies, Trudeau’s Liberal Party has resisted cutting the corporate income tax rate (preferring to sneak its corporate handouts in obscure “budget updates” that will likely go unnoticed by the Canadian public at large).

“According to Bloomberg, the cuts represent the Trudeau government’s biggest gift to Canadian businesses since taking power.”

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