Canada budget to contain tax measures: Flaherty

Wed Jan 21, 2009 1:29pm EST
 
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OTTAWA (Reuters) - The Canadian budget next week will contain tax measures, Finance Minister Jim Flaherty said on Wednesday, but declined to say whether they would be permanent or broad-based.

The minority Conservative government will unveil its budget next Tuesday and needs the support of the opposition Liberals to pass it. The Liberals say they oppose far-reaching tax cuts, preferring instead to target low wage earners.

"There will be some tax measures in the budget and we are conscious of the need to use the tax system to the extent possible to create further stimulus in the economy. So that's the approach we're taking in respect to tax measures," Flaherty told reporters.

Flaherty said the challenge posed by permanent tax cuts is that they have a long-term effect on government finances.

He reiterated promises that the budget would not lead to permanent long-term deficits and vowed the government would not cut payments to the 10 provinces for health and education.

Officials say the deficit next fiscal year could be as high as C$40 billion ($31.5 billion).

"We are in a time of substantial uncertainty and it's important in the budget that we build in flexibility ... (so) that we're able to react to circumstances as they develop this year and next," said Flaherty, adding that Canada is "in great shape, relatively speaking" to fight the crisis.

"We are going to take steps in the budget, not only short-term but also longer-term steps, to ensure that we build capacity during the recession so that Canada exits the recession even stronger than we enter it," he said.

(Reporting by David Ljunggren; editing by Peter Galloway)

 
<p>Canadian Finance Minister Jim Flaherty gestures as he speaks with the media in Montreal, January 6, 2009. REUTERS/Christinne Muschi</p>