Canada's Harper signals permanent tax cuts in budget

Sat Jan 24, 2009 6:32pm EST
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By Frank McGurty

TORONTO (Reuters) - Canadian Prime Minister Stephen Harper signaled on Saturday for the first time that the budget his government will introduce next week will contain permanent tax cuts, not just short-term measures to lift the sagging economy.

"I think that if we're talking about tax cuts, these measures in most cases have to be permanent to be effective," the Conservative leader said in an interview with La Presse, the French-language daily.

Harper's minority government will introduce a budget on Tuesday for the coming fiscal year that will call for Canada's first deficit in a decade.

The package is expected to feature measures to stimulate Canada's flagging economy, including spending billions of dollars to build roads, bridges and other infrastructure, and modest tax cuts for consumers and businesses.

Canada has avoided deficits since 1996-97, and Harper has vowed that his government would never allow a return to permanent or "structural" fiscal shortfalls.

To that end, most of the stimulus measures in the package for the 12 months beginning April 1 are expected to be short term in nature, such as infrastructure projects, whose funding would end with their completion.

Harper, a longtime fiscal conservative and free-market champion, said on Saturday that the global economic crisis gave the government little choice.

"I think we're in a rare time where you need a deficit," Harper said in a separate interview with the Toronto Star newspaper, pointing to a sharp decline in consumer spending and business investment.   Continued...

<p>Canada's Prime Minister Stephen Harper delivers a speech during the Outstanding Achievement Award ceremony at Rideau Hall in Ottawa January 23, 2009. REUTERS/Chris Wattie</p>