Flaherty says will press on with tax cuts

Mon Jan 31, 2011 12:28pm EST
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VAUGHAN, Ontario (Reuters) - Canada's minority Conservative government will follow through on plans to cut business taxes despite opposition demands to cancel them, Finance Minister Jim Flaherty said on Monday.

Flaherty told reporters he saw a 50 percent chance his upcoming budget, to be presented in March, will be defeated in Parliament, which would trigger an election.

He said he may consider some measures requested by the three opposition parties, but not fundamentally alter the government's low-tax approach.

"It's dangerous to create uncertainty in a fragile business economic environment ...we're going to stay on our old tax plan," he told reporters following the release of a progress report on Ottawa's economic stimulus plan.

Parliament passed legislation in 2007 to gradually lower the corporate tax rate to 15 percent in 2012 from 18 percent. The federal tax rate on corporate income now stands at 16.5 percent.

But the main opposition party, the Liberals, has now made opposition to those cuts a central plank of its platform, saying the tax cuts should be reversed and the money spent on social programs.

Prime Minister Stephen Harper's Conservatives hold a minority of seats in the House of Commons, and therefore need support from some opposition members to pass key legislation like the budget.

If the budget is defeated in Parliament, an election will be triggered.

"I'm happy, open to discussions about constructive steps for Canadians. We're not open, of course, to changing the direction of growth in the Canadian economy," Flaherty said.   Continued...