September 16, 2015 / 2:58 PM / 3 years ago

UPDATE 1-Canada New Democrats to limit corporate tax hike

(Adds implications and background)

By Randall Palmer

OTTAWA, Sept 16 (Reuters) - Canada’s left-leaning New Democratic Party will raise the corporate tax rate from the current 15 percent to something less than 17.5 percent in its first term in office if it wins the Oct. 19 federal election, an NDP official said on Wednesday.

This is less than the party’s 2011 pledge to boost the corporate tax rate to 19.5 percent. The NDP’s fiscal framework was scheduled for release on Wednesday afternoon ahead of a leaders’ debate on Thursday on economic policy.

The party also will not eliminate the current 50 percent tax exemption for capital gains in the first mandate, the official added, despite an earlier pledge by the party to do so. The exemption means that only half of capital gains are subject to tax.

“We will not be getting rid of the capital gains exemption,” said the official, who requested anonymity because the plans were not yet public.

The party is seeking to replace Prime Minister Stephen Harper’s Conservatives, who have charged that the NDP’s promises would require billions of dollars of tax hikes or deficits. NDP leader Thomas Mulcair has pledged to keep the budget in balance from the start of his mandate.

It was not immediately clear how much the corporate tax hike would raise. In 2011, the NDP had budgeted for C$9.9 billion ($7.5 billion) in increased revenue by 2014-15 from its plan to restore the corporate tax rate to 19.5 percent.

The Conservatives, who defeated the NDP and other parties in the 2011 election, had brought the corporate rate down and encouraged the provinces to do the same, with the goal of making Canada more competitive in drawing companies and helping them to compete internationally.

Their opponents have charged that the companies have merely sat on their cash rather than investing, leading former Bank of Canada Governor Mark Carney to speak of “dead money.”

Because the polls suggest none of the parties would win a majority, each would have to rely on another’s support, making their fiscal plans somewhat notional.

Neither the Conservatives nor the Liberals, to their left, favor raising corporate taxes.

$1=$1.32 Canadian Reporting by Randall Palmer; Editing by Lisa Von Ahn

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