January 31, 2011 / 5:04 PM / in 7 years

Flaherty says will press on with tax cuts

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.

“I said the other day 50-50 (chance of the budget being passed), I suppose it’s as good an estimate as one can make,” he said.

Flaherty released a report on the country’s C$60 billion ($60 billion), two-year stimulus program, which Ottawa estimates has boosted gross domestic product by 1.3 percentage points, annualized, per quarter since the second quarter of 2009.

In December, Ottawa extended the deadline for stimulus funds by seven months to October 31, 2011. It said it was concerned that the rate of growth in Canada was starting to slow significantly and that extending the timeline would keep people employed for longer.

($1=$1.00 Canadian)

Reporting by Ka Yan Ng; Writing by Louise Egan; editing by Peter Galloway

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