The federal government could offer substantial tax relief if it limited annual spending increases, further paid down the debt and became more efficient in delivering public services, says the Canadian Chamber of Commerce.

The statement was made today by the Canadian Chamber in its pre-budget submission to the House of Commons Standing Committee on Finance.

It said easing the burden of personal taxes is the top priority of the organization for Budget 2005.

The Canadian Chamber told the Committee that families earning between $25,000 and $35,000 annually need an income tax break because many of the public transfers they receive are clawed back as income rises. In addition, the Canadian Chamber believes that there should be downward movement for the top marginal tax rate, which averages 45.5% in Canada compared to 38.4% in the United States.

The Canadian Chamber also called for a lower corporate tax rates to put Canada in an even stronger position to attract businesses.

While the Canadian Chamber acknowledged that Canada has made tremendous progress in reducing the federal debt, it recommended that Ottawa continue to allocate any unused contingency and economic prudence funds, and any unanticipated year-end surplus, to debt reduction.

It added that the growth in program spending should never outstrip growth in the economy, and recommended a spending cap on the growth of government program spending of 3% per year based on anticipated growth in population plus inflation. It noted Ottawa has increased its spending by more than 6% annually on average over the past four years.

“If the federal government capped the growth in spending, reallocated resources from lower to higher priorities, delivered services more efficiently and continued to pay down the debt, then it could provide tax relief for all Canadians,” said Michael Murphy, senior vp, policy, Canadian Chamber of Commerce, in a release.

The Canadian Chamber also made other recommendations including some regarding Canada’s Employment Insurance Program to ensure that it is conducive to fostering productivity and that it is managed as a true insurance program.

It also recommended that corporate dividends and business capital gains are taxed at the same rate under the personal income tax, and said the federal government should eliminate withholding taxes on arm’s length interest payments under domestic legislation.

Pre-budget submission http://www.chamber.ca/cmslib/general/PreBudget041103.pdf