(December 21 – 17:50 ET) – Finance Minister Paul Martin has released a package of draft amendments to the Income Tax Act that implement the tax cuts announced in the 2000 budget and the fall mini-budget.

Several of the draft amendments released today provide for key elements of the government’s Five-Year Tax Reduction Plan. One of the plan’s key measures was to restore full indexation to the personal income tax system effective January 2000. Legislation enacting this measure received Royal Assent last June.

Measures included in the draft legislation released today would:

  • Reduce income tax rates. As of January 2001, the low- and middle-income tax rates will fall to 16% and 22% respectively. The top 29% rate will be reduced to 26% on incomes between about $61,000 and $100,000, which means that the 29% rate will apply only to income in excess of $100,000.
  • Eliminate the 5% deficit reduction surtax as of January 2001.
  • Increase the Canada Child Tax Benefit.
  • Reduce the capital gains inclusion rate from 75% to 67% effective February 28, 2000, and further reduce it to 50% effective October 18, 2000.
  • Provide a capital gains rollover on investments in shares of certain small- and medium-sized active business corporations.
  • Provide a tax-deferred rollover for shares received on certain foreign spin-offs.
  • Reduce the 28% general corporate tax rate to 21% — starting with a one point reduction on January 1, 2001, followed by a two point cut in each of the following three years.
  • Defer the taxation of certain stock option benefits, increase the stock option deduction and allow an additional deduction for certain stock option shares donated to charity.

Martin also indicated that the government intends to introduce a bill to implement the measures released today, at the earliest opportunity. He said releasing these measures in draft form at this time will give taxpayers and their advisors an opportunity to consider these changes and comment on them before they are introduced in Parliament.

As announced on September 7, the comment period on draft legislation regarding the taxation of non-resident trusts and foreign investment entities, including exchange-traded funds, has been extended to December 31, 2000. Finance will consider all the comments received before the end of this year and will release a revised draft of the proposals in the spring of 2001.
-IE Staff