Finance Minister Paul Martin today stated that as part of the federal government’s five-year tax reduction plan, all indexed amounts of the personal income tax system will be adjusted by 3% for 2002.

“Our tax reduction plan continues to unfold, providing timely relief to Canadians,” said Martin. “Indexation of the personal income tax system benefits all Canadian tax filers — but it benefits low- and middle-income Canadians the most.”

Full indexation of the personal income tax system was introduced in the 2000 budget and took effect as of January 1, 2000.

It applies on an ongoing basis to tax bracket thresholds, benefits and non-refundable credits. As a result, these amounts are adjusted every year to ensure that Canadians receive permanent relief from the effects of inflation.

Indexation protects tax payers from automatic tax increases, or “bracket creep”, that would otherwise occur when their incomes rise because of inflation.