The federal government has just about finished with consumer tax cuts are about just about done says TD Bank.

Promises for additional cuts are a long shot in the upcoming 2002 budget round, as the government attempts to limit the impact of the struggling economy on its fiscal position.

TD says that the federal government has essentially fulfilled its obligations under its 5-year personal income tax cut plan, apart from one remaining commitment to boost the Child Tax Benefit by July 2004.

“Keeping tax rates at the reduced levels struck effective January 1, 2001 is sufficient to allow this cumulative total to rise every year going forward, even in the absence of further tax cuts.”

In contrast to personal tax cuts, the federal government left its timetable to cut its corporate income-tax rate largely in the future.

“While the move down to a 21% rate will significantly improve the competitiveness of corporations across the country, the cuts are unlikely to provide a significant near-term economic boost for two reasons. First, the bleak picture for corporate profits over the near term means that businesses will not benefit to the same extent as they would if bottom lines were swelling. And, second, the rate cuts don’t apply to the sector in Canada’s economy that has been hardest hit of late — manufacturing — which already enjoys the lower CIT rate of 21%.”

As for the increase in the CPP rate announced today, TD says, “The rate hike will come at a time when the economy is on its knees, with not much in the way of offsetting tax reductions on other fronts to cushion the blow. It may be tempting for the Minister of Finance, Paul Martin, to reduce or delay the CPP premium increase set for the New Year, in view of the weakened state of the federal fiscal position. However, it was such a mindset that created the problems in the CPP — and the resultant need for urgent action — in the first place.”

TD notes that in 2001, provincial income tax rates fell in all provinces except Nova Scotia, where the government continued to focus on lowering its sizeable deficit. “Looking forward to 2002 and beyond, there exist only a handful of provinces that have outstanding IOUs to trim PIT rates further — British Columbia, Saskatchewan, Manitoba, and Ontario.”

“British Columbians may have another sizeable dose of personal tax relief coming their way on January 1, 2002, but Canadians in other regions hoping to see their tax bills continue to fall steadily over the next few years are likely to be disappointed. Not only have most of the PIT cuts committed to in recent federal and provincial government budgets already been delivered, but few new measures appear to be in the cards in the near term as governments grapple with a souring revenue picture. On top of this, CPP premium rates are poised to move sharply higher in 2002. In contrast, Canadian businesses will reap the rewards from healthy reductions in tax rates on corporate income, small business income and capital in the years ahead,” concludes TD.