Ernst & Young's federal budget analysis now online



    OTTAWA, March 19 /CNW/ - Ernst & Young's annual in-depth analysis of
today's federal budget is now online. Some of the measures announced in
today's budget appear to be election-year promises for Canadian taxpayers;
however, other changes - notably in the international arena - represent major
policy shifts which will adversely affect the financing of foreign operations
of multinational corporations.
    Last November, in his economic and fiscal update, Finance Minister Jim
Flaherty outlined the Four Core Principles intended to guide the federal
government's future economic policymaking. The 2007 budget provides a
timetable for several tax measures as they relate to these Principles:

    
        1) Focusing Government

    -   Legislating the "Tax Back Guarantee," dedicating all interest savings
        from the shrinking federal debt to personal income tax reductions.
        This will deliver $1.1 billion in personal tax rate reductions for
        fiscal 2007-08, with a projected rise to $1.3 billion by 2008-09.
    -   If the 2006-07 surplus is higher than current projections, the
        additional interest savings will be allocated to personal income tax
        reductions in the 2008 budget.

        2) Freeing Businesses to Grow and Succeed

    -   Enhancing tax assistance for manufacturers
    -   Aligning capital cost allowance deductions to reflect an asset's
        useful life
    -   Providing a financial incentive to the provinces to assist in the
        elimination of provincial capital taxes
    -   Attracting foreign investment to Canada through the elimination of
        non-resident withholding tax on arm's-length interest payments
        generally (and on all interest payments between Canada and the U.S.)
    -   Harmonizing provincial sales tax with the GST. The government
        reaffirmed its commitment to work with the provinces to eliminate
        their retail sales taxes and move to a harmonized federal-provincial
        system.

        3) Investing for Sustainable Growth

    -   Expanding incentives for the generation of clean energy
    -   Introducing public-private partnerships for infrastructure.
    -   Providing new scientific research and experimental development
        incentives. While no new measures were announced, over the coming
        year the federal government plans to improve the SR&ED program,
        including its administration.

        4) Creating New Opportunities and Choices for People

    -   Continuing to reduce personal income taxes through a series of
        focused tax credits - including the Working Income Tax Benefit
        (WITB), the $2,000 child tax credit, raising the spousal amount,
        increasing the age limit for converting RRSPs.
    -   Enhancing the capital gains exemption for farmers, fishers and small
        business investors
    -   Broadening capital gains deferral opportunities. No new measures were
        announced.
    -   Reducing the GST rate to 5% no later than 2011. No timetable has been
        announced.
    

    For specific tax-related highlights of the 2007 federal budget and Ernst
& Young's full analysis, please visit:     
http://www.ey.com/Global/download.nsf/Canada/Tax_Alert_2007_No_4/$file/TaxAler
t2007No4.pdf.
    A Webcast of the budget analysis and other tax matters of current
interest will also be available Monday evening at http://eyo.tax.ca/Budget07/.

    About Ernst & Young

    Ernst & Young, a global leader in professional services, is committed to
restoring the public's trust in professional services firms and in the quality
of financial reporting. Its 114,000 people in 140 countries pursue the highest
levels of integrity, quality and professionalism in providing a range of
sophisticated services centred on our core competencies of auditing,
accounting, tax and transactions. Further information about Ernst & Young and
its approach to a variety of business issues can be found at
ey.com/perspectives. Ernst & Young refers to the global organization of member
firms of Ernst & Young Global Limited, each of which is a separate legal
entity. Ernst & Young Global Limited does not provide services to clients.





For further information:

For further information: Vashti Singh, Media Relations, Ernst & Young
LLP, (416) 941-1881, vashti.singh@ca.ey.com; Nichola Petts, Media Relations,
Ernst & Young LLP, (416) 941-1813, nichola.petts@ca.ey.com


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