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Canada's Finance Minister Bill Morneau receives a standing ovation as he prepares to deliver the fall economic statement to the House of Commons on Parliament Hill in Ottawa, Ontario , Canada, November 21, 2018. REUTERS / Chris Wattie
OTTAWA (Reuters) – Canada will allow companies to write off additional investments to make them more competitive as the United States aggressively cuts taxes, Finance Minister Bill Morneau said on Wednesday.
However, Morneau unveiled a budget update that projected a slightly lower deficit than forecast for 2018-2019. He said Ottawa would not cut taxes at the expense of aggressive action by Washington.
"If we did that, it would add tens of billions of dollars in new debt," he told the House of Commons.
This decision may disappoint business groups who have said that Ottawa needs to do a lot more to deal with the cuts to the United States. Morneau acknowledged their concern and said that it would be neither rational nor responsible to do nothing.
The federal government will allow businesses to immediately deduct for tax purposes the total cost of machinery and equipment used in the manufacturing and processing of goods. The measure covers purchases made on Wednesday or after Wednesday and expires in 2027.
The budget update projected a deficit of C $ 18.1 billion ($ 13.7 billion) for 2018-19, which was lower than the revised C $ 18.8 billion projected in the budget for the year. February. The fiscal year ends on March 31st.
Ottawa also introduces accelerated capital cost allowance for all businesses and allows certain clean energy equipment to qualify for immediate write-off.
The combined effect of these measures means that the average overall tax rate in Canada on new business investment will fall from 17.0% to 13.8%, the lowest level of the large seven group. industrialized countries.
($ 1 = 1.3234 Canadian dollar)
Reportage of David Ljunggren; Written by Fergal Smith; Edited by Peter Cooney
