On October 30, 2007 Minister of Finance, the honourable Jim Flaherty, gave his 2007 Economic Statement.

The announcement is meaningful in that the following taxes are being cut:

GST will be lowered from 6% to 5% effective January 1, 2008, so book your local “cash register guru” now to be ready for business next year!

There will be no changes to the GST tax credit nor to the GST rebate on new housing. However, you may want to watch the transition rules, especially for real property.

Corporate taxes are declining, too. Not only are they declining a little bit sooner but they are being reduced over all.

For small business Canadian Controlled Private Corporations (CCPC’s) the federal rate will be lowered to 11.0% from the originally scheduled 11.5%.

Don’t be fooled by any claims about this rate dropping from 13.12% – the 1.12% surtax was already scheduled to be dropped in 2008 along with a 0.50% point drop that was going to happen in 2009 anyway – nevertheless, sooner is always better than later.

For CCPC’s with taxable income that is more than $400,000, or for other corporations, the federal general corporate rate is being reduced sooner and by more than previously announced. For 2008 the rate, after abatement, will be 19.5% and by 2012 it will be 15.0%.

Finally, there are the personal income tax cuts.

The basic exemption (as well as the spousal amount) is being increased to $9,600 retroactive to January 1, 2007. This alone will reduce personal income taxes by about $56 for 2007 for anyone earning $9,600 or more.

Which brings us to the lowest federal income tax rate. The one that started 2005 at 16% only to be retroactively changed to 15% in November 2005. And then it was increased to 15.5% effective July 1, 2006.

Well, it is back to 15%!

This rate will apply to taxable income between $9,600 and $37,178 in 2007 and will reduce taxes by about $167 for anyone earning $37,178 or more in taxable income.

So, why do governments like to give retroactive tax breaks in October or November?

Simple, so they don’t have to pay us interest while we get a warm fuzzy feeling from that refund we get in April and May of the next year!

It’s enough to warm an accountants’ heart over the holiday season.