Couple highlites from the Federal Mini Budget

Personal Tax ChangesLowest personal income tax rate — The mini-budget proposes to reduce the lowest personal tax rate,which applies to taxable income up to $37,178 for 2007, to 15% (from 15.5%), retroactively toJanuary 1, 2007.Basic personal, spousal and wholly dependent relative amounts — The mini-budget proposes toincrease the amount used to compute the basic personal tax credit to $9,600 (from $8,929) for 2007and 2008, and to $10,100 in 2009 (indexed for later years). The mini-budget also proposes that theamounts used to compute the spousal and wholly dependent relative credits will be changed to matchthe basic personal amount for each of these years.For a single tax filer with income over about $38,000, the above personal tax changes will provideoverall tax savings of about $240 in 2007.


GST ChangesGST rate reduced — The government proposes to reduce the GST rate to 5% (from 6%) as of January 1,2008. The mini-budget sets out transitional rules that are similar to the rules that applied when the GSTrate was reduced to 6% as of July 1, 2006, including the following general transitional rules:o If GST becomes payable, or is paid without becoming payable, before January 1, 2008, the 6%rate applies.o If GST becomes payable on or after January 1, 2008, without having been paid before that day,the 5% rate applies.o If GST is paid on or after January 1, 2008, without having become payable before that day, the5% rate applies.Specific transitional rules are introduced for certain types of transactions, including sales of real property,deemed supplies, imported goods and taxable services and intangibles and taxable benefits.Excise tax — To ensure that the GST rate cut does not affect the overall price of cigarettes and othertobacco products, the federal excise duty on these products will increase accordingly as of January 1,2008.Provincial sales tax harmonization — The federal government notes that it is willing to work towardfederal-provincial sales tax harmonization with the five provinces that still impose retail sales taxes.However, the mini-budget does not appear to offer the provinces any concrete incentive for doing so.