MGPS: Tax Cuts Will Take the Pressure Off Manufacturers

TORONTO, ONTARIO--(Marketwire - Nov. 1, 2007) - The Canadian government announced tax cuts, including corporate tax cuts which are apparently intended to offset the rising Canadian dollar, and the weakening American housing market.

By 2012, the federal tax rate will be reduced to 15%. The federal government is also pushing the provinces to reduce their tax rates to 10% - for a total tax rate of only 25% - one of the lowest rates in the industrial world. This is a welcome reversal for Canadian business, which currently has one of the highest corporate tax rates among the OECD nations.

In order for Canadian business to compete globally, taxes have to be cut. Considering that many countries are already cutting taxes Canada is merely following the global trend. Even with tax cuts it will still be tough for Canadian manufacturers to compete. Still, lower taxes are always welcome.

The problem is the tax cuts will be implemented over the next 4 years and this may not be enough for the profit-challenged Canadian exporter. However, lower taxes mean more cash will be available for re-investment. Considering that capital equipment and machinery are typically purchased from the U.S. and that GST is not charged in these areas, Canadian corporations might want to consider upgrades now.

Although we can quibble over the amount and implementation schedule of the tax cuts, the fact of the matter is, Canadian corporations will be in a much better position to compete globally.

About MGPS

MGPS is a management consulting firm that specializes in reducing non-core expenses. These expenses tend to be indirect, hidden and scattered throughout the organization. MGPS identifies hidden costs and develops and implement efficient processes to drive out unnecessary expenses. The end result is increased cash flow and greater profitability.