Canadian Electors Approve Of Harper’s Low-Tax Plans
Wednesday May 04 2011 | 02:20 AM

For the first time in seven years, a Canadian federal election has produced a majority government. The re-election of Stephen Harper's Conservative party sets the scene for an administration with a professedly low-tax agenda, the reintroduction of the party's late Budget and a further reduction in the headline rate of corporate tax.

With the majority of results from the May 2 election declared, preliminary results afford Harper his first majority since becoming Prime Minister in 2006. Two minority administrations later, and, following an election triggered by a parliamentary vote of no-confidence, Harper now has a 26 seat advantage over his rivals combined. With 155 seats required to achieve the majority Harper consistently asked electors to grant him during the election, the Conservatives now hold 167 in parliament. At the last election, held in 2008, the party achieved 143 seats, with a 37.6% share of the vote. In possession of his majority, Harper will now have a four-year fixed term administration, during which he will attempt to implement policies repeatedly referred to as "low-tax plans" during his election campaign.

Harper's victory aside, the makeup of Canada's parliamentary opposition landscape has also altered dramatically. The combined force of Canada's Liberal, New Democrat (NDP) and Bloc Québécois (BQ) opposition parties was instrumental in instigating the parliamentary collapse of Harper's last minority government, in turn triggering the election. However, a major shift occurred on May 2, with the NDP overtaking both the Liberals and the BQ to become Canada's official opposition. The NDP, led by Jack Layton, surged to 102 seats, taking 30.6% of the popular vote, marking a leap from 37 seats and 18.2% of the vote in 2008.

The Liberal party, which, until Harper's first victory in 2006, had very much been seen as the natural party of government, saw a sizeable decline in its parliamentary representation. Liberals took 77 seats and 26.2% of the vote in 2008, but saw dismal returns on May 2, achieving only 34 seats and 18.9% of votes cast. Leader Michael Ignatieff, a vocal critic of Harper's, and his tax policies in particular, lost his own seat by over 2,000 votes. Ignatieff has yet to comment on his future as party leader. Elsewhere, the BQ also fared badly, dropping to a mere four seats, when it had previously held 49. As with the Liberals, the BQ's leader, Gilles Duceppe, lost his seat, but, unlike Ignatieff, promptly resigned.

The results mark the close of what has been a tense and bitter election. Criticism of Harper's tax policies not only helped trigger the election, but also featured heavily in opposition party campaigns. Canada's headline rate of corporation tax was reduced to 16.5% in January this year, and had been set to fall still further to 15% from January 2012. Both the Liberals and the NDP had pledged to reverse this process, to differing extents. The Liberal platform proposed to revert the rate to its 2010 level of 18%, whereas the NDP argued it should return to 19.5%, a rate last seen in 2008.

The Liberal platform targeted what it called the late government's unnecessary and unaffordable tax cuts, while Layton quizzed Harper over why corporate tax rates could be permitted to continue falling while the Canadian public suffered economically. Harper, for his part, clearly saw the Liberal party as his main rivals, referencing the likelihood of an Ignatieff-led coalition on many occasions. The Conservatives' campaign stance towards corporate tax was that, were rates hiked, it would impose costs on businesses, and deprive the economy of the jobs it requires.

According to Harper, the choice faced by electors was: "Between, on one hand, the opportunistic and reckless Michael Ignatieff-led Coalition, with its high-tax agenda that would stall our recovery, kill jobs and set hard-working families back; and, on the other hand, principled leadership and stable national government with our low-tax plan for jobs and growth". Now, given Harper's re-election, Canada is likely to forge ahead with its rate reduction.

Harper's election strategy included three "low-tax plans". The first of which, a plan for jobs and economic growth, focused largely on the planned reintroduction of Finance Minister Jim Flaherty's March 22 Budget, which remains in limbo, the election having been called before a parliamentary vote could pass judgement on it. The Budget contained proposals such as a Hiring Credit for small businesses, providing approximately 525,000 businesses with a one-year Employers Insurance break, and the extension of the accelerated Capital Credit Allowance rate for manufacturing or processing machinery by an additional two years.

Another plan, targeting the family vote, contained a series of tax breaks, including a Family Tax Cut, which would allow spouses to share up to CAD50,000 (USD53,000) of their household income for tax purposes (to be introduced following the budget's balancing). Harper also pledged to double the Tax Free Savings Account investment cap to CAD10,000, and to top up the Guaranteed Income Supplement for low-income seniors.

Finally, it was Harper's intention to eliminate the federal budget deficit by the 2014-15 financial year, using three tactics: the completion of a stimulus package; the continuation of specific measures to restrain programme spending; and the conclusion of a comprehensive spending review.

Speaking in his constituency, Calgary Southwest, as news of his victory came in, Harper stressed both the urgency of the government's task, and his intention to fulfil his pledges. "Our job starts tomorrow. We will implement what we laid out in the budget, our plan for jobs and growth without raising taxes."