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Government 'panicking' on corporate tax cuts issue, Liberals say

OTTAWA – The Harper government brought out the big guns Tuesday to counter a parliamentary move against corporate tax cuts that are emerging as a possible trigger for an election.

While MPs debated a non-binding Liberal motion to scrap the tax cut in the House, Finance Minister Jim Flaherty called an impromptu press conference outside.

And he brought Catherine Swift, president of the Canadian Federation of Independent Business, along with him for support.

“They will raise taxes,” Flaherty warned of the Liberals. “They will raise taxes on employers, on job-creators.”

Swift said she was there to clear up a misconception that the tax cut only benefited big corporations.

Small firms would be better off too, she said, adding it was unfair to businesses who have planned on the scheduled reductions to reverse course now.

To the Liberals, the response was a sign the Conservatives are getting antsy that corporate tax cuts could topple their minority government this spring and become the ballot-box question in the subsequent election.

Polls suggest most voters oppose the notion of handing $1.6 billion this year to some of the country’s largest and wealthiest firms, and another $1.6 billion next year.

The NDP and the Bloc Quebecois also oppose the tax reductions, but have not been clear whether they are prepared to trigger an election over the measure.

For the Liberals, there is no question, said finance critic Scott Brison — the party thinks it has a winning issue.

“It’s pretty clear that they’re panicking,” he said. “They are running scared.

“The Harper government realizes that middle-class Canadian families overwhelmingly oppose the plan to cut corporate taxes on the wealthiest corporations at a time when we have a $56 billion deficit, and at a time when middle class families are really struggling.”

Brison accused Swift of being a late-comer to the debate, saying he met with the CFIB’s vice president of national affairs Monday and was told corporate tax reductions were not a priority of small and medium-sized firms.

Contacted afterward, Corinne Pohlmann did not dispute Brison’s account. She said the CFIB supports corporate tax cuts, but they are not a top priority for the organization.

“If you look at our website we have our Top 11 in 2011 and corporate tax cuts are not in our top 11,” she said.

The measure does have staunch backers in the business community. The Canadian Chamber of Commerce posted a new warning on its website Tuesday about the Commons debate, saying while it is not binding, it can set a precedent.

“When larger companies have money to spend, who benefits? Usually, it’s smaller companies, their suppliers, their employees and the communities they help to sustain,” wrote the chamber’s president Perrin Beatty, a former Conservative minister. “Some economists argue that tax cuts don’t always create new jobs, but they all agree that high taxes cost jobs.”

Respected economist Jack Mintz of the University of Calgary estimated in a recent report that the tax reduction would generate about 100,000 jobs, although it will take seven years for the gains to be fully realized.

But Pohlmann said the CFIB is more interested in bringing down payroll taxes, such as employment insurance premiums, which she said have a much bigger impact on hiring.

NDP finance critic Tom Mulcair said one objection to the tax cuts is based on the fact that only profitable corporations will benefit, while struggling manufacturers will not be able to take advantage of them.

The move to bring down Canada’s once uncompetitive tax regime on corporations began with the Liberal government of Jean Chretien, which reduced the rate from 29 per cent to 21 per cent.

Brison said the Liberals still believe lower taxes will benefit the economy, but not if the government has to borrow money to finance them and not when families are struggling and unemployment is high.

“To cut corporate taxes today means that all Canadians will have to pay higher taxes tomorrow,” he said.