CANADA SETS WIDE-RANGING PERSONAL TAX CHANGES
Finance Minister Michael Wilson unveiled
a wide-ranging reform of the personal tax system that includes
limiting the capital gains exemption and a sharp cut in the
dividend tax credit.
    With most changes effective at the first of next year,
Wilson also announced he was cutting the number of tax brackets
from 10 to three.
    He said the changes will cut personal tax revenues by two
billion dlrs in 1988 and by more than 11 billion dlrs over the
next five years.
    "Most Canadians will pay lower taxes because of two
far-reaching changes. A new structure of federal income tax
rates and the conversion of exemptions and deductions to tax
credits," Wilson told the House of Commons.
    The new tax brackets will be 17 pct on the first 27,500
dlrs of taxable income, 26 pct on the next 27,500 dlrs and 29
pct on taxable income in excess of 55,000 dlrs. The maximum tax
rate is 34 pct under the current system.
    In a major reversal of his own initiative, Wilson said the
controversial 500,000 dlrs capital gains exemption will be
reduced to 100,000 dlrs over an investors' lifetime.
    Wilson introduced the exemption shortly after taking office
in 1984 as a a way of stimulating investment, but it was
sharply criticized by the opposition as over-generous to
wealthy investors.
    The 500,000 dlr lifetime exemption  will be kept on the
sale of farm land and for small businesess, however.
    Also, the taxable portion of a capital gain will increase
from 50 pct currently to 66-2/3 pct in 1988 and 75 pct in 1990.
    The dividend tax credit will be reduced from 33-1/3 pct to
25 pct and the deduction for up to 1,000 dlrs of interest and
dividend income will be eliminated in 1988.
    Wilson said tax treatment for registered retirement savings
plan contributions will be maintained but the phase in of the
increase in the maximum limit to 15,500 dlrs will be delayed 
four years to 1994.
 Reuter
