Finance Minister Dwight Duncan presented his latest budget speech yesterday. The Budget, as announced contains no new taxes; in terms of tax matters, it contains in fact very few new measures. Generally speaking, the Ontario Government is building on, and continuing the tax plan announced in last year's budget where personal income tax cuts affecting 93% of taxpayers were announced as well as the planned introduction of the Harmonized Sales Tax ("HST") to replace the existing 8% Retail Sales Tax ("RST").
Continuing on that trend, the Budget Speech centered on jobs creation as a continuing government goal which can be summarized in the "Open Ontario" slogan. The government continues building on previously announced or implemented plans to facilitate education, child care and Second Careers for older workers.
Mr Duncan did not miss a chance to remind us that the 2009 tax cuts and HST reform are forecast to create 600,000 new jobs over time; he also reminded us of the investments the government has made in "green jobs" by the continuing replacement and phasing out of coal produced electricity. Co2 emissions from coal-fired electricity plants are down 73% in 2009 compared to 2003. There should be no more electricity produced from coal in 2014. Ontario's incentives have already secured major investments in solar and wind powered energy. Al Gore is said to have stated that Ontario's initiatives are the best gas emission reduction program in North America. It will also allegedly create 50,000 jobs.
While all the above is not news, in effect rehashing previously announced measures, the budget does contain some noteworthy measures. For example, the government will invest in Full-day learning for four- and five-year-olds beginning in September 2010, benefiting up to 35,000 children in nearly 600 schools.
New Tax Measures:
- The Ontario Property Tax Credit becomes the Ontario Property and Energy Tax Relief; this is a new tax measure broadening the 2009 introduction of the Property Tax Credit. This new measure increases benefits by $455 million to a total of $1.2 billion for the current year.
- The planned introduction of the HST initially provided that compensation for RST vendors would be terminated on March 31, 2010. The government will now prorate and extend the vendor's compensation for collecting RST for the period of April 1 to June 30, 2010.
- Similarly, compensation will continue to be provided to insurance vendors because the taxing measures of certain insurance premiums remains in effect after July 1, 2010 under the Retail Sales Tax Act.
- Technical amendments are introduced to provide refunds of the RST in the event of double application of the RST and RST.
- As part of the Ontario-Canada agreement Ontario's tax measures will parallel changes announced in the federal budget.
- Measures are announced to exempt registered charities from the Land Transfer Tax in certain situations.
The impact of the measures is summarized in the following table:
| 2010-11 | 2011-12 | 2012-13 | |
|---|---|---|---|
| Northern Ontario Energy Credit1 | (35) | (30) | (45) |
| Paralleling Federal Tax Measures | |||
| Personal Income Tax | 65 | 85 | 85 |
| Corporate Income Tax | (3) | (4) | (4) |
| RST Vendor Compensation2 | (27) | - | - |
| Sales Tax on Insurance | |||
| Vendor Compensation2 | (3) | (3) | (3) |
| Specified Fees Exemption | (3) | (4) | (4) |
| Technical Measures | - | - | - |
| Total Tax Changes | (6) | 44 | 29 |
(1)Benefit levels for northerners would be maintained in 2011-12 but program cost would decline because accounting rules require one of the four quarterly payments to be reported in 2012-13. Northern Ontario Energy Credit for 2010
As shown above, the impact is a total tax reduction of $6 million for the current year and projected revenue increases ( i.e tax increases) of $44 and $29 million respectively, for 2011 and 2012 due essentially to the adoption of federal Personal Income Tax measures.
Deficit Reduction
Again, the Finance Minister restates that "natural"revenue increase stemming from the end of the recession will form the backbone of deficit reduction and elimination. The deficit should be reduced to $21.1 billion next year ( a $3.9 billion reduction); it should be cut in half and eliminated by 2017.
The budget also announces a three year pay freeze for members of parliament as well as a 2 year pay freeze for non-union members. While no changes are made to current collective agreements, the minister makes it clear that there will be no available funds for salary increases in the near future; the government also intends virtually to freeze government spending in general at current levels.
Time will tell if these lofty objectives can be met.
Complete budget information is available here
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