2009 Ontario Budget
CHAPTER III
REFORMING ONTARIO'S TAX
AND PENSION SYSTEMS
INTRODUCTION
The McGuinty government is proposing a comprehensive package of changes to
Ontario's tax and pension systems. These proposed changes, if approved by
the legislature, would strengthen the foundation for job creation and
economic growth and improve fairness and transparency.
The Budget proposes to:
o fundamentally reform Ontario's tax system to help position Ontario for the
next generation of economic growth and prosperity by:
• implementing a single sales tax on July 1, 2010 to further strengthen
Ontario's economic growth and tax competitiveness;
• providing $10.6 billion in tax relief to people over three years
to help consumers through the transition to a single sales tax and
to provide ongoing tax reductions through the Personal Income Tax
(PIT) system; and
• providing $4.5 billion in business tax relief over three years
that includes reducing the Corporate Income Tax (CIT) rate to 10
per cent over three years, cutting the small business CIT rate and
exempting more small and medium-sized businesses from the
Corporate Minimum Tax (CMT);
o provide targeted tax incentives to support innovation, the entertainment
and creative cluster and skills training;
o move forward on reforming Ontario's pension system by:
• implementing measures to provide temporary solvency funding relief
for defined benefit pension plans while helping to ensure greater
transparency and security of pension benefits; and
• laying out a framework for strengthening Ontario's pension system,
including measures to modernize pension regulations.
TAX REFORM MEASURES
Sales Tax Reform
Structure and Tax Rate
It is proposed that, starting July 1, 2010, Ontario's Retail Sales Tax
(RST) would be converted to a value-added tax structure and combined with
the federal Goods and Services Tax (GST) to create a federally administered
single sales tax. The single sales tax would have a combined tax rate of 13
per cent. The provincial portion would be eight per cent — the same as
the general RST rate — and the federal portion would be five per cent.
Value-Added Tax Structure
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VALUE-ADDED TAXATION
In general, a value-added tax applies to all commercial activities related
to the sale of goods and services. Tax is paid on the supply of goods and
services throughout the supply chain, but the tax paid by business is
generally reimbursed through input tax credits.
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The current RST applies to many purchases made by businesses in the course
of providing goods and services for sale. As a result, the tax can become
embedded in the price of the finished goods and services throughout the
supply chain. This hidden RST is passed on to consumers. The new single
sales tax would use a value-added tax structure, meaning that most
businesses would be reimbursed for the tax they pay on most of their
inputs.
Studies show that most of the cost savings to business from removing
embedded sales taxes are passed on to consumers through lower prices. A
recent C.D. Howe report that examined the effects of GST harmonization in
the Atlantic provinces found that the benefit to consumers can occur
quickly, with the majority of the savings passed through to consumers in
the first year.(1)
(1) Michael Smart, "Lessons in Harmony: What Experience in the Atlantic
Provinces Shows About the Benefits of a Harmonized Sales Tax," C.D. Howe
Institute Commentary, July 2007.
Exported goods would also be generally free of embedded sales tax, making
Ontario exports more competitive.
Input Tax Credits
Businesses selling taxable or zero-rated goods and services would be able
to claim input tax credits on their purchases, as under the federal GST,
with limited exceptions. These credits would reimburse businesses for the
tax they pay in the course of commercial activities. This approach would
reduce business costs, most noticeably in areas that are taxable under the
current RST system, and would support business investment in Ontario.
In general, businesses selling tax-exempt goods or services would be unable
to claim input tax credits, as under the federal GST rules. For example,
most financial services are GST exempt and therefore input tax credits
could not be claimed in respect of those services.
Tax Base and Administration
To simplify administration, the single sales tax would generally use the
same rules and tax base as the federal GST. This would significantly reduce
the administrative burden on businesses that currently must comply with two
separate and sometimes conflicting sets of tax rules. Ontario businesses
would save more than $500 million a year in compliance costs. The unified
tax base would also facilitate the administration of the single sales tax
by the Canada Revenue Agency, improving cost efficiencies in government.
Under the RST system, Ontario compensates vendors for collecting and
remitting the tax. With the elimination of the RST, vendor compensation
would end as part of the transition to the single sales tax. Vendor
compensation would continue to apply for RST returns filed up to and
including those filed for the period ending March 31, 2010 under the
existing RST system.
Small Business Transition Support
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Small Business Transition Credit Table 1
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Total Taxable Revenues in First Full Fiscal
Quarter Commencing After June 30, 2010 Amount of Transition Credit
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Up to and Including $15,000 $300
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Over $15,000 and Up to and Including $50,000 2% of Taxable Revenue for that Quarter
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Over $50,000 and Up to and Including $500,000 $1,000
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Although most RST vendors are also registrants under the federal GST,
businesses would have to make some changes to their point-of-sale and
accounting systems in order to collect the single sales tax. Ontario would
provide up to a total of $400 million in one-time transition support to
small business in the form of a small business transition credit.
Most businesses, other than financial institutions, with less than $2
million in annual revenue from taxable sales, would be eligible for a
transition credit of up to $1,000.
Small Supplier Threshold
Under the single sales tax, Ontario would parallel the GST small supplier
threshold where businesses with sales under the threshold would not be
required to register and collect the single sales tax. This would reduce
administrative burden and complexity for small businesses. Similar to the
GST, small suppliers (with total taxable revenues of $30,000 or less in the
prior year or $50,000 or less in the case of a public service body) that
choose not to register would not be required to file a single sales tax
return and would not be eligible to claim input tax credits. If a small
supplier chooses to register, it would be eligible to claim input tax
credits related to its taxable supplies when it files its single sales tax
return.
Point-of-Sale Exemptions
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POINT-OF-SALE EXEMPTIONS
Point-of-sale rebates would provide exemptions for books, children's
clothing and footwear, children's car seats and car booster seats, diapers
and feminine hygiene products.
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To provide targeted relief while maintaining the single administration of
sales taxes in Ontario, point-of-sale rebates would be introduced for the
provincial portion of the tax for the following items: books, children's
clothing and footwear, children's car seats and car booster seats, diapers,
and feminine hygiene products. This treatment would also preserve
retailers' ability to claim input tax credits.
New Housing Rebate
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HOUSING REBATE
Buyers of new housing would be eligible for new housing rebates. The annual
benefit of the new housing rebate is estimated to be $1.1 billion.
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Currently, the RST applies to building supplies used in the construction of
new homes. The single sales tax would remove this embedded tax. Based on a
recent Canada Mortgage and Housing Corporation study, this embedded sales
tax ranges from about two per cent to three per cent, on average, on the
final sale of a new house in Ontario.
To ensure that, on average, new homes under $400,000 would not be subject
to an additional tax burden, the government is proposing a new housing
rebate. Homebuyers would be able to claim a rebate of part of the
provincial portion of the tax for new homes priced up to $500,000. The
rebate for new primary residences under $400,000 would be 75 per cent of
the provincial portion of the tax (or six per cent of the purchase price),
with the rebate amount reduced for homes priced between $400,000 and
$500,000.
Resale homes would not be subject to the single sales tax.
Keeping Public Service Bodies Fiscally Neutral
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REBATES FOR PUBLIC SERVICE BODIES SECTOR REBATE*
Municipalities 78%
Universities and Colleges 78%
School Boards 93%
Hospitals 87%
Charities and Qualifying Non-Profit 82%
Organizations
* Rebate of provincial portion of tax paid based on federal GST public service
body definitions.
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Ontario's public service bodies (i.e., municipalities, hospitals,
universities, colleges, school boards, charities and qualifying non-profit
organizations) would be able to claim rebates for the provincial portion of
the single sales tax so that the net effect of the tax on each sector would
be fiscally neutral relative to the amount of RST currently paid by these
sectors. As with the GST, the rebates would be a percentage of tax paid.
Temporarily Restricted Input Tax Credits
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TEMPORARY ITC RESTRICTIONS FOR LARGE BUSINESSES:
o Energy, except where purchased by farms or used to produce goods for sale.
o Telecommunication services other than internet access or toll-free numbers.
o Road vehicles weighing less than 3,000 kilograms (and parts and certain
services) and fuel to power those vehicles.
o Food, beverages and entertainment.
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Similar to the restricted input tax credit (ITC) system in Quebec, large
businesses (those with annual taxable sales in excess of $10 million) and
financial institutions would be unable to claim input tax credits in
certain areas. These restrictions would be temporary, during the initial
implementation of the single sales tax, and would apply only to the
provincial portion of the tax. After the first five years of single sales
tax implementation, full input tax credits on their taxable supplies would
be phased in over a three-year period.
Supporting Tourism
The RST rate on transient accommodation, such as hotel rooms, is currently
five per cent. Under the single sales tax, the provincial portion would
increase to eight per cent.
Approximately $40 million of annual net revenue associated with the
difference in rates would be allocated to destination marketing in Ontario
tourism regions, once these are established.
Private Transfers of Motor Vehicles
Similar to the tax treatment in other provinces, Ontario would retain a
sales tax on private transfers of used motor vehicles. This would help to
ensure a level playing field between used vehicles sold through dealerships
and private sales.
Maintaining Current Tax Levels on Certain Types of Insurance
Retail Sales Tax currently applies to premiums for some types of insurance
such as group insurance. Ontario would retain a tax on insurance at eight
per cent after the transition to the single sales tax, on the same types of
insurance currently taxed under the RST. Automobile insurance premiums
would continue to be exempt from sales tax.
Maintaining Current Levels of Revenue from Alcohol Sales
The RST is currently collected on alcoholic beverages sold through licensed
establishments at the rate of 10 per cent and on alcoholic beverages sold
through retail stores at the rate of 12 per cent.
Under the single sales tax, the provincial rate on these products would
fall to eight per cent.
To maintain social responsibility and existing revenue, while introducing
the new single sales tax, the government proposes to make adjustments to
current alcohol fees, levies and charges.
The government also proposes to introduce legislation to replace various
alcohol and other fees, levies and charges with taxes to enhance their
operational structure and legislative clarity.
Additional Information
Additional information on technical design issues and transitional rules
will be released in the coming months to help taxpayers and businesses
prepare for the proposed changes. The government will also establish an
implementation panel to assist with the transition to the single sales tax.
Stronger Economic Foundation
Canada and Ontario have entered into a Memorandum of Agreement for Ontario
to join a framework agreement for federal collection and administration of
a single value-added sales tax, effective July 1, 2010. Key provisions of
the Memorandum of Agreement include $4.3 billion in cash transfer payments
to Ontario and flexibility to provide certain consumer exemptions.
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KEY FEATURES OF THE CANADA-ONTARIO MEMORANDUM OF AGREEMENT TO ENTER INTO A COMPREHENSIVE INTEGRATED TAX
COORDINATION AGREEMENT
Subject to the appropriate legislative approvals, Canada and Ontario are
agreeing to conclude a Comprehensive Integrated Tax Coordination Agreement
that would:
o provide the policy framework for the application of a single,
value-added sales tax in Ontario on July 1, 2010, administered by the
Canada Revenue Agency and the Canada Border Services Agency;
o enable Ontario to:
• provide consumer exemptions on a limited number of items such as
children's clothing, feminine hygiene products and books;
• phase in full tax relief for certain business input tax credits,
for a transitional period of up to eight years;
• establish provincial rebate rates and thresholds for new housing,
public service bodies, including charities and qualifying
non-profit organizations; and
o negotiate best possible arrangements for employment in the federal
government of provincial employees affected by the change and to
retain them in Ontario.
Canada would provide Ontario with $4.3 billion in cash transfer payments
— $3 billion upon implementation of the combined sales tax on July 1,
2010 and $1.3 billion on July 1, 2011, to promote economic growth and
support the transition to the new value-added tax.
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Tax Breaks for People
Ontario Sales Tax Transition Benefit
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Ontario Sales Tax Transition Benefit Table 2
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Single Individuals Single Parents or Couples
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Maximum Phase-out Maximum Phase-out
Payment Month Benefit Range Benefit Range
- -------------------- ------------ ---------------- ------------ -------------------
June 2010 $100 $80,000-$82,000 $330 $160,000-$166,600
December 2010 $100 $80,000-$82,000 $335 $160,000-$166,700
June 2011 $100 $80,000-$82,000 $335 $160,000-$166,700
- -------------------- ------------ ---------------- ------------ -------------------
Total $300 $1,000
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As part of the sales tax reform proposed in this Budget, $4 billion in
relief would be provided to Ontarians to help ensure a smooth transition to
the new sales tax system.
Benefits would be delivered to eligible Ontario tax filers aged 18 and over
in each of June 2010, December 2010 and June 2011, totalling a maximum of
$300 for single people and $1,000 for single parents and couples. Each
maximum benefit would be reduced by five per cent of the recipients'
previous year's adjusted family net income over $80,000 for single
individuals and over $160,000 for families. To qualify for the two benefits
in 2010, a 2009 tax return would have to be filed, and a 2010 tax return
would have to be filed for the June 2011 benefit. About 6.5 million
individuals and families in Ontario would receive sales tax transition
benefits.
A single person with no children and income of up to $80,000 would receive
a benefit of $100 in each of June 2010, December 2010 and June 2011. The
maximum benefit would be reduced by five per cent of income over $80,000,
so a single person with income of $81,000, for example, would receive three
benefits of $50 each. Single people with income over $82,000 would not
receive a benefit.
A family with income of up to $160,000 would receive three benefits: $330
in June 2010, $335 in December 2010 and $335 in June 2011. The maximum
benefits would be reduced by five per cent of family income over $160,000,
so a family with income of $163,000, for example, would receive one benefit
payment of $180 and two benefit payments of $185 each. Families with income
over $166,700 ($166,600 for the June 2010 benefit) would not receive a
benefit.
Sales Tax and Property Tax Relief
The government is proposing to increase the amount of ongoing sales tax and
property tax relief for individuals and families with low to middle incomes
by more than $1 billion a year. To better target this tax relief, the
current combined sales and property tax credits would be replaced with two
new tax credits: the Ontario Sales Tax Credit and the Ontario Property Tax
Credit. These changes would improve transparency, fairness and timeliness.
Ontario Sales Tax Credit
This Budget proposes a new ongoing sales tax credit to help low- to
middle-income individuals and families with the sales taxes they pay.
Under the current tax system, Ontario families have to wait until their
income tax returns are processed to receive sales tax relief for sales tax
paid in the previous year. To provide more timely assistance, the new sales
tax credit would replace the current sales tax relief, provided through the
Ontario Property and Sales Tax Credits, with advance payments. The sales
tax credit would be refundable and paid quarterly starting in July 2010,
when the new sales tax would come into effect.
The new sales tax credit would provide annual relief of up to $260 for each
adult and each child. It would be reduced by four per cent of adjusted
family net income over $20,000 for single people and over $25,000 for
families.
For example, for the period from July 2010 to June 2011, a single
individual with income of $20,000 or less would receive $260; a single
parent with one child or a couple with $25,000 or less of income would
receive $520; and a couple with two children and family income of $25,000
or less would receive $1,040.
Unlike the current sales and property tax credits, the maximum benefit and
thresholds would be indexed for inflation to protect the value of this
assistance for people with low to middle incomes.
About 2.9 million families and individuals would benefit from this measure.
Ontario Property Tax Credit
Property tax relief, currently provided through the Ontario Property and
Sales Tax Credits, would be replaced by a new refundable Ontario Property
Tax Credit for low- to middle-income homeowners and tenants that would
provide an additional $270 million in property tax relief on an annual
basis. The new credit would maintain existing benefit amounts while
extending property tax relief to more Ontarians.
The credit would be based on occupancy cost — that is, property tax
paid or 20 per cent of rent paid. A credit would be provided for occupancy
cost of up to $250 for non-seniors or $625 for seniors, plus 10 per cent of
occupancy cost. The credit would not exceed occupancy cost and would be
subject to a maximum of $900 for non-seniors and $1,025 for seniors. It
would then be reduced by two per cent of adjusted family net income in
excess of $20,000 for single individuals and $25,000 for families.
For example, for the 2010 taxation year, a single individual with income of
$20,000 or less and $500 in monthly rent would receive $370 in Ontario
Property Tax Credit; a couple with $1,500 in property tax and $25,000 or
less of family income would receive $400; and a senior couple with $4,000
in property tax and $25,000 or less in family income would receive $1,025.
The amounts and thresholds would be indexed for inflation to protect the
value of this assistance for people with low to middle incomes.
About 2.3 million families and individuals would benefit from this measure.
Eligible senior homeowners will continue to receive additional assistance
with their property taxes through the Ontario Senior Homeowners' Property
Tax Grant.
Personal Income Tax Relief
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Ontario Personal Income Tax Rates (%) Table 3
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Taxable Income(1) Current (2009) Proposed (2010)
- --------------------------- ---------------------- -----------------------------
$0-$36,848 6.05 5.05
$36,848-$73,698 9.15 9.15
> $73,698 11.16 11.16
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(1) Taxable income thresholds would be adjusted in 2010 and future years to
reflect Ontario inflation.
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The government is proposing to provide more than $1.1 billion annually in
broadly based PIT relief by cutting the first tax rate by one percentage
point, from 6.05 per cent to 5.05 per cent, effective January 1, 2010. As a
result, Ontarians would benefit from the lowest provincial tax rate in
Canada on the first $36,848 of taxable income, based on legislation
currently in place in other provinces.
Ontario Tax Reduction
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Approximately 90,000 lower-income taxpayers would no longer pay Ontario PIT,
and approximately 725,000 additional taxpayers with lower incomes would have
their Ontario PIT further reduced by the OTR.
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The Ontario Tax Reduction (OTR) reduces or eliminates PIT by up to $205 per
tax filer and $379 per child or disabled or infirm dependant. By leaving
these parameters in place while reducing the first tax rate, approximately
90,000 lower-income tax filers would no longer pay Ontario PIT, and
approximately 725,000 additional taxpayers with lower incomes would have
their Ontario PIT further reduced by the OTR.
Other Changes
Various tax credits and provisions of the PIT system are based on the tax
rate structure. As a consequence, these credits and provisions would be
adjusted to reflect the proposed tax rate cut.
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Ontario Surtax Thresholds Table 4
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Current (2009) Proposed (2010)(1)
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20% surtax Basic Ontario Tax > $4,257 Basic Ontario Tax > $3,978
36% surtax Basic Ontario Tax > $5,370 Basic Ontario Tax > $5,091
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(1) Thresholds would be adjusted in 2010 and future years to reflect Ontario
inflation.
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Ontario's two-tiered surtax adds to the progressivity of the PIT system.
Currently, Ontario levies a 20 per cent surtax on basic Ontario tax over
$4,257, and a 36 per cent surtax on basic Ontario tax over $5,370. This
Budget proposes to adjust both surtax thresholds to maintain the
progressivity of the income tax system by providing a more proportionate
distribution of benefits to taxpayers as a result of the rate reduction.
Most of Ontario's non-refundable tax credits are calculated by multiplying
a credit amount (for example, the Basic Personal Amount) by 6.05 per cent,
the first tax rate. With the proposed reduction in the first tax rate, the
calculation of these non-refundable credits would be adjusted so that the
credit amounts would be multiplied by 5.05 per cent. The tax credit rate on
the first $200 of qualifying charitable donations would also be adjusted
from 6.05 per cent to 5.05 per cent. Consequential adjustments would also
be made to the calculation of Ontario minimum tax.
Ontario Dividend Tax Credit
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Ontario Dividend Tax Credit Rates(1) (%) Table 5
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Current Proposed
2009 2010(2) 2010(2)
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Eligible Dividends (generally those 7.4 7.7 6.4
paid by large corporations)
Other than Eligible Dividends 5.13 5.13 4.5
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(1) Rate applied to taxable amount of dividends.
(2) Effective January 1, 2010.
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The dividend tax credit provides PIT relief to Ontario investors and small
business owners in recognition that dividends from Canadian corporations
are distributed from earnings that have already been taxed at the corporate
level. As a result of the proposed reductions in CIT rates, Ontario would
adjust the tax credit rates for dividends from taxable Canadian
corporations. The changes to the dividend tax credit rates would maintain
the integration of Ontario's CIT and PIT systems by reflecting the
reduction in CIT rates.
Competitive Business Taxes
The Budget is proposing business tax relief that would lower business
costs, enhance Ontario's competitiveness and support growing small
businesses. These measures would support the government's five-point
economic plan and build on the tax relief already in place, such as the
elimination of Capital Tax in 2010.
Cutting CIT Rates
Ontario's current general CIT rate is 14 per cent of taxable income and the
rate for manufacturing and processing (M&P), mining, logging, farming
and fishing is 12 per cent. The small business CIT rate currently is 5.5
per cent.
The government is proposing to cut CIT rates, beginning July 1, 2010, as
follows:
o the general CIT rate would be cut from 14 per cent to 12 per cent and
further reduced to 10 per cent over three years;
o the CIT rate on M&P and resource sectors would be cut from 12 per
cent to 10 per cent;
o the small business CIT rate would be cut from 5.5 per cent to 4.5 per
cent; and
o the small business deduction surtax of 4.25 per cent would be
eliminated.
The following table sets out the proposed CIT rate cut plan:
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Ontario's Proposed Corporate Income Tax Rate Cut Plan Table 6
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Rates (Per Cent)
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Small Small Business
Date General M&P(1) Business(2) Deduction Surtax(3)
- ---------------------------------- ------------------ ------------------- ---------------- ---------------------
Current 14 12 5.5 4.25
July 1, 2010 12 10 4.5 0
July 1, 2011 11.5 10 4.5 0
July 1, 2012 11 10 4.5 0
July 1, 2013 10 10 4.5 0
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(1) Income from manufacturing and processing, mining, logging, farming or
fishing.
(2) Applies to Canadian-controlled private corporations (CCPCs) on the first
$500,000 of active business income.
(3) Applies to CCPCs on taxable income between $500,000 and $1.5 million.
Note: The proposed tax rate reductions would be pro-rated for taxation years
straddling the effective dates.
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Lowering the CIT rate to 10 per cent would enhance Ontario's
competitiveness and create a more efficient tax system that would encourage
investment and increase productivity.
When the proposed Ontario CIT rate cuts are fully implemented, Ontario's
combined federal-provincial CIT rate of 25 per cent would be lower than the
current average Organisation for Economic Co-operation and Development
(OECD) corporate tax rate of 26.7 per cent. Compared to the U.S. Great
Lakes states — Ontario's key competitors for jobs and investment
— Ontario's combined rate would be 15 percentage points lower than the
average combined federal-state general CIT rate and more than 11 percentage
points lower than the average combined manufacturing rate.
The proposed Ontario CIT rate reductions, together with the conversion of
the RST into the single sales tax, would also cut Ontario's marginal
effective tax rate (METR) on new capital investment in half, when those
measures are fully phased in. This would make Ontario one of the most
competitive jurisdictions in the industrialized world in terms of the
taxation of new capital investment by corporations.
[Chart 1, bar graph: Cutting Ontario's Marginal Effective Tax Rate on New Investment]
The Ontario METR, which includes federal taxes, currently stands at 32.8
per cent. The sales tax and CIT measures proposed in this Budget, together
with previously announced Ontario and federal tax cuts, would bring
Ontario's marginal effective tax rate in 2010 down to 18.6 per cent —
below the OECD average of 21.8 per cent. Following the completion of the
proposed CIT rate cuts in 2013, the Ontario rate would fall further to 17.3
per cent. When the restrictions on input tax credits under the single sales
tax are phased out in 2018, the rate would decline to 16.2 per cent.
This would promote increased foreign and domestic investment and
productivity in Ontario.
Eliminating the Small Business Deduction Surtax
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ELIMINATING A BARRIER TO SMALL BUSINESS GROWTH
Ontario's proposed elimination of the small business deduction surtax would
make Ontario the only province not to claw back the benefit of the small
business deduction.
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The small business deduction provides a lower CIT rate of 5.5 per cent to
Canadian-controlled private corporations (CCPCs) on the first $500,000 of
active business income. Currently, the benefit of the small business
deduction is gradually phased out on taxable income between $500,000 and
$1.5 million. In 2008, the small business deduction provided over $1.1
billion of tax relief to CCPCs in Ontario.
The benefit of the small business deduction is phased out by a 4.25 per
cent surtax that is applied in addition to the regular CIT rates.
As part of the government's plan to enhance the competitiveness of
Ontario's corporate tax system, the government proposes to eliminate this
barrier to growth for small businesses effective July 1, 2010. This would
extend the benefit of the small business deduction to all CCPCs. If passed
by the legislature, CCPCs would be taxed at the proposed new small business
rate of 4.5 per cent, effective July 1, 2010, on the first $500,000 of
active business income, regardless of income level. The proposed
elimination of the small business deduction surtax and the general CIT rate
cut to 10 per cent, in 2013, would provide all CCPCs with an average CIT
rate on active business income of below 10 per cent.
[Chart 2, line graph: Cutting Taxes for Growing Small Businesses]
Based on legislation currently in place in other provinces, eliminating the
surtax would make Ontario the only province not to claw back the benefit of
the small business deduction.
This measure would be pro-rated for taxation years straddling the effective
date.
Reducing the Corporate Minimum Tax
The CMT is calculated as the amount by which four per cent of adjusted net
income for accounting purposes exceeds CIT payable. The CMT generally acts
as a prepayment of CIT by providing for a carry-forward credit equal to the
amount of CMT paid. The credit can be carried forward up to 20 years and
may be applied to reduce CIT in years where CIT exceeds CMT. A corporation
or an associated group of corporations with total assets under $5 million
and annual gross revenues under $10 million does not pay CMT.
As a result of the CIT reform proposals in this Budget, a corresponding
reduction in the CMT rate is necessary to ensure that corporations subject
to the CMT are able to fully benefit from the proposed CIT rate reductions.
In addition, the government is proposing to exempt more small and
medium-sized businesses from calculating and paying the CMT.
It is proposed that effective for taxation years ending after June 30,
2010:
o the CMT rate be reduced to 2.7 per cent; and
o a corporation or an associated group with under $50 million in total
assets or under $100 million in annual gross revenues would not pay
CMT.
The 20-year CMT credit carry-forward mechanism would continue to apply.
The proposed rate reduction would be pro-rated for taxation years
straddling the effective date.
Ontario's Legislated Plan to Eliminate Capital Tax
Capital Tax, which taxes business investment, is widely recognized as a
barrier to attracting new investment. In 2004, the government set out a
plan to eliminate Ontario's Capital Tax by 2012.
Since then, the government has accelerated the elimination plan and further
relieved the Capital Tax burden on business. On January 1, 2007, Capital
Tax rates were cut by an additional 21 per cent, and Capital Tax was
eliminated for Ontario companies primarily engaged in M&P and resource
activities.
On January 1, 2010, Capital Tax rates will be cut by one-third and the tax
will be fully eliminated on July 1, 2010. The accelerated Capital Tax
elimination plan has been fully legislated.
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Ontario's Accelerated Capital Tax Elimination Plan Table 7
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Rates (Per Cent)
--------------------------------------------------------------------------------
Non-Financial Institutions Financial Institutions
--------------------------------------------------------------------------------
1st $400 Taxable Capital Over
Million of $400 Million
- -------------------- ------------ --------------------------------------------------------------------------------
Deduction M&P and Other Taxable Non-Deposit Deposit
Date ($ M) Resources(1) Corporations Capital Taking Taking
- -------------------- ------------ ----------------- --------------- ---------------- --------------- -------------
2004 5 0.3 0.3 0.6 0.72 0.9
Jan. 1, 2007 12.5 Eliminated 0.225 0.45 0.54 0.675
Jan. 1, 2008 15 0.225 0.45 0.54 0.675
Jan. 1, 2010 15 0.15 0.3 0.36 0.45
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July 1, 2010 Legislated Accelerated Elimination Date
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Measures are pro-rated for taxation years straddling the effective date.
(1) Primarily engaged in manufacturing and processing, mining, logging, farming
or fishing activities in Ontario.
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TARGETED TAX MEASURES
This Budget proposes a number of targeted tax measures to build on the
government's five-point economic plan to create jobs, strengthen the
economy and enhance the quality of life in the province. These targeted tax
relief measures would support key sectors in the economy, innovation and
skills training, and would provide additional benefits of more than $940
million over four years to Ontario families, businesses and communities.
Encouraging Innovation
Ontario Innovation Tax Credit
The Ontario Innovation Tax Credit (OITC) is a 10 per cent refundable tax
credit for small and medium-sized corporations performing eligible
Scientific Research and Experimental Development (SR&ED) in Ontario.
This Budget proposes to extend the OITC to more small and medium-sized
corporations by extending the taxable income phase-out range of between
$400,000 and $700,000 to a new phase-out range of between $500,000 and
$800,000.
This measure would parallel the enhancement of the federal Investment Tax
Credit for SR&ED proposed in the 2009 federal budget.
The required amendments would be introduced once the implementing federal
legislation is enacted. The effective date of the amendments and phase-in
rules would parallel the federal amendments.
Accelerated Capital Cost Allowance for Computers
Currently, computers are eligible for a 55 per cent Capital Cost Allowance
(CCA) rate on a declining-balance basis.
Ontario will parallel the 2009 federal budget proposal to provide a
temporary 100 per cent accelerated CCA rate for eligible computers and
software acquired after January 27, 2009 and before February 2011, subject
to federal implementation. As announced federally, the temporary
accelerated CCA rate for computers will not be subject to the half-year
rule and, accordingly, the full cost of eligible computers and software can
be deducted in the first taxation year that the assets are available for
use.
Supporting Key Sectors
Accelerated Capital Cost Allowance for Manufacturing and Processing
Machinery and Equipment
Ontario and the federal government currently provide a temporary tax
incentive in the form of an accelerated CCA rate for M&P machinery and
equipment acquired after March 18, 2007 and before 2012. Eligible assets
acquired before 2010 qualify for a 50 per cent straight-line accelerated
CCA rate and those acquired in 2010 and 2011 are eligible for accelerated
CCA rates on a declining-balance basis.
Ontario will parallel the 2009 federal budget proposal to extend the 50 per
cent straight-line accelerated CCA rate for eligible assets acquired in
2010 and 2011, subject to federal implementation.
Ontario continues to call on the federal government to extend the 50 per
cent straight-line CCA rate to all M&P machinery and equipment acquired
before 2014 to benefit businesses making longer-term investments.
Making the Enhanced Ontario Film and Television Tax Credit Rate Permanent
The Ontario Film and Television Tax Credit (OFTTC) is a refundable tax
credit available to qualifying corporations for labour expenditures related
to certified domestic film and television productions in Ontario.
In the 2007 Ontario Economic Outlook and Fiscal Review, the government
announced an increase to the OFTTC rate to 35 per cent from 30 per cent,
effective January 1, 2008 to December 31, 2009.
As announced on February 20, 2009, the government proposes to make the
enhanced 35 per cent OFTTC rate permanent.
Making the Enhanced Ontario Production Services Tax Credit Rate Permanent
The Ontario Production Services Tax Credit (OPSTC) is a refundable tax
credit available to qualifying corporations for labour expenditures related
to qualifying foreign film and television production services and
non-certified domestic film and television productions in Ontario.
In the 2007 Ontario Economic Outlook and Fiscal Review, the government
announced an increase to the OPSTC rate to 25 per cent from 18 per cent
effective January 1, 2008 to December 31, 2009.
As announced on February 20, 2009, the government proposes to make the
enhanced 25 per cent OPSTC rate permanent.
Enhancing the Ontario Interactive Digital Media Tax Credit
The Ontario Interactive Digital Media Tax Credit (OIDMTC) is a refundable
tax credit available to qualifying corporations for expenditures related to
the creation, marketing and distribution of eligible interactive digital
media products. Currently, a 30 per cent refundable tax credit is available
to small corporations that develop their own eligible products and a 25 per
cent refundable tax credit is available to large corporations that develop
their own eligible products or to corporations that develop eligible
products under a fee-for-service arrangement.
This Budget proposes permanent enhancements to the OIDMTC to:
o enhance the tax credit rates;
o expand eligible labour expenditures; and
o extend the tax credit to more fee-for-service arrangements.
Enhancing the OIDMTC Rate
This Budget proposes, effective for qualifying expenditures incurred after
March 26, 2009, to enhance the OIDMTC rates to:
o 40 per cent for qualifying corporations, regardless of size, that
develop and market their own eligible products; and
o 35 per cent credit for qualifying corporations that develop eligible
products under a fee-for-service arrangement.
Expanding Eligible Labour Expenditures under the OIDMTC
This Budget proposes to expand the OIDMTC, effective for qualifying
expenditures incurred after March 26, 2009, to allow corporations to claim
100 per cent of the amount paid to eligible arm's-length contractors that
is attributable to the salaries and wages of the contractor's employees.
Currently, qualifying corporations that develop and market their own
products are able to claim 50 per cent of such labour expenditures while
corporations developing eligible products under a fee-for-service
arrangement are unable to claim these expenditures.
Extending the OIDMTC to More Fee-for-Service Arrangements
This Budget also proposes, effective for qualifying expenditures incurred
after March 26, 2009, to extend the OIDMTC to digital media game developers
that incur a minimum $1 million of eligible labour expenditures over a
36-month period for fee-for-service work done in Ontario in respect of an
eligible product. Corporations that meet the minimum expenditure test would
not be required to be at arm's length with the purchaser corporation, or to
develop all, or substantially all, of the eligible product.
Expanding the Ontario Computer Animation and Special Effects Tax Credit
The Ontario Computer Animation and Special Effects (OCASE) tax credit is a
20 per cent refundable tax credit available to qualifying corporations for
eligible labour expenditures related to digital animation and special
effects in qualifying film and television productions.
This Budget proposes, effective for qualifying expenditures incurred after
March 26, 2009, enhancements to the OCASE tax credit that would:
o increase eligible labour expenditures to 100 per cent from 50 per cent
of amounts paid to arm's-length unincorporated individuals and
partnerships providing freelance services;
o expand eligible labour expenditures to include 100 per cent of amounts
paid to arm's-length incorporated individuals providing freelance
services while ensuring that incorporated individuals cannot claim the
credit directly; and
o streamline administration by relaxing the requirement that an eligible
animation or visual effect be created primarily with digital
technologies.
Expanding the Ontario Book Publishing Tax Credit
The Ontario Book Publishing Tax Credit is a 30 per cent refundable tax
credit available to Ontario book publishing corporations for qualifying
expenditures related to publishing and promoting the first three books by a
Canadian author in an eligible category of writing. Eligible categories of
writing are adult or children's fiction, non-fiction, poetry or biography.
This Budget proposes to expand eligibility to qualifying expenditures
incurred after March 26, 2009 for:
o any number of books by a Canadian author in an eligible category of
writing; and
o direct expenses that reasonably relate to publishing an electronic
version of an eligible book.
Supporting Skills and Knowledge
Enhancing the Co-operative Education Tax Credit
The Co-operative Education Tax Credit (CETC) is a refundable tax credit
available to businesses that employ postsecondary students enrolled in
qualifying co-operative education programs at eligible educational
institutions. Currently, the CETC is a 10 per cent refundable tax credit
(15 per cent for small businesses) on salaries and wages paid, to a maximum
credit of $1,000 per work placement.
This Budget proposes enhancements to the CETC, effective for eligible
expenditures incurred after March 26, 2009, that would:
o increase the 10 per cent CETC rate to 25 per cent and the enhanced 15
per cent rate for small businesses to 30 per cent; and
o increase the maximum tax credit available from $1,000 to $3,000 per
work placement.
Enhancing the Apprenticeship Training Tax Credit
The Apprenticeship Training Tax Credit (ATTC) is a refundable tax credit
available to businesses on the salaries and wages paid to eligible
apprentices in designated construction, industrial, motive power and
service trades. Currently, the ATTC provides a 25 per cent refundable tax
credit (30 per cent for small businesses) on the salaries and wages paid
during the first 36 months of an apprenticeship program, to a maximum
annual credit of $5,000. The ATTC is available for apprentices that begin
their apprenticeship program before January 1, 2012 and salaries and wages
paid before January 1, 2015.
This Budget proposes enhancements to the ATTC that would make it the most
generous tax credit of its kind currently legislated in Canada. These
proposed enhancements, effective for expenditures incurred after March 26,
2009, would:
o increase the 25 per cent ATTC rate to 35 per cent and the enhanced 30
per cent rate for small businesses to 45 per cent;
o increase the $5,000 annual maximum tax credit to $10,000;
o extend the ATTC to salaries and wages paid during the first 48 months
of an apprenticeship program; and
o make the ATTC a permanent tax incentive.
Helping Seniors and Families
Ontario Senior Homeowners' Property Tax Grant
Introduced in the 2008 Budget, the Ontario Senior Homeowners' Property Tax
Grant is providing a grant of up to $250 to help low- to middle-income
senior homeowners pay their 2009 property taxes.
Starting in 2010, the maximum grant amount will be doubled from $250 to
$500. Senior homeowners can apply for the grant when filing their income
tax returns. In 2010, over 575,000 seniors will be able to benefit from
this grant.
Eligible single seniors with $500 or more in property taxes and income of
up to $35,000 a year will receive the maximum $500 grant in 2010. Eligible
single seniors with income between $35,000 and $50,000 will receive a
proportionately smaller grant. Eligible senior couples with $500 or more in
property taxes and income of up to $45,000 a year will receive the maximum
grant. Eligible senior couples with income between $45,000 and $60,000 will
receive a proportionately smaller grant.
Ontario Property and Sales Tax Credits for Seniors
The Ontario Property and Sales Tax Credits for seniors were established in
1992 to assist seniors with modest incomes. In 2004, the government
enhanced these refundable credits by increasing the underlying property tax
credit amount by 25 per cent, from $500 to $625. In each of the last four
budgets, the government also increased the income threshold at which senior
couples' benefits begin to be reduced.
The 2009 minimum level of income guaranteed by the Ontario and federal
governments for eligible senior couples is rising because of increases to
Old Age Security (OAS) and the Guaranteed Income Supplement (GIS). As a
result of these increased amounts, the minimum level of income guaranteed
by governments, including Ontario's Guaranteed Annual Income System
(GAINS), for qualifying Ontario senior couples is rising above $24,300 in
2009.
The Province wants seniors who receive the guaranteed minimum level of
income to get the full benefit of the Ontario Property and Sales Tax
Credits. To achieve this goal, this Budget proposes to increase the income
threshold for senior couples in 2009. The new level would be determined
when the federal government finalizes OAS and GIS amounts for 2009. About
695,000 senior recipients would benefit this year from an estimated $95
million in enhancements to these credits since 2003, including this
proposal.
Starting in 2010, the Ontario Property and Sales Tax Credits would be
replaced with a new Ontario Sales Tax Credit and a new Ontario Property Tax
Credit.
Increasing Access to Locked-In Accounts
This Budget proposes to amend the Pension Benefits Act Regulation and the
Schedule of Required Fees to:
o enhance access to locked-in funds by increasing, from 25 per cent to
50 per cent, unlocking permitted on purchase from new Life Income
Funds (LIFs), effective January 1, 2010. Current new LIF owners would
have an opportunity to unlock an additional 25 per cent of amounts
previously transferred into their existing fund. Remaining old LIFs
and Locked-in Retirement Income Funds (LRIFs) would be harmonized with
the updated new LIF rules; and
o temporarily waive financial-hardship application withdrawal fees for
Ontario locked-in accounts. This two-year fee waiver would take effect
for applications approved on or after April 1, 2009.
Concordance with the Income Tax Act (Canada)
The following proposals announced by the federal government in its 2009
budget to help families would be adopted automatically once federal
legislative and regulatory changes have been approved.
o Effective for withdrawals from Registered Retirement Savings Plans
(RRSPs) made after January 27, 2009, the Home Buyers' Plan withdrawal
limit would be increased from $20,000 to $25,000. As a result,
first-time homebuyers would have greater access to funds to purchase
or build a home. The increase to the withdrawal limit would also be
available to those who purchase or build a more accessible home for
the benefit of a related person with a disability, and to persons with
disabilities who purchase or build a more accessible home.
o Where the final distribution of property from the RRSP or Registered
Retirement Income Fund (RRIF) of a deceased annuitant occurs after
2008, the amount of post-death decreases in the value of the plan
would be allowed to be carried back and deducted against the
year-of-death RRSP/RRIF income inclusion.
Tax-Free Savings Accounts and the Succession Law Reform Act
The government proposes to change the Succession Law Reform Act (SLRA) to
allow for beneficiary designation of Tax-Free Savings Accounts (TFSAs).
Designated beneficiaries would be able to receive TFSAs outside of a will
in the same way that beneficiaries can receive proceeds of RRSPs. The TFSA
could also pass to the designated beneficiary without being subject to
Estate Administration Tax, simplifying estate matters and reducing costs.
Other Measures
New Measures to Encourage Tobacco Tax Compliance
Ontario continues to review opportunities in its Tobacco Tax Act to enhance
its enforcement measures to encourage compliance. The following proposals
build on measures enacted over the past five years to strengthen
enforcement against the illegal manufacture and distribution of tobacco
products. These proposed measures would add the following:
o enforcement provisions aimed at individuals suspected of contravening
the act;
o the authority for the court to suspend the driver's licence of a
person convicted of an offence under the act involving the use of a
vehicle;
o provisions that prohibit the possession of any quantity of unmarked
cigarettes, unless otherwise permitted under the act; and
o requirements to mark fine-cut tobacco similar to cigarettes. Revenue
officials will consult with manufacturers on how to best implement
this measure.
The federal government has requested that the Ontario Flue-Cured Tobacco
Growers' Marketing Board revise its licensing system for tobacco leaf
production. Government enforcement agencies will have access to the Board's
licensing records in their ongoing efforts to address the distribution of
raw leaf tobacco that may be used in contraband tobacco products.
Ontario will continue to work with key stakeholders and its federal and
provincial counterparts to explore new and innovative measures to address
contraband tobacco.
Ontario Political Contributions
As announced on December 30, 2008, the government proposes to introduce
legislation this spring to convert the tax deduction that was available for
corporations making eligible Ontario political contributions under the
Corporations Tax Act into a non-refundable tax credit, based on the general
CIT rate, under the Taxation Act, 2007. The proposed tax credit, effective
for taxation years ending after December 31, 2008, would maintain a similar
level of support as that provided under the former tax deduction.
Eligible Ontario political contributions would be contributions made under
the Election Finances Act to Ontario parties and constituency associations
or to candidates in an Ontario election. Unused contributions, including
those from pre-2009 taxation years, would be available to be carried
forward and claimed for up to 20 years. Similar to the deduction, the
annual contribution limit would be indexed according to the manner and
schedule set out in the Election Finances Act.
PENSION REFORM MEASURES
Solvency Funding Relief Measures
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CONSENT FOR 10-YEAR SOLVENCY EXTENSIONS
All plans, except those that are jointly governed (e.g., multi-employer and
jointly sponsored pension plans), would be required to obtain the consent
of plan beneficiaries to extend the solvency payment schedule.
o The solvency payment schedule would only be extended if no more than
one-third of the aggregate of all active, deferred and retired plan
members indicate (before the start of payments) that they do not
consent.
o Collective bargaining agents would only be able to provide consent for
the proportionate share of the active members whom they represent.
- --------------------------------------------------------------------------------
In December 2008, the government announced that it would seek the approval
of the legislature to provide temporary solvency funding relief to pension
plans affected by the financial-market turmoil and take steps to ensure
greater transparency while helping to protect the security of pension
benefits.
Amendments to the Pension Benefits Act (PBA) will be introduced that would,
if passed, provide for temporary solvency funding relief through
regulations that would have retroactive effect to September 30, 2008.
Under proposed solvency relief rules, when filing the first scheduled
valuation report dated on or after September 30, 2008, a plan administrator
would be able to elect to:
o consolidate existing solvency payment schedules into a new five-year
payment schedule;
o defer for one year from the valuation date, the start of new
going-concern and solvency special payments identified in the
valuation report; and
o subject to consent, extend the solvency payment schedule to a maximum
of 10 years for a new solvency deficiency determined in the report.
To further enhance solvency relief and to maximize its effectiveness, up to
10 years of going-concern special payments could be taken into account to
determine the net solvency deficiency where the special payment schedule is
extended to a maximum of 10 years.
If an election is made, a solvency excess identified in subsequent
valuation reports could be used to reduce or eliminate solvency special
payments identified in the initial report. To promote transparency,
enhanced notice regarding the funded status of the plan and the effect of
the election would be provided to active, deferred and retired members.
If solvency payment schedules are consolidated or extended, future benefit
enhancements would be funded over a maximum of five years on both a
solvency and going-concern basis. This provision would remain in effect for
up to five years following the start of special payments identified in the
initial valuation report.
To protect benefit security in light of adverse economic conditions,
contribution holidays would not be permitted in fiscal years ending in 2010
to 2012 unless:
o an actuarial cost certificate, based on an approximation from the last
filed report, is filed annually with the Financial Services Commission
of Ontario (FSCO) and the cost certificate confirms the plan was in a
surplus position at the start of the fiscal year; or
o the plan is a designated plan under the Income Tax Act (Canada).
The Canadian Institute of Actuaries' revised Standard of Practice for
Pension Commuted Values, scheduled to take effect April 1, 2009, could be
used for the purpose of solvency valuations as of December 12, 2008, if the
legislature approves the necessary regulation-making authority.
Strengthening Ontario's Pension System
In November 2006, the Ontario government established the Expert Commission
on Pensions. The Commission held extensive consultations with Ontarians and
issued its final report, A Fine Balance: Safe Pensions, Affordable Plans,
Fair Rules, in November 2008.
The government is reviewing the many comments received from stakeholders
about the Commission's report and will continue to be informed by ongoing
stakeholder engagement.
Moving Forward with Pension Modernization
The government is moving forward on a number of initiatives to modernize
Ontario's pension system, including legislative or regulatory amendments to
the PBA to assist plan sponsors, plan members, retired members and their
families.
Pension Division on Marriage Breakdown
The current rules that apply to pension division on marriage breakdown have
resulted in unnecessary delays, costs and disputes for spouses, plans and
the pensions regulator. Following consultations, the government is moving
forward with important changes, introduced in Bill 133 on November 24,
2008. These changes would simplify and clarify pension rules faced by
members, pensioners and spouses in the difficult process of marriage
breakdown. If legislation is approved by the legislature, the government
will consult with stakeholders on regulatory details.
Phased Retirement
Complementary to recent federal tax changes, amendments would be introduced
to permit pension plans to offer phased retirement programs to workers.
These changes would permit plans to allow members at retirement age to
continue working while receiving a pension and continuing to accrue pension
benefits. These reforms would enhance labour market flexibility by helping
employers retain valuable employees while providing workers with additional
employment opportunities.
Enhancing the Powers of the Superintendent of Financial Services
Complementary to recent amendments to the federal Companies' Creditors
Arrangement Act, amendments would be introduced to allow the Superintendent
to review certain pension arrangements in restructuring proceedings.
Modernizing Multi-jurisdictional Regulation
To improve the regulation and administration of multi-jurisdictional
pension plans, the government will finalize a new agreement governing the
regulation of these plans. The proposed new agreement is being developed in
partnership with other governments under the auspices of the Canadian
Association of Pension Supervisory Authorities.
Improving Pension Regulation
The government has taken steps to strengthen the regulation of pensions:
o In response to concerns raised by the Expert Commission on Pensions'
report, between March 31, 2008 and January 31, 2009, FSCO reduced
outstanding pension applications relating to asset transfers, plan
mergers and surplus distributions by 60 per cent and reduced the
average processing time for all defined benefit pension plan
applications by 25 per cent.
o To further improve service and enhance the effectiveness of pension
plan regulation, FSCO will assign 25 additional full-time positions to
support better regulatory efficiency and oversight. These resources
are being phased in over a three-year period.
Laying the Groundwork for Further Reform
The government is committed to introducing a package of pension reforms in
the legislature in the fall of 2009 to further modernize Ontario's pension
system. Additional stakeholder input, building on responses to the
Commission's report, will be sought. As part of the government's plan to
transform Ontario's pension system, the Province is:
o establishing a Pension Reform Advisory Council, representing a broad
spectrum of interests and perspectives, to provide practical and
focused feedback on specific pension reform proposals;
o formally consulting with the Canadian Institute of Actuaries and FSCO
representatives to review actuarial standards and practices to improve
pension plan funding;
o initiating the first actuarial projection study of the stability and
financial status of the Pension Benefits Guarantee Fund, including
revenues and claims, to inform the development of long-term policy;
o improving data collection and developing greater analytical and
research capacity to improve pension policy and regulation; and
o working with the federal government and other provinces to explore
possible strategies to increase pension coverage for working Ontarians
and their families.
These are critical first steps to a legislative framework that better
supports today's workforce, as well as current and future pensioners in
Ontario.
Ontario Teachers' Pension Plan
Expanded Mandate
The government is introducing legislation that, if passed, would expand the
mandate of the Ontario Teachers' Pension Plan (OTPP) Board if the
government and the Ontario Teachers' Federation (as Partners of the Plan)
agree. The amendment would permit the OTPP Board to provide pension
administration and investment services to other pension plans and
institutional investors in the public sector.
o Benefits would include higher revenues for the OTPP Board, lower
administrative costs and enhanced investment opportunities for future
OTPP clients.
o This change is consistent with recommendations of the Expert
Commission on Pensions that large pension plans be permitted to offer
their services to smaller pension plans to improve investment returns
for Ontario pension plans and others.
Government Contributions
In September 2008, the Province came to an agreement with the Ontario
Teachers' Federation and the OTPP Board to reduce guaranteed inflation
protection from 100 per cent to 50 per cent of annual consumer price index
(CPI) changes for pension benefits earned after December 31, 2009. The
intention is to provide inflation adjustments at 100 per cent of the annual
change in the CPI. However, adjustments in excess of 50 per cent will
depend on the financial health of the plan in the future.
As part of the agreement, the government proposes to amend the Teachers'
Pension Act to allow it and other employers that contribute to the Plan to
make specified contributions to the pension plan whenever inflation
protection adjustments paid to retired teachers and others are less than
100 per cent of the annual CPI change.
Financial Information
Currently, every government ministry and Crown agency must provide the
Minister of Finance with financial information when required for budgetary
and Public Accounts purposes. In recent years, additional entities such as
hospitals and colleges have been consolidated in the Province's financial
statements.
A technical amendment to the Ministry of Treasury and Economics Act is
proposed that, if passed, would extend the same information and reporting
requirements to public-sector pension plans that are either sponsored or
co-sponsored by the Province, or by an organization consolidated on the
Province's financial statements.
In addition, a technical amendment is also being proposed to the Financial
Administration Act to clarify that pension expense adjustments arising from
actuarial valuations are non-cash statutory accounting adjustments. Cash
pension contributions will continue to be treated as pension expenses
requiring voted appropriations.
TECHNICAL AMENDMENTS
Legislation will be proposed to improve administrative effectiveness and
enforcement, and maintain the integrity and equity of Ontario's tax and
revenue collection system, as well as enhance legislative clarity and
regulatory flexibility to preserve policy intent, including amendments to
the following statutes:
o Assessment Act
o Capital Investment Plan Act, 1993
o City of Toronto Act, 2006
o Commodity Futures Act
o Community Small Business Investment Funds Act
o Corporations Act
o Corporations Tax Act
o Education Act
o Electricity Act, 1998
o Employer Health Tax Act
o Financial Administration Act
o Fuel Tax Act
o Gasoline Tax Act
o Government Advertising Act, 2004
o Income Tax Act
o Land Transfer Tax Act
o Local Roads Boards Act
o Mining Tax Act
o Ministry of Revenue Act
o Ministry of Treasury and Economics Act
o Municipal Act, 2001
o Northern Services Boards Act
o Ontario Home Ownership Savings Plan Act
o Pension Benefits Act
o Provincial Land Tax Act, 2006
o Public Service Pension Act
o Retail Sales Tax Act
o Securities Act
o Statute Labour Act
o Taxation Act, 2007
o Teachers' Pension Act
o Tobacco Tax Act
o Treasury Board Act, 1991
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2009 Budget Impact Summary Table 8
($ Millions)
- ----------------------------------------------------------------------------------------------------------------------
2008-09 2009-10 2010-11 2011-12 2012-13
----------- ---------- ---------- ----------- ----------
Tax Reform Measures
Conversion of RST Base to New Sales Tax Base - - 1,670 2,175 2,315
Tax Measures for People
Personal Income Tax Cut - (275) (1,115) (1,175) (1,240)
New Sales Tax and Property Tax Credits - 40 (770) (1,125) (1,185)
Ontario Sales Tax Transition Benefit(1) - - (2,700) (1,300) -
----------- ---------- ---------- ----------- ----------
- (235) (4,585) (3,600) (2,425)
Tax Measures for Business
CIT and CMT Cuts - - (530) (1,330) (1,665)
Small Business CIT Rate Cut - - (35) (150) (150)
Small Business Surtax Elimination - - (65) (70) (70)
Small Business Transition Credit(1) - - (400) - -
----------- ---------- ---------- ----------- ----------
- - (1,030) (1,550) (1,885)
Temporary ITC Restrictions for Business - - 905 1,260 1,315
----------- ---------- ---------- ----------- ----------
Total Tax Reform Measures - (235) (3,040) (1,715) (680)
- ------------------------------------------------------------- ----------- ---------- ---------- ----------- ----------
Targeted Tax Measures
Encouraging Innovation
Ontario Innovation Tax Credit (OITC) - (2) (2) (2) (2)
Accelerated Capital Cost Allowance for Computers (4) (110) (53) 59 48
Supporting Key Sectors
Accelerated Capital Cost Allowance for Manufacturing and - - - (110) (180)
Processing Machinery and Equipment
Ontario Film and Television Tax Credit (OFTTC) - (15) (58) (58) (58)
Ontario Production Services Tax Credit (OPSTC) - (5) (19) (19) (19)
Ontario Interactive Digital Media Tax Credit (OIDMTC) - (7) (10) (15) (17)
Ontario Computer Animation and Special Effects Tax Credit - (9) (9) (9) (9)
(OCASE
Ontario Book Publishing Tax Credit (OBPTC) - (3) (3) (3) (3)
Supporting Skills and Knowledge
Co-operative Education Tax Credit (CETC) - (10) (10) (10) (10)
Apprenticeship Training Tax Credit (ATTC) - (40) (40) (40) (40)
Helping Seniors and Families
Ontario Property and Sales Tax Credits for Seniors (1) (5) - - -
Concordance with the Income Tax Act (Canada) (9) (9) (3) (4) (5)
Tax-Free Savings Accounts (TFSAs) - (2) (3) (5) (6)
----------- ---------- ---------- ----------- ----------
Total Targeted Tax Measures (14) (217) (210) (216) (301)
- ------------------------------------------------------------- ----------- ---------- ---------- ----------- ----------
Total Tax Changes (14) (452) (3,250) (1,931) (981)
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(1) Transitional support reported as a program expense.
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