The 2010 Ontario Budget was announced on March 25, 2010, and on May 18, 2010, Bill 16, Creating the Foundation for Jobs and Growth Act, 2010, the legislation enacting many of the changes announced in the Budget, received both its Third Reading and Royal Assent.
The Budget Speech, focuses on short-term job creation with an “aggressive job-creation plan”, and an “aggressive training plan” to allow Ontarians to acquire the skills necessary to attain newly created jobs, and jobs in new sectors such as clean energy – what is expected to be a significant source of employment in the very near future. Of note, there will be a $32 billion investment in job-creating stimulus, with a view to creating 50,000 new jobs in Ontario over the next three years. The Ontario Government also plans to reduce the size of the deficit every year, hoping to cut it in half in five years and completely eliminate it in eight.
The Budget did not propose many substantive corporate and personal tax changes. The Ontario Government has announced many relieving measures in the Budget to correspond with the move to HST on July 1, 2010.
The Budget confirms that the previously announced reductions to the corporate income tax rates will proceed as announced. As such, effective July 1, the Ontario corporate tax rate on general active business income will be 12% in 2010, 11.5% in 2011, 11% in 2012, and 10% in 2013. By the time the reductions have been fully phased-in in 2014, the combined federal and Ontario corporate tax rate will be 25% on general income and 15.5% on small business income for Canadian-controlled private corporations (“CCPCs”). The Budget also confirms that the small business deduction surtax applying to the income of CCPCs between $500,000 and $1.5 million will be eliminated effective July 1, 2010.
The capital tax remains unaffected by the Budget and is scheduled to be eliminated as of July 1, 2010.
Corporate Group Tax
The Ontario Government intends to work in collaboration with the Federal Government on rules for the taxation of corporate groups, such as consolidated reporting and formal loss transfers. However, Ontario first wants the Federal Government to ensure that losses are utilized in the province in which they occur, and will take the appropriate action within its administrative powers to enable this to take place.
No changes to personal income tax rates have been announced.
The Budget proposes to convert the Ontario Property Tax Credit into the Ontario Energy and Property Tax Credit, a refundable credit to be paid quarterly starting in 2011 after individual income tax returns have been filed. In addition, starting in 2010, residents of Northern Ontario may be eligible for an annual Northern Ontario Energy Credit of up to $130 for individuals or $200 for families, depending on income.
The Ontario Government proposes measures for vendors, small businesses, and consumers to mitigate some of the effects of the transition from Ontario Retail Sales Tax (“RST”) to the 13% HST. In particular, the Budget proposes to extend vendor compensation for collecting and remitting RST past the March 31, 2010 deadline to June 30, 2010, up to a maximum of $375.
A small business transitional credit will be available to some businesses with annual revenue of under $2 million from taxable sales, and Ontario will be able to prescribe the 12-month period for calculating this $2 million threshold for purposes of this credit.
The deadline for vendors to provide RST refunds to consumers for goods purchased before July 1, 2010, other than returned goods, has been extended to October 31, 2010. To relieve double taxation, an RST rebate will be available for consumers paying RST for goods and services after June 30, 2010.