How might the 2012 Ontario Budget affect your business?

Chapter IV of the Ontario Budget is about our provincial tax system, this is an important chapter to look at as it affects Canadian businesses of all size. In what follows, I will discuss some of the highlights from the 2012 Ontario Budget:

Freezing the Corporate Income Tax Rate

Under the Tax Plan for Jobs and Growth, Ontario’s general Corporate Income Tax (CIT) rate was originally scheduled to drop to 11% on July 1, 2012 and to 10% on July 1, 2013. However, the 2012 Ontario Budgeted signaled that the general CIT rate will stay frozen at 11.5% until Ontario’s budget is balanced (which would probably take another 5 years). A delay of the planned corporate tax rate cut in Ontario is no surprise to most of us, but the news about the freeze staying in place for that long will be a hard pill to swallow for some businesses.

Freezing the Business Education Tax Rate

Over the years, the government has significantly cut Business Education Tax (BET) rates with the objective to maintain a competitive tax system that promotes investment and economic growth. Specifically, in 2007, the government announced that it would cut high BET rates over a seven-year period. These rate reductions have resulted in huge savings for Ontario businesses, making them more competitive and strengthening the provincial economy. Now, the Budget proposed to temporarily freeze the BET reduction plan, beginning in 2013. While this is pretty much a bad news for most businesses, it’s a good thing that the BET rate reductions already implemented will not be reversed.

Possible Changes to the SR&ED program

The government might simplify the Scientific Research and Experimental Development (SR&ED) tax credit and address high compliance costs associated with the program. This is something pay close attention to as any changes to the SR&ED program will have an impact on businesses in Ontario, as well as the provincial tax system.

Dealing with Corporate Tax Avoidance

To mitigate the adverse effects of Corporate Tax Avoidance and ensure that businesses are paying their fair share of taxes, Ontario might begin to implement various measures used by Quebec to fight aggressive tax planning in the province.

Dealing with Employer Health Tax

Ontario will reevaluate its administrative practice in the determination of an employer-employee relationship to ensure that employers pay their fair share of the Employer Health Tax (EHT).

To view the details of the Budget, you can follow this link: http://www.fin.gov.on.ca/en/budget/ontariobudgets/2012/papers_all.html

If you have questions about how the 2012 Ontario Budget might affect your business, please feel free to give us as call.

Source: Ministry of Finance / Ministère Des Finances. Web. 29 Mar. 2012.