On March 29, 2011, Finance Minister Dwight Duncan tabled the Ontario government’s 2011 Budget, “Turning The Corner to a Better Tomorrow”, which focuses on eliminating the provincial deficit and strengthening the economy, while protecting education and health care. As anticipated, Chapter III of Budget 2011 offers few new tax measures, instead emphasizing the ongoing benefits of business tax measures previously announced under Ontario’s Tax Plan for Jobs and Growth, including scheduled corporate income tax rate reductions, the elimination of capital tax and the small business deduction surtax, the transition to a single federally administered corporate tax administration and the replacement of the retail sales tax system with the harmonized sales tax (HST) system. Budget 2011 does confirm that the government is still committed to reducing Ontario’s general statutory corporate income tax rate to 10% by 2013. According to Budget 2011, the HST and Ontario corporate income tax rate cuts, along with the elimination of capital tax and the federal corporate income tax rate reductions, has lowered Ontario’s marginal effective tax rate on new business investment from 32.8% in 2009 to 18.6% in 2010, which is below the average rates for the U.S. and OECD member countries.
In addition to stating its intention to improve the administration of Ontario’s tax system and to work with the federal government to improve the effectiveness of the federal scientific research and experimental (SR&ED) program, the Ontario government proposes to amend the Mining Tax Act to allow Ontario mine operators who report in a functional currency for federal income tax purposes to do the same for Ontario tax purposes for taxation years beginning after December 31, 2010.
To read Budget 2011’s tax plan, please click here.