Highlights of the 2011 Ontario Budget
Today Ontario Finance Minister Dwight Duncan tabled the province’s 2011 budget. The budget forecasts a deficit of $16.7 billion in 2011 and projects deficits of $16.3 billion for 2012 and $15.2 billion for 2013. The government does not foresee a balanced budget until 2018.
The budget does not include any significant corporate or personal tax changes.
Highlights of tax measures and tax administration changes announced in today’s budget are summarized below.
Business Tax Changes
Corporate tax rates
The budget does not include any corporate tax rate changes.
R&D tax credit review
A federally appointed panel is reviewing the effectiveness of federal support for business innovation and the R&D tax incentive program. The budget says that Ontario looks forward to working with the federal government to improve the effectiveness of federal R&D tax support through such measures as strengthening administration, enhancing support for collaboration between the business and education sectors, and levelling the playing field for small businesses that perform R&D.
Taxation of corporate groups
The federal government is currently carrying out consultations concerning whether it should implement a formal system for the taxation of corporate groups.
The budget points out that provincial governments have responsibility for key programs such as health and education, and are entitled to tax the economic activity taking place within them. The budget reiterates Ontario’s position that the focus of any changes should be to increase the efficiency and competitiveness of Canada’s corporate tax system and ensure that provinces receive the revenue to which they are entitled.
Ontario Book Publishing Tax Credit
A 30% refundable tax credit is available to Ontario book publishing corporations for qualifying expenditures related to publishing and promoting a book by a Canadian author in an eligible category of writing.
The budget proposes to change the 12-month period for qualifying marketing expenditures to a period beginning one year before and ending one year after publication, effective for expenditures incurred after March 29, 2011.
Mining Tax — Functional currency reporting
The budget proposes to allow mine operators who report in a functional currency under the federal Income Tax Act to elect to file their Ontario mining tax returns in the same functional currency. In such cases, they would no longer have to prepare a separate set of Canadian-dollar financial statements solely for Ontario mining tax purposes.
This election would apply until such time as the mine operator revokes its functional currency election under the federal Income Tax Act or ceases to meet the conditions for functional currency reporting.
The amendments would be based on the functional currency rules in the federal Income Tax Act and would apply for taxation years beginning after December 31, 2010.
Indirect Tax Changes
Retail Sales Tax clearance certificates for bulk sales
Retail Sales Tax Act (RSTA) clearance certificates are required for sales under the Bulk Sales Act. The budget proposes to amend the RSTA to allow the government to withhold such clearance certificates until tax debts under the following statutes are paid:
· Alcohol and Gaming Regulation and Public Protection Act, 1996
· Fuel Tax Act
· Gasoline Tax Act
· Race Tracks Tax Act
· Tobacco Tax Act.
These changes would generally apply to bulk sales completed on or after July 1, 2011. Under a transitional rule, bulk sales under written agreements entered into on or before March 29, 2011 would not be subject to the changes even if the sale is completed after July 1, 2011.
Promotional product — Beer and wine
To support the Ontario wine and beer industries’ marketing efforts, the budget proposes an exemption from the Beer and Wines Taxes under the Alcohol and Gaming Regulation and Public Protection Act, 1996. The annual exemption would apply to up to 10,000 litres of wine, wine coolers or beer distributed without charge. The exemption would be retroactive to July 1, 2010, pro-rated based on the manufacturer’ s sales year. Beer distributed without charge would, however, not qualify for the small beer manufacturers’ tax credit under the Taxation Act, 2007.
Tax Administration Changes
Estate administration tax
The budget proposes to change the administration of estate administration tax, otherwise known as probate fees. The government will integrate the administration of this tax with the audit and verification functions at the Ministry of Revenue, starting January 1, 2013. Currently, the tax is administered by the Attorney General.
Tax collection measures
The budget says amendments will be proposed to various provincial tax statutes to:
· Allow the province to recover reasonable third-party costs incurred in the course of collection activities
· Extend the period of garnishment for monies to be loaned or advanced from 90 days to 365 days
· Standardize provisions concerning director liability and the issuance of warrants in certain circumstances
· Set out deeming rules concerning the receipt of notices of demand and requirement sent by registered mail
· Allow an appeal to be dismissed if the person appealing has failed to set the appeal down for trial within seven years of it being instituted, and allow a notice of appeal to be struck down when it does not meet legislative requirements.
Low-income tax credit administration
The budget proposes to combine the refundable sales tax, energy and property tax, and Northern Ontario energy credits for low to moderate income taxpayers and pay them monthly under the Ontario Trillium Benefit program, beginning July 2012.
Pension Reforms
Canada Pension Plan enhancements
The budget states that Ontario remains committed to a modest, phased-in and fully funded expansion of the Canada Pension Plan (CPP). The federal, provincial and territorial Finance ministers have deferred their decision on the modest enhancement to the CPP until the summer of 2011, when the ministers will review specific options.
Pooled registered pension plans
The federal government released a framework in December 2010 for a new pension option, the Pooled Registered Pension Plan (PRPP). PRPPs can potentially expand retirement plan coverage, particularly to small business employees and the self-employed. The budget says that the plan must provide a low-cost option that is simple for smaller employers and the self-employed to access and it is critical that plan members’ interests be protected.
The budget says Ontario will continue to work closely with other provinces and the federal government to design implementation details based on this framework.
Ontario is also exploring the feasibility, design and implementation of jointly governed, single-employer target benefit plans with stakeholders, including Finance Canada, as recommended by the Expert Commission on Pensions.
Unlocking of locked-in accounts
Ontario pension law permits partial “unlocking” of locked-in pension accounts for Ontarians facing financial hardship. The budget says the government will review the administration of financial hardship unlocking as part of efforts to improve and modernize its processes.
Updating pension investment rules
The budget says the government remains committed to updating Ontario’s pension investment rules to reflect recent and future federal changes.
Nortel pension plans
Proposed amendments to the Pension Benefits Act would allow Nortel pensioners to opt out of the current wind-up process and transfer the lump-sum value of their pensions to a life income fund, consistent with what is currently available to plan members who are not yet receiving pensions.
AbitibiBowater pension plans
The Ontario government has agreed to join the Quebec government in providing restructuring support to AbitibiBowater. The pension funding relief provided to the AbitibiBowater plans in Ontario is consistent with the funding relief measures Quebec has agreed to. These measures allow the company a 10‑year transition period to return to the funding requirements that normally apply.
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Today Ontario Finance Minister Dwight Duncan tabled the province’s 2011 budget. The budget forecasts a deficit of $16.7 billion in 2011 and projects deficits of $16.3 billion for 2012 and $15.2 billion for 2013. The government does not foresee a balanced budget until 2018.
The budget does not include any significant corporate or personal tax changes.
Highlights of tax measures and tax administration changes announced in today’s budget are summarized below.
Business Tax Changes
Corporate tax rates
The budget does not include any corporate tax rate changes.
R&D tax credit review
A federally appointed panel is reviewing the effectiveness of federal support for business innovation and the R&D tax incentive program. The budget says that Ontario looks forward to working with the federal government to improve the effectiveness of federal R&D tax support through such measures as strengthening administration, enhancing support for collaboration between the business and education sectors, and levelling the playing field for small businesses that perform R&D.
Taxation of corporate groups
The federal government is currently carrying out consultations concerning whether it should implement a formal system for the taxation of corporate groups.
The budget points out that provincial governments have responsibility for key programs such as health and education, and are entitled to tax the economic activity taking place within them. The budget reiterates Ontario’s position that the focus of any changes should be to increase the efficiency and competitiveness of Canada’s corporate tax system and ensure that provinces receive the revenue to which they are entitled.
Ontario Book Publishing Tax Credit
A 30% refundable tax credit is available to Ontario book publishing corporations for qualifying expenditures related to publishing and promoting a book by a Canadian author in an eligible category of writing.
The budget proposes to change the 12-month period for qualifying marketing expenditures to a period beginning one year before and ending one year after publication, effective for expenditures incurred after March 29, 2011.
Mining Tax — Functional currency reporting
The budget proposes to allow mine operators who report in a functional currency under the federal Income Tax Act to elect to file their Ontario mining tax returns in the same functional currency. In such cases, they would no longer have to prepare a separate set of Canadian-dollar financial statements solely for Ontario mining tax purposes.
This election would apply until such time as the mine operator revokes its functional currency election under the federal Income Tax Act or ceases to meet the conditions for functional currency reporting.
The amendments would be based on the functional currency rules in the federal Income Tax Act and would apply for taxation years beginning after December 31, 2010.
Indirect Tax Changes
Retail Sales Tax clearance certificates for bulk sales
Retail Sales Tax Act (RSTA) clearance certificates are required for sales under the Bulk Sales Act. The budget proposes to amend the RSTA to allow the government to withhold such clearance certificates until tax debts under the following statutes are paid:
· Alcohol and Gaming Regulation and Public Protection Act, 1996
· Fuel Tax Act
· Gasoline Tax Act
· Race Tracks Tax Act
· Tobacco Tax Act.
These changes would generally apply to bulk sales completed on or after July 1, 2011. Under a transitional rule, bulk sales under written agreements entered into on or before March 29, 2011 would not be subject to the changes even if the sale is completed after July 1, 2011.
Promotional product — Beer and wine
To support the Ontario wine and beer industries’ marketing efforts, the budget proposes an exemption from the Beer and Wines Taxes under the Alcohol and Gaming Regulation and Public Protection Act, 1996. The annual exemption would apply to up to 10,000 litres of wine, wine coolers or beer distributed without charge. The exemption would be retroactive to July 1, 2010, pro-rated based on the manufacturer’ s sales year. Beer distributed without charge would, however, not qualify for the small beer manufacturers’ tax credit under the Taxation Act, 2007.
Tax Administration Changes
Estate administration tax
The budget proposes to change the administration of estate administration tax, otherwise known as probate fees. The government will integrate the administration of this tax with the audit and verification functions at the Ministry of Revenue, starting January 1, 2013. Currently, the tax is administered by the Attorney General.
Tax collection measures
The budget says amendments will be proposed to various provincial tax statutes to:
· Allow the province to recover reasonable third-party costs incurred in the course of collection activities
· Extend the period of garnishment for monies to be loaned or advanced from 90 days to 365 days
· Standardize provisions concerning director liability and the issuance of warrants in certain circumstances
· Set out deeming rules concerning the receipt of notices of demand and requirement sent by registered mail
· Allow an appeal to be dismissed if the person appealing has failed to set the appeal down for trial within seven years of it being instituted, and allow a notice of appeal to be struck down when it does not meet legislative requirements.
Low-income tax credit administration
The budget proposes to combine the refundable sales tax, energy and property tax, and Northern Ontario energy credits for low to moderate income taxpayers and pay them monthly under the Ontario Trillium Benefit program, beginning July 2012.
Pension Reforms
Canada Pension Plan enhancements
The budget states that Ontario remains committed to a modest, phased-in and fully funded expansion of the Canada Pension Plan (CPP). The federal, provincial and territorial Finance ministers have deferred their decision on the modest enhancement to the CPP until the summer of 2011, when the ministers will review specific options.
Pooled registered pension plans
The federal government released a framework in December 2010 for a new pension option, the Pooled Registered Pension Plan (PRPP). PRPPs can potentially expand retirement plan coverage, particularly to small business employees and the self-employed. The budget says that the plan must provide a low-cost option that is simple for smaller employers and the self-employed to access and it is critical that plan members’ interests be protected.
The budget says Ontario will continue to work closely with other provinces and the federal government to design implementation details based on this framework.
Ontario is also exploring the feasibility, design and implementation of jointly governed, single-employer target benefit plans with stakeholders, including Finance Canada, as recommended by the Expert Commission on Pensions.
Unlocking of locked-in accounts
Ontario pension law permits partial “unlocking” of locked-in pension accounts for Ontarians facing financial hardship. The budget says the government will review the administration of financial hardship unlocking as part of efforts to improve and modernize its processes.
Updating pension investment rules
The budget says the government remains committed to updating Ontario’s pension investment rules to reflect recent and future federal changes.
Nortel pension plans
Proposed amendments to the Pension Benefits Act would allow Nortel pensioners to opt out of the current wind-up process and transfer the lump-sum value of their pensions to a life income fund, consistent with what is currently available to plan members who are not yet receiving pensions.
AbitibiBowater pension plans
The Ontario government has agreed to join the Quebec government in providing restructuring support to AbitibiBowater. The pension funding relief provided to the AbitibiBowater plans in Ontario is consistent with the funding relief measures Quebec has agreed to. These measures allow the company a 10‑year transition period to return to the funding requirements that normally apply.
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