Ian McCormack, Board Member
Ontario Chamber of Commerce
Tax Reforms Editorial
November 20, 2009
Taxation in Ontario is a popular topic right now as a result of the many changes announced in last spring’s Ontario budget as well as the Ontario government’s recent announcement regarding a harmonized sales tax (HST).
The Ontario Chamber of Commerce (OCC) is pleased the government has initiated such a significant overhaul of the tax regime in this province, primarily because the OCC had been advocating for such changes for many years.
Chambers of Commerce and Boards of Trade in Ontario, including the Thunder Bay Chamber of Commerce, first proposed a tax reform package in 2004. This original package included the elimination of capital tax, the consolidation of corporate tax collection, and sales tax harmonization. Later the package also adopted lower corporate taxes.
This Chamber initiative was driven by the need to improve Ontario’s competitiveness. At the time, Ontario’s economy had begun to stagnate. Manufacturing was disappearing and investment in the province was waning. The chamber network identified the high rate of taxes as a primary culprit and did the necessary research to prove it. In fact, in 2004 Ontario’s marginal effective tax rate (METR) or the rate of tax paid on each dollar of investment, had crept up to 44% - the highest rate in Canada. The METR was a huge disincentive for businesses to invest in expansion or productivity-enhancing improvements.
Since first introducing the tax reform package, the OCC and the network of chambers in Ontario have been very successful. The consolidation of corporate tax collection at the federal level, reducing to one the number of corporate income tax returns for companies in Ontario, was the first to be achieved in 2006. This was followed by the announcement to eliminate capital taxes, and this spring with the introduction of a single sales tax, and lower corporate tax rates for businesses.
As a result of this major overhaul, Ontario’s rate of taxes on investment will be cut in half. A recent analysis by Jack Mintz of the School of Public Policy at the University of Calgary, predicts that the halving of the marginal effective tax rate will result in $47 billion more investment in Ontario, and almost 600,000 new jobs over the next 10 years.
Dramatic changes to taxation are never easy but it has never been the opinion of the OCC that the status quo is good enough for Ontario. The OCC firmly believes that Ontario has the natural attributes to make it a ‘magnet for the world’ – for investment, for business development and for talent – with these tax reforms in place, our province will again be a beacon for business and entrepreneurialism in this increasingly challenging global marketplace.