Take a closer look at Ontario tax relief programs for businesses

By John Wilkinson

My name is John Wilkinson and I have the privilege of being the Ontario Minister of Revenue. I’ve been invited by STAPLES to share information about important tax changes being implemented by the McGuinty government that will help create new jobs, reduce prices and attract new business investment.

As a business operator, you understand the importance of knowing your market. You know that when your market changes, either you change too or you fall behind. Well, government is no different. We have witnessed the biggest global downturn in eighty years. The world has changed and so must we.

Ontario chose to take action. That’s why we’ve introduced a comprehensive tax package that will modernize our tax system, leading to more jobs and economic growth. We need to be more competitive. We need to attract more investment and jobs. We need to protect those important services we've worked so hard to build, services like health care and education.

Our comprehensive tax package will do just that. The package includes significant tax relief for businesses and individuals, as well as the introduction of a harmonized sales tax (HST) which combines the current provincial and federal sales taxes into a single, value-added tax, at a rate of 13 per cent.

It’s a big change that is going to make a big difference for all Ontarians.

Savings for Businesses

Thanks to these tax changes, Ontario will have one of the most competitive tax environments for business investment in the industrialized world.

Right now, businesses generally pay the provincial sales tax on capital investments and business purchases, at every stage of production. That adds roughly $4.5 billion per year to the cost of doing business in Ontario. For consumers, it’s an extra cost that is buried in prices. For Ontario businesses, it’s a big competitive disadvantage and a disincentive to invest in our province.

Under the HST, most businesses will receive input tax credits (ITCs), generally removing this hidden, embedded tax.

For the eligible items you buy for your business, ITCs for the provincial portion of the HST add up: for a case of paper and copier toner worth $250, that’s $20 in savings. For a new computer worth $2,500, that’s $200 in savings. And for a new vehicle worth $20,000, that’s $1,600 in savings. These savings are in addition to the expected pass through of ITC savings at every stage of production.

It is also estimated that replacing two sales taxes with one will save businesses more than $500 million a year in administrative and compliance costs. All businesses will benefit from filing only one sales tax return, making one sales tax payment, having one point of contact and following one set of rules.

Business Tax Cuts

Of course, the HST is just one part of our comprehensive tax package. Ontario will be providing businesses with $2.4 billion a year in corporate income tax cuts. This is in addition to the existing plan to eliminate the capital tax by July 1, 2010, which will save businesses nearly $1.6 billion a year. Capital tax was eliminated in 2007 for firms primarily engaged in manufacturing and resource activities.

And to help with the changeover to the HST, eligible small businesses will receive transitional support of up to $1,000.

Small businesses will also benefit substantially as the marginal effective tax rate on their business investment will fall by more than half due to the HST and the reduction in corporate income tax.

Creating Jobs

Many experts agree that a value-added tax – like the HST – is the most important thing we can do to strengthen Ontario's economy.

A report by economist and tax expert, Jack Mintz, predicts that as a result of the HST and other tax changes, Ontario will, within ten years, see 591,000 new jobs, increased capital investment of $47 billion and increased annual incomes of up to 8.8 per cent, or $29.4 billion.

More than 140 countries – countries we compete with – now have a value-added tax. In fact, in following Ontario’s lead, B.C.’s own finance minister said, “We had to move fast so as not to be left at a competitive disadvantage in comparison to Ontario.”

Businesses have been calling on government for years to make changes to our complicated and out-dated tax system. That’s because you know what it takes to compete in today’s changing world. This modern, comprehensive tax package will help attract investment and jobs and result in a more prosperous future for all Ontarians.

Visit here for more information about our comprehensive tax plan, its benefits and what businesses need to do to get ready.

Canada Revenue Agency is also an important source for the latest information on how the transitional rules apply and how to get ready for the HST. Visit the CRA's “Are You HST Ready” Web site at or call 1-800-959-5525.


John Wilkinson is the Ontario Minister of Revenue.

By Adam

April 04, 2010