Posted By Canadian Press
March 24, 2009
TORONTO - Ontario businesses would save $4.5 billion over three years under sweeping corporate tax cuts meant to bolster the province's struggling manufacturing industry and other sectors, Finance Minister Dwight Duncan said Thursday.
The provincial budget will see Ontario cut its corporate income tax rate from the current 14 per cent to 12 per cent by July 1, 2010, then to 10 per cent in 2013.
The small business tax rate will fall from 5.5 per cent to 4.5 per cent by July of next year. Combined with other tax changes, the budget will save small businesses more than $1 billion over three years, the government said.
The budget also throws a lifeline to the province's manufacturing and natural resource sectors, reducing the manufacturing and processing corporate income tax rate from 12 per cent to 10 per cent by 2010.
Additionally, manufacturers will benefit from a 50 per cent capital-cost deduction for machinery and equipment acquired in 2010 and 2011.
In total, the budget will provide approximately $1.3 billion per year in savings to the province's troubled manufacturing industry.
The business tax reforms are meant to send a signal that “this is a good place to do business and it's going to get better,” said Ontario Finance Minister Dwight Duncan.
“Reform of our tax system will improve this province's competitiveness and set the stage for growth and economic recovery,” he said.
However, the budget includes no direct aid for the auto industry, which has been hit particularly hard by the recession.
The government said negotiations with Chrysler and General Motors, both of which have asked for billions in aid to survive an unprecedented sales slump, are ongoing, and money has been set aside for the companies in a $3.4-billion contingency fund.
Progressive Conservative finance critic Tim Hudak said the budget does nothing to stimulate auto sales. He called for a tax holiday on purchases of new vehicles or a scrappage program for old vehicles.
“As opposed to (Premier Dalton McGuinty's) policy of handing out loans after loans, we actually believe you should stimulate demand and purchases,” he said.
NDP Leader Andrea Horwath said the government has so far done what's necessary to support the auto industry.
“Where we wanted to see changes is around the accountability of those investments,” she said, adding that any aid to the industry should be tied to guarantees that jobs will be protected and new products will be built in Ontario.
Once the proposed tax cuts take effect, Ontario's federal-provincial corporate income tax rate will be 25 per cent -15 percentage points lower that the average U.S. Great Lake state, considered Ontario's main competitors for jobs and investment.
The government said the cuts will reduce the province's marginal effective tax rate - the all-inclusive tax that applies to an incremental dollar of income from new capital investment - by close to half.