McGuinty government continues to send mixed messages

Canadian Federation of Independent Business
News Release

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Toronto – In their 2009 budget, the Ontario government continues to send mixed messages to small- and medium-sized enterprises (SMEs). On the positive side, the main tax priorities of Ontario SMEs were addressed in the budget, namely reductions in Personal Income Tax, Small Business Corporate Income Tax and elimination of the Small Business Surtax.

“Having some certainty that taxes will be going down over the next few years is welcome, especially in light of our current economic challenges,” said CFIB president Catherine Swift. “Also positive is the commitment to reduce the regulatory burden by 25 per cent over the next two years.”

The Ontario budget confirmed previously leaked plans to merge the provincial and federal sales taxes into one tax. This was the result of government-to-government negotiation, with little to no consultation. The Ontario Retail Sales Tax has long been a thorn in the side of SMEs due to its complex rules and poor administration, and it will not be missed. Although the budget contains several measures to ease the pain of transition for both individuals and SMEs, the jury is out on how SMEs will receive the new single sales tax. Prior to the implementation of the single sales tax in mid-2010, CFIB will ensure that small business priorities are factored into the ultimate structure of the single sales tax. For example, one problematic issue is that while firms were compensated to some extent for collecting the Retail Sales Tax, they will not be for the single sales tax.

“Ontario small businesses are once again being asked to work for free to collect taxes for the provincial government,” said Swift. “It would also be nice to see a significant reduction in Ontario’s tax collection bureaucracy as a result of this harmonization.”

In other tax relief moves important to SMEs, the budget provides: accelerated capital cost relief for manufacturing machinery and equipment; improved tax credits for cooperative education and apprenticeship training; plus several measures for arts related businesses (media/publishing). As expected, deficits will be alarmingly high for a number of years to come, bringing into question the government’s ability to balance the budget by 2016. For many years, Ontario has had a spending problem, not a revenue problem, and this budget does nothing to counter this trend.

The provincial labour minister’s recent wrong-headed decisions have also contradicted the government’s overall claim that it is “Open for Business.” For instance, the budget confirmed that the government is moving ahead with minimum wage increases, which will be particularly negative in the current economic climate. And the plan to proceed with mandatory WSIB coverage for owners of construction companies is nothing more than an annual 500 million dollar tax grab.

So, although the tax and regulatory burden reductions will be well received by Ontario SMEs, many negative factors still remain in Ontario’s approach to the sector that provides the jobs and wealth creation in difficult times.

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