Ontario's Tax Plan for Jobs and Growth

As part of its plan to make Ontario more competitive, the province is implementing the most important tax reform in a generation. This tax package will help Ontario attract new investments and create jobs by:

• Cutting taxes for people.
• Cutting taxes for businesses.
• Combining two existing sales taxes into one - the HST - and removing the hidden taxes that we all pay.
  

These tax changes will do three things:

• Make Ontario businesses more competitive by removing hidden taxes and reducing the cost of making products.
• Help Ontario businesses sell more products and hire more people. 
• Permanently cut people's taxes to help balance out the new sales tax system.

Ontario's tax plan will deliver a stronger, more competitive economy and independent experts say it will help create almost 600,000 net new jobs.

HARMONIZED SALES TAX

As of July 1, 2010, the Retail Sales Tax (RST) has been replaced with a modern value-added tax that is combined with the federal Goods and Services Tax (GST) to create the federally administered HST.

The HST modernizes an out-dated, 50-year-old, tax system. It puts Ontario on a level playing field with four other provinces and 140 other countries that already had the HST.

The provincial portion of the HST is eight per cent and the federal portion is five per cent, for a combined HST rate of 13 per cent.

83 per cent of consumer purchases will not see a new tax; only 17 per cent of consumer purchases will be affected by the HST.

Under the old system, RST was charged at each stage of production before a product reached the store. This hidden tax increased costs to consumers and was a significant competitive disadvantage to businesses in Ontario.

Replacing the RST with the HST allows most businesses to be reimbursed for tax paid on their business inputs through the use of input tax credits. These credits are paid to most businesses for the HST they originally paid on many of their purchases and capital investments, providing significant savings by lowering the tax burden on business.

TAX CUTS FOR BUSINESS

As of July 1, 2010, the government is providing tax cuts totalling more than $4.6 billion over three years for large and small businesses:

• The general Corporate Income Tax (CIT) rate has been lowered from 14 per cent to 12 per cent and then to 10 per cent over three years
• The Corporate Income Tax rate on income from manufacturing and processing, mining, logging, farming and fishing has been lowered from 12 per cent to 10 per cent
• The small business Corporate Income Tax rate has been cut from 5.5 per cent to 4.5 per cent
• The small business deduction surtax of 4.25 per cent has been eliminated.
• These tax cuts are in addition to the more than $1.6 billion in annual savings for businesses from the elimination of the Capital Tax on July 1, 2010.

Along with targeted tax measures announced in the 2009 Budget, Ontario's tax cuts will provide more than $1 billion to small businesses over three years.

The Tax Plan for Jobs and Growth reduces Ontario revenue by more than $4 billion in the first three years, net of federal transitional assistance of $4.3 billion.

Assisting Businesses with the Transition to the Harmonized Sales Tax

As announced in the 2009 Budget, Ontario is providing up to $400 million in one-time
transitional assistance for small businesses to help them adapt to the HST, providing up to $1,000 to businesses with less than $2 million in annual taxable sales.

TAX CUTS FOR PEOPLE

The government is providing tax relief for people totalling $11.8 billion over three years by enhancing ongoing sales tax and property tax relief, permanently cutting Personal Income Tax (PIT) and providing direct payments to help Ontarians transition to the HST.

New Tax Credits
Two new tax credits are replacing the combined property and sales tax credits, starting in 2010, to help offset the impact of the HST. The new credits are refundable and provide tax relief to low-to middle-income people:

• Ontario Sales Tax Credit -- this will provide up to $260 for each eligible adult and child a year starting in August 2010.
• Ontario Energy and Property Tax Credit -- in the 2010 Budget, the government proposed to introduce legislation to convert the Ontario Property Tax Credit to the Ontario Energy and Property Tax Credit. This tax credit would provide more than $1.2 billion annually in energy and property tax relief to low- to middle-income individuals and families.

Personal Income Tax Cuts
Effective January 1, 2010, the tax rate on the first tax bracket was cut from 6.05 per cent to 5.05 per cent. 

• 93 per cent of income tax payers saw a PIT cut, including about 90,000 lower-income tax filers who no longer pay Ontario PIT 
• Ontarians now benefit from the lowest provincial tax rate in Canada on the first $37,106 of taxable income for 2010. 
• On average, individuals saw an income tax cut of $209.

Transition Payments
Eligible Ontario residents aged 18 or over will receive Sales Tax Transition Benefit payments in June 2010, December 2010 and June 2011.

• Eligible families, including single parents, with adjusted family net incomes of $160,000 or less, will get three payments totalling $1,000
• Eligible single people with adjusted net incomes of $80,000 or less will get three payments totalling $300.

Point-of-Sale Exemptions
Ontario will also provide targeted HST relief to people and key public service bodies through point-of-sale exemptions and rebates. Point-of-sale exemptions mean that selected goods will only be taxed at the five per cent GST rate. These include:

• Children's clothing 
• Children's footwear 
• Children's car seats and car booster seats 
• Diapers 
• Books (including audio books)
• Qualifying prepared food and beverages sold for $4.00 or less 
• Print newspapers Feminine hygiene products