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Ontario to raise taxes, mandate pension contributions for employers


May 1, 2014   by Greg Meckbach, Associate Editor


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The Ontario government announced Thursday it plans to eliminate the small business deduction on corporate taxes for large firms, to raise individual tax rates for those earning $150,000 or more and to require employers not offering their own pension plan to pay 1.9% of employees’ earnings towards a new mandatory provincial pension plan.

Finance Minister Charles Sousa presented Thursday the 2014-15 budget in the legislature. If passed without amendments, the budget would phase out the small business deduction that allows some large corporations to pay a corporate tax of 4.5%, instead of 11.5%, on the first $500,000 of active business income.

In 2014-15, the ruling minority Liberal government is planning to spend $11.01 billion — or $800 for every man, woman and child in the province — on interest on the debt alone, which is expected to rise to nearly $190 billion.

The Liberals are also proposing the Ontario Retirement Pension Plan (ORPP), which would require equal contributions, not exceeding 1.9% each, from employers and employees, on earnings up to a maximum annual earnings threshold of $90,000.

“Those already participating in a comparable workplace pension plan would not be required to enrol in the ORPP,” the government stated.

“Two-thirds of Ontarians don’t have a pension plan” and will rely mainly on the Canada Pension Plan, Sousa suggested during a press conference Thursday.

In the 2014-15 fiscal year, the government is planning to spend $130.4 billion while raising $118.9 billion in revenue. So by March 31, 2015, the accumulated debt is planned to increase from $177.26 billion to $189.76 billion, or $13,788 for every man, woman and child in the province.

Final numbers are not in yet for the 2013-14 fiscal year, but the government is projecting to earn $115.65 billion in revenue and to spend $126.95 billion for the most recent ficsal year. 2013-14 spending will include $10.556 billion on interest payments on the debt, or $767 for every man, woman and child in the province.

Over the 2014-15 fiscal year, the net debt — which factors in the debt of hospitals, colleges and school boards — is projected to rise from $269.15 billion to $289.2 billion, or $21,019 for every man, woman and child in the province.

This means the Liberals are planning for a 2014-15 budget deficit of $12.505 billion, or about $1.2 billion higher than the $11.3-billion projected deficit for the 2013-14 fiscal year.

For 2014-15, the three largest planned areas of spending, in order, are health and long-term care ($50.055 billion), education ($24.84 billion) and interest on the debt of $11.01 billion.

Under the plan announced Thursday, some individuals will pay higher income tax while some companies can expect to pay higher corporate taxes.

The corporate income tax rate is 11.5%, and the Ontario Small Business Deduction (ODSP) is 7%, meaning in essence that for some companies the tax rate could be 4.5%.

As a result, Canadian-controlled private companies (CCPCs) can receive a benefit of up to $35,000 on the first $500,000 of active business income. So the ruling Liberals plan to phase this benefit out for large companies, as measured by taxable capital employed.

“The government proposes to take action to ensure only small CCPCs can qualify for the deduction, which would bring Ontario in line with every other province and the federal government,” the government promised in the budget.

OSDB “would be phased out for large CCPCs (and associated groups of CCPCs) with more than $10 million in taxable capital employed in Canada in the previous year and would be fully eliminated for large CCPCs (and associated groups of CCPCs) with taxable capital employed in Canada in the previous year in excess of $15 million.”

In Ontario, individuals currently pay 5.05% on the first $40,120 of taxable income, 9.15% on the next $40,122, 11.16% on the next $433,848, and 13.16 % on the amount over $514,090.

In the 2014-15 budget, the Liberals plan to lower the taxable income threshold for the 13.16 per cent tax rate from $514,090 to $220,000 and to add a new tax rate of 12.16% on taxable income between $150,000 and $220,000.

Those changes apply to income in 2014.


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