Federation of small business reaction to Ontario budget
March 27, 2009, 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
"Having some certainty that taxes will
be going down over the next few years is welcome, especially in light of our
current economic challenges," says Canadian Federation of Independent
Businesses 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
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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