Canada: 2014 Ontario Budget Commentary - May 1, 2014

Introduction

On May 1, 2014 Finance Minister Charles Sousa tabled his second Budget. 

The deficit for the 2013-14 fiscal year is projected to be $11.3 billion, which is $400 million less than the amount estimated when the 2013 Budget was tabled. The deficit for the 2014-15 year is projected to be $12.5 billion and the longer-term forecast continues to call for a return to a surplus by 2016-17. Net public debt to GDP is projected to continue to increase until 2015-16, from which time it will to start to decrease.

Top income earners, large Canadian-controlled private corporations (CCPC), users of aviation fuel and tax-exempt diesel fuel, and smokers will all face increases in the taxes they pay.

Measures Affecting Individuals

Personal Income Tax Rates

The Budget proposes to increase the rate at which tax is paid by top income-earning individuals, now defined as those who have taxable income greater than $150,000. Two changes are proposed:

  • A new intermediate income tax bracket will apply to taxable income over $150,000 and up to $220,000. Income in this bracket will be taxed at 12.16%; it was previously taxed at 11.16%
  • The top tax rate of 13.16% will apply to taxable income over $220,000. Prior to the Budget this rate would have applied to taxable income over $514,090.

Unlike the current threshold limits, these new thresholds will not be adjusted for inflation in the future.

Taxpayers in these brackets will also be subject to both Ontario surtaxes, with the result that the marginal rates of Ontario tax will be 19.0% in the intermediate bracket and 20.5% in the top bracket.

Notably, Ontario's credit for charitable donations over $200 will be calculated at 11.16%, and not at the top rate of 13.16%.

The combined federal and Ontario marginal rates for these newly defined tax brackets are set out in the following table:

Type of Income $150,000 - $220,000 Over $220,000
Eligible dividends 31.67% 33.82%
Non-eligible dividends 38.29% 40.13%
Capital gains 23.98% 24.76%
Other income 47.97% 49.53%

Dividend Tax Credit and Surtax Calculations

In the November 2013 Economic Outlook, for 2014 the Ontario dividend tax credit on non-eligible dividends is increased from 4.5% of the taxable dividend to 10%. As was also announced, surtaxes for 2014 will be applied to Ontario tax payable before the dividend tax credit is claimed.

Ontario Child Benefit

From July 1, 2014 this benefit will increase to $1,310 per child, an increase of about $60. The benefit amount will be indexed to Ontario inflation from July 1, 2015.

Debt Retirement Charge on Electricity Bills

Starting after 2015 it is proposed that the debt retirement charge will be removed from residential electricity bills. The charge will be maintained on other bills until such time as the hydro debt it is servicing is retired, anticipated to be the end of 2018.

Measures Affecting Businesses

The Budget proposes no changes to corporate income tax rates which remain:

Income Ontario Federal Combined
Small business 4.5% 11.0% 15.5%
M&P 10.0% 15.0% 25.0%
General 11.5% 15.0% 26.5%

Note that the income to which the lower small business rate applies may be reduced for larger corporations, as discussed below.

Small Business Deduction

The Budget proposes the amount on which the Ontario small business tax credit is claimed will be reduced where a CCPC has taxable capital in excess of $10 million and will be eliminated where taxable capital is $15 million or more. This change will parallel the federal reduction of the $500,000 annual business limit. Accordingly it will be calculated on taxable capital for the prior year, as determined for the (now repealed) federal Large Corporation Tax and will take into account the taxable capital of all associated corporations.

This change applies to taxation years which end after May 1, 2014 and, as is customary, it will be pro-rated for taxation years that straddle this date.

Minimum Wage

The minimum wage will increase to $11.00 per hour on June 1, 2014 and will be indexed to Ontario inflation from October 2015.

Registration of Road Building Machines

Under the Fuel Tax Act, tax-exempt diesel fuel may be purchased for use in unregistered vehicles used in construction. The Budget proposes that by 2016 such vehicles that use public roadways will be required to be registered and, consequently, fuel for such vehicles will be subject to the normal excise tax – currently 14.3 cents per litre. The Budget papers mention mobile cranes, concrete pumpers and hydrovacs as examples of vehicles that will be affected. Consultations with the Department of Transportation are promised to review how such vehicles are to be registered.

Fuel Tax on Aviation Fuel

Aviation fuel is currently subject to an excise tax of 2.7 cents per litre under the Gasoline Tax Act. It is proposed to increase this by 1.0 cent per litre in 2014 and by a similar amount in each of the next three calendar years, so that in 2017 the tax will be 6.7 cents per litre. The 2014 change will apply from the date the amendments to the Act receive Royal Assent, and measures will be introduced to require an accounting for inventories of such fuel on hand at that date.

Relief is promised to users of such fuel who service remote communities, after consultations with the Department of Transportation.

Tax Credit to Farmers for Donations

Regulations are to be introduced governing the non-refundable 25% tax credit available to farmers who donate food to community food programs. This credit was included in the 2013 Local Food Act and applies to gifts made after 2013.

Other Measures

Tobacco Tax

Effective May 2, 2014 the tax on a cigarette or a gram of tobacco increases from 12.350 cents to 13.975 cents. There is no change to the tax on cigars. Wholesalers of such products are required to take an inventory of such goods on hand at the end of May 1, 2014 and remit the additional tax.

Administration

The Budget acknowledges several continuing concerns in maintaining a sound tax base. Of particular concern are the underground economy, corporate tax avoidance and trading in contraband tobacco.

Legislation will be introduced requiring Ontario corporations to disclose aggressive tax plans to the Minister of National Revenue, in the same manner that is now called for under the federal law.

In addition, a specific anti-avoidance rule will be introduced in the Land Transfer Tax Act, to take effect from May 1, 2014.

Paralleling Federal Changes

As is required under the Canada-Ontario tax collection agreement, Ontario will parallel the changes to the federal Income Tax Act included in the 2014 federal Budget: medical expenses, farmers and fishers, amateur athletic trusts, donations made through a will, non-resident trusts, pension transfer limits, tax on split income, donations of ecologically sensitive land, clean energy generation equipment, taxation of insurance swap transactions, and the application of HST to health services.

Other Matters under Study

  • Scientific Research &Experimental Development (SR&ED) – as was announced in the 2013 Economic Outlook, Ontario will continue to review the SR&ED program with a view to providing incentives to incremental research activities.
  • Training Credits – both the Apprenticeship Training Tax Credit and the Co-operative Education Tax Credit are currently refundable. It is suggested that for large businesses these credits may be non-refundable, so that they can be applied only against taxes otherwise payable.
  • Graduated Rate Trusts – the federal 2014 Budget included changes to the taxation of testamentary trusts which are to take effect in 2016. Such trusts will generally be able to access graduated tax rates for only three taxation years following the death of the settlor, from which time they will be taxed as inter vivos trusts. Ontario is reviewing this proposed change.
  • Provincial Land Tax – as was announced in the 2013 Economic Outlook, Ontario continues consultations on the Provincial Land Tax, which applies to land outside municipal areas in Northern Ontario. Currently, this tax is significantly lower than the property tax levied by adjacent municipalities. It is intended that a reformed regime will be implemented in 2015.
  • Hospices – the 2011 Budget included a property tax exemption for non-profit entities providing end-of-life care. Regulatory changes are to be made to clarify the scope of the exemption.

New Programs

The Budget includes several new programs to take effect over a period of several years.

Ontario Retirement Pension Plan (ORPP)

The Budget proposes to introduce a mandatory defined benefit pension plan, to take effect in 2017, to be funded by Ontario employers and employees. While it is clear that much of the detail remains to be worked out, the Budget outlines a plan which is similar to the Canada Pension Plan (CPP) and, indeed, anticipates that the ORPP might be rolled into the CPP should future negotiations be successful.

Specific provisions in the Budget include:

  • Contributions are not to exceed 3.8% of earnings (up to a maximum annual earnings threshold of $90,000), with half to be funded by each of the employer and the employee. An exemption will be provided for low-income earners, but the exemption threshold has not been determined. Currently, the first $3,500 of pensionable earnings are not subject to CPP contributions;
  • Benefits would be tied to contributions made, so that those who retire in the early years of the plan would receive reduced benefits;
  • The Budget provides that those already covered by a "comparable" workplace plan would not be required to enroll; and
  • The government will consult on how the ORPP is to apply to self-employed individuals.

Pooled Registered Pension Plans (PRPP)

PRPPs were introduced by the federal government as a mechanism for pooling retirement savings and thereby reducing administration costs. Ontario is proposing to introduce legislation which will establish PRPP's in Ontario.

Legislation is anticipated in the fall of 2014. The Budget suggests that key design features will include:

  • Employers will choose whether to offer a PRPP and, if they do, whether to contribute to their employees' PRPP; and
  • Where an employer has chosen to offer a PRPP, participation by employees will be automatic unless the employee chooses to opt out.

Jobs and Prosperity Fund

$2.5 billion is earmarked for a 10-year program to attract significant business investments.

Moving Ontario Forward

The Moving Ontario Forward program will provide $29 billion over the next 10 years for infrastructure investment. $15 billion is to be targeted to the Greater Toronto and Hamilton Area and $14 billion to the remainder of the province.

The Budget suggests that some of these amounts are to be funded from dedicated sources, including:

  • Redirecting 7.5 cents per litre of the existing provincial gasoline tax; 
  • Repurposing the HST on the provincial taxes included in the cost of gasoline and road diesel fuel; and
  • Allocating the increased revenues from the following measures in this budget:
  • the increase in fuel tax on aviation fuel;
  • the tax on fuel used by road-building machines; and
  • the additional taxes paid by CCPCs that are subject to the reduction of the small business deduction.

The balance of the funding is to be borrowed or, it is suggested, provided by the federal government under the Building Canada Plan.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Collins Barrow National Incorporated
Collins Barrow National Incorporated
Crowe Soberman LLP
Minden Gross LLP
Grant Thornton
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Collins Barrow National Incorporated
Collins Barrow National Incorporated
Crowe Soberman LLP
Minden Gross LLP
Grant Thornton
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions