Dwight Duncan, Ontario’s Minister of Finance presented Ontario’s 2010-2011 budget on March 25, 2010. Building on an Open Ontario theme, the budget attempts to be all things to all people, contributing to jobs and re-training programs, and increasing spaces available in colleges and universities, while continuing with scheduled tax cuts and the introduction of the HST on July 1, 2010. In addition, the Minister promised to cut the deficit in half in five years and eliminate it in eight years, but without much detailed information on how this would be achieved. However, the Minister promised compensation freezes for those in the public non-bargaining sector, and no compensation increases for new collective bargaining agreements. Further, the government plans to exert more control over public health spending, under the guise of responsible management.
In terms of commodity tax policy, changes were light compared to the government’s commitment to the HST, but some minor tinkering took place.
Retail Sales Tax
Transition to the Harmonized Sales Tax
Due to the wind-down of compensation for Ontario Retail Sales Tax (ORST) vendors as of March 31, 2010, the government is proposing to extend compensation to ORST vendors up to a maximum of $375 for the shortened ORST collection period of April 1, 2010 to June 30, 2010.
Further, a technical amendment would be made to enable the government to prescribe the 12-month period for calculating the $2 million taxable sales threshold, for purposes of the small business transition assistance.
The government also proposes to amend the Retail Sales Tax Act to further support consumers and businesses with implementation of the HST, as follows:
- vendors will be permitted to provide refunds of ORST to purchasers after October 31, 2010, other than for returned goods. Where goods are purchased before July 1, 2010 and returned to the vendor after October 31, 2010, purchasers would continue to be able to claim ORST refunds directly from the Ontario Ministry of Revenue;
- a rebate of ORST will be made to a purchaser to relieve double taxation where the purchaser has paid both the ORST and HST on goods and services acquired on or after July 1, 2010; multi-jurisdictional vehicles will no longer be subject to the exit tax where they cease to be registered under the International Registration Plan on or after July 1, 2010; and
- the exemption for gifts of used vehicles between siblings would continue to be available effective July 1, 2010, as previously announced.
Sales Tax on Insurance
As the tax on certain types of insurance premiums will be continued under the Retail Sales Tax Act after June 30, 2010, the government is proposing that vendors of taxable insurance continue to be eligible for vendor compensation of up to $1,500 annually. For the transitional year of April 1, 2010 to March 31, 2011, the vendor compensation for insurance would be available up to $375 for the period of April 1, 2010 to June 30, 2010 and up to $1,125 for the period of July 1, 2010 to March 31, 2011.
Further, an amendment is proposed to the tax on insurance premiums to ensure that certain costs and fees, such as administration fees for benefit plans, would not be subject to both the HST and the ORST, by providing an ORST exemption for such costs and fees from the tax on insurance.
As of July 1, 2010, tobacco retailers will no longer be able to obtain a vendor’s permit under the Retail Sales Tax Act. Amendments to the Tobacco Tax Act are proposed to require tobacco retailers who do not hold a vendor’s permit on June 30, 2010, to obtain a retail dealer’s permit under the Tobacco Tax Act.
Finally, Ontario has proposed to introduce technical amendments to all taxation statutes, including the Retail Sales Tax Act, to improve administrative effectiveness and enforcement, and maintain the integrity and equity of Ontario’s tax and revenue collection system. This, according to the government, will enhance legislative clarity and regulatory flexibility to preserve policy intent.
Further information on the Ontario budget may be found on the province’s web site at: