News and Insights

Ontario Budget 2012

Tax Development Mar 28, 2012



On March 27, 2012, the Honourable Dwight Duncan, Minister of Finance, presented the 2012 Ontario budget.  This year’s budget is the next step in the government’s five-year plan to balance the budget by 2017-18.  

The province proposes to reduce program spending and contain costs by $17.7 billion over the next three years, while increasing revenues by $4.4 billion without raising or creating any taxes.

The budget also introduced a few interesting tax measures, as discussed below.  

Commodity Tax Measures  

Retail Sales Tax Refunds and Rebates  

The government is proposing to shorten the refund and rebate periods for Retail Sales Tax purposes in order to help wind-down the tax in Ontario.  Currently, taxpayers may apply for refunds and rebates until the time limits for claiming them have expired (i.e., within four years of the date of payment of the tax) or June 30, 2014, whichever is earlier.  However, proposed amendments will require applications to be made on or before December 31, 2012.  

Tobacco Tax Enforcement  

Ontario has previously announced that it is committed to reducing smoking among youth and other vulnerable persons, and the province has reiterated that it is striving to have the lowest smoking rate in Canada.  To facilitate this goal and, coincidentally, protect tobacco tax revenues, the government has announced that it is considering various measures to improve enforcement of the Tobacco Tax Act and combat the use of contraband tobacco.  Some of the strategies being contemplated include:

  • increased fines for those convicted of offences related to illegal tobacco;
  • stronger enforcement tactics, which could include forfeiture of items seized as evidence, impounding of vehicles, and the use of court-authorized tracking devices;
  • strengthening the registration system for retail dealers; and
  • replacing Ontario’s yellow tear tape with the federal stamp.

Corporate Income Tax Measures  

The budget announced that the corporate income tax rate will remain at 11.5%.  This tax rate was originally scheduled to decrease to 11% on July 1, 2012, and to 10% on July 1, 2013.  However, those planned rate reductions will not be implemented until the Ontario budget is balanced, which is projected to occur in 2017-18.  

The province also announced that it intends to review a number of areas involving corporate income taxes, including research and development tax credits, the apprenticeship training tax credit, mining taxation, and tax avoidance.  

The Underground Economy  

Like many governments, Ontario believes it has lost a significant amount of tax revenue as a result of businesses operating in the underground economy.  To counteract such losses, the province is proposing to adopt several measures similar to those recently implemented by Quebec to protect provincial tax revenues, including:

  • measures to stop the use of point-of-sale software designed to conceal sales (i.e., sales “zappers”);
  • measures to encourage Ontario ministries, municipalities and the Canada Revenue Agency to share information;
  • measures to assist in identifying those persons who engage in tax evasion, including disclosure requirements, fines and penalties; and
  • various initiatives to promote further collaboration among different government ministries.

In addition, Ontario has indicated that it plans to continue to work with the federal government on additional compliance activities.  

Please note that all of the measures discussed above are proposed and the budget must still be passed by the province’s minority government.  

Further details on the 2012 Ontario budget are available from the Ontario Ministry of Finance web site at:
2012 Ontario Budget.