On April 23, 2015, the Honourable Charles Sousa, Minister of Finance, presented the 2015 Ontario budget. This year’s budget was released with a view towards job creation, making investments aimed at creating a highly skilled workforce, funding additional infrastructure projects, and managing the province’s funds in a responsible manner. In addition, this year’s budget estimates the deficit for 2015–16 to be $8.5 billion, with a deficit of $4.8 billion predicted for 2016-17, and reaffirms the government’s promise to balance the budget by 2017–18.
The province reiterated its intention to establish an Ontario Retirement Pension Plan by January 1, 2017, as announced in the 2014 budget, and noted that the legislation for this proposal was introduced in the legislature this past December.
The budget also contained a few interesting tax initiatives, which are discussed below.
Tax on Beer
This year’s budget contains a number of announcements related to beer sales in Ontario, including a proposal to add a new tax on beer. This new charge, to be phased in over a four-year period, is expected to commence on November 1, 2015 at a rate of 3 cents per litre of beer, and will increase each year until 2018 by the same amount. This new levy will add approximately 25 cents to the cost of a case of 24 beer and is expected to increase provincial revenues from beer sales by $100 million annually.
Registration Requirements for Road-Building Equipment
Last year’s budget proposed to amend the Highway Traffic Act to require the registration and licensing of road-building equipment used on public roads and highways. This requirement would create additional fuel tax revenue for the province, since the operators of newly licensed road-building equipment would no longer be allowed to purchase tax-exempt fuel for use in these vehicles. Currently, the province is developing and reviewing potential registration and licensing requirements and processes in order to implement this initiative by 2016.
Harmonized Sales Tax
No changes to Ontario’s HST were introduced in this year’s budget, which means that large businesses can expect the phase-out of the recapture of input tax credits (“RITC”) requirements to proceed, as planned, starting with a 25% reduction in the amount to be recaptured on July 1, 2015. However, the government did take the opportunity to trumpet the fact that the HST creates a more competitive tax system, with the removal of an estimated $4.7 billion in embedded sales taxes annually, and reduced compliance costs for businesses. The province also noted that the change has been instrumental in cutting the province’s marginal effective tax rate by 50% since 2009, placing this tax rate, on average, below rates in many places in the United States.
The Underground Economy
The budget estimates that the underground economy in Ontario is roughly $15 billion per year, and is comprised of activities that are made in a deliberate effort to evade taxes and other legal responsibilities. Typically, this economy exists where payments in cash are encouraged by businesses and such transactions are frequently found in the construction, retail and hospitality segments of the economy. In an effort to curb the underground economy, Ontario is proposing several initiatives, including:
- Making it illegal to use, produce and dispense electronic sales suppression technologies (i.e., zapper software) and reviewing potential options to prevent the use of sales suppression measures at cash registers;
- Improving the sharing of information with other governments and within Ontario’s own government to focus on business activities that can lead to underground economy schemes;
- Expanding the tax verification of businesses hired by provincial government entities and Crown corporations to ensure that tax obligations have been met; and
- Enhancing various existing policies in place to curtail the proliferation of contraband tobacco, including:
- regulating key components of tobacco products;
- partnering with law enforcement agencies to tackle the link between organized crime and illicit tobacco products;
- creating additional compliance capacity through the authorization of Ministry of Finance enforcement personnel as peace officers;
- allowing for information sharing as it relates to raw leaf tobacco oversight;
- legislation to make enforcement of the Tobacco Tax Act simpler, such as providing the authority for vehicles to be searched, where it is reasonable to believe that raw leaf tobacco will be found inside; and
- improving the synchronization of Ministry of Finance – Tobacco Tax Act and Public Health Unit – Smoke-Free Ontario Act inspections.
Technical Legislative Amendments
The government has also committed to amending various provincial statutes in the next fiscal year in order to improve the effectiveness, enforcement and equity of the tax and revenue collection system. As a result, the Fuel Tax Act, Gasoline Tax Act, Retail Sales Tax Act and Tobacco Tax Act may all be impacted by these technical legislative amendments.
Property Tax Changes
This year’s budget also included some interesting property tax news. The provincial government, along with the Municipal Property Assessment Corporation (“MPAC”), has been conducting a series of consultations called the Special Purpose Business Properties Assessment Review. As part of this process, MPAC is undertaking an extensive program of data collection on so-called "special purpose properties". The budget advises that the province intends to strengthen protections for such highly confidential data, and also “bolster MPAC’s ability to obtain additional information about properties.” Some taxpayers have already begun to receive these detailed questionnaires. The stated intent of this activity is to improve the “transparency, accuracy, and predictability of the assessment system.”
As part of this effort, new valuation procedures are being introduced for "special purpose properties", which will be put in place before the 2017 tax year. To this end, the budget also informs taxpayers that “the Province is proposing changes that would support these objectives by helping to resolve disputes about assessed values before the return of the assessment roll.”
Further details on the “Building Ontario Up 2015 Budget” are available from the Ontario Ministry of Finance web site at: