Canadian Manufacturing

Tax cuts delayed and support programs chopped for business in Ontario Budget

Tax reductions, sweeteners and other programs companies have already planned for are out the door if budget passes

TORONTO —A delay of the planned corporate tax rate cut in Ontario was a near certainty, but the added caveat Tuesday of the freeze staying in place until the cash-strapped province balances its books proved a hard pill to swallow for some business groups.

The rate was scheduled to come down to 10 per cent by July 2013—a vow reaffirmed during last fall’s election campaign. But Ontario’s austerity budget, tabled Tuesday, signalled that the rate will stay at 11.5 per cent for the next five years.

More in-depth 2012 Ontario Budget Coverage

It’s a move Finance Minister Dwight Duncan called necessary, and one he said will put $1.5 billion in government coffers over three years.

The minority Liberals, grappling with a $15.3-billion shortfall this year, intend to erase the deficit by 2017-18.

The budget also promised to save $250 million by merging many business support programs into a Jobs and Prosperity Fund, as well as freeze scheduled decreases in business education taxes, again until the budget is balanced, for an additional $300 million in savings.

The government also plans to limit the 10 per cent rebates on electricity bills to 3,000 kilowatt-hours a month, to save $470 million. The move will affect small businesses but not most homeowners, since the average energy use for a family of four is between 800 and 1,000 kilowatt-hours per month.

Certain business fees, including the environmental fee for hazardous waste disposal, will see an increase that will have to be paid by the larger generators of the waste.

The changes come as the minority Liberals walk a political and fiscal tightrope, charged with creating a budget that must appease credit agencies and the wider business community. The province pays about $10 billion a year to make interest payments on its $237.6-billion debt, which is expected to reach $260 billion next year. That will bring Ontario’s net debt-to-GDP ratio to 39.5 per cent, second only to Quebec.

Ontario may wind up shelling out hundreds of millions more in interest if it gets hit with a credit downgrade or interest rates go up.

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