Daniel Sawatsky CA - Chartered Accountants in Orillia Ontario

Finance Minister Dwight Duncan delivered Ontario’s 2009 Budget on March 26, 2009. The Budget is projecting a deficit of $3.9 billion in 2008-09, increasing to $14.1 billion in 2009-10. 

As anticipated the Budget proposes to harmonize Ontario’s current 8% Retail Sales Tax and the federal 5% GST tax to create a single 13% value added sales tax. These changes are effective July 1, 2010. 

The Budget proposes minor tax rate changes for individuals while increasing the tax rate on both eligible and non-eligible dividends. For corporations there are tax cuts in the general, manufacturing and processing and small business tax rates as well as the elimination of the small business deduction surtax. 

The following summarizes the tax related measures included in the current Budget.

Sales Tax Harmonization

General

It is proposed that starting July 1, 2010 Ontario will introduce a value-added tax. This tax will be combined with the federal Goods and Services Tax (“GST”) to create a federally administered single sales tax. The Ontario value-added tax will replace the existing Ontario Retail Sales Tax (“RST”). The single combined value-added tax will have a 13% rate representing a 5% federal portion and 8% Ontario portion (the same rate as the current RST). The single sales tax will be largely consistent with the GST. The single sales tax will tax a wide range of goods and services but will not be charged on items such as basic groceries, prescription drugs and medical devices. Businesses making taxable or zero-rated sales will generally be able to claim input tax credits for the single sales tax paid on their purchases. As part of this sales tax reform process Ontario is to receive $4.3 billion in cash transfer payments from the federal government to promote economic growth and support transition to the single sales tax.