Ontario's New Liberal Government To Dispense With Tax Cuts

by Mike Godfrey, Tax-News.com, Washington

26 November 2003

Defying Canada's federal tax-cutting agenda, the incoming Liberal government of Ontario is to cancel legislation containing corporate tax cuts and personal tax credits, citing the need to restore the Canadian province’s public finances to health.

"It's an important step towards keeping our core commitment to get the province's financial house back in order," Finance Minister Greg Sorbara said whilst introducing new legislation known as the Fiscal Responsibility Act.

“We made that commitment because it's the foundation of everything else that Ontarians want us to do. That includes excellence in education, improving our health-care system, strengthening our communities and obviously creating a more prosperous economy,” the provincial Finance Minister explained.

Under the new proposals, the general rate of corporate tax will be raised to 14% from January 1 next year, and manufacturing and processing tax increased to 12%. The 5.5% rate for small businesses with an income of less than $400,000 will be maintained, however.

If the bill makes it on to the statute book, it will supersede pledges made by the departing Tory government which promised personal tax cuts. It also allows the new administration to borrow up to $7.1 billion for investment and debt servicing.

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