The cash-strapped provincial government is wrestling with a freeze of corporate tax cuts to boost the minority Liberals’ political and fiscal fortunes, sources tell the Star.
In a move that would also help Ontario’s tarnished image in the eyes of bond-rating agencies, Premier Dalton McGuinty’s administration could keep the corporate tax rate at 11.5 per cent instead of continuing to gradually lower it to 10 per cent by mid-2013.
Former Progressive Conservative premier Ernie Eves similarly delayed planned tax cuts in 2002 after the Sept. 11, 2001 terrorist attacks in the U.S.
McGuinty insisted Monday he is “trying to bring a balanced approach” by ensuring business taxes are competitive with other jurisdictions.
But the Liberals are mindful they need support from opposition MPPs to pass the budget next March and NDP Leader Andrea Horwath has been pressuring the government to reconsider its 2009 pledge on such tax rates.
“Reductions in corporate taxes are not the right way for Ontario to go,” Horwath said last week as she unveiled a motion in the House that was viewed as an NDP concession to the Liberals.
Compromising on her previous stance that the rate be increased to 14 per cent, where it stood until July 2010, the New Democrat leader urged “a moratorium” so the tax would be frozen at 11.5 per cent.
“I would suggest that the government actually look seriously at setting a pause on those corporate tax cuts. Put the money in the pockets of people for a change,” she said Thursday.
Privately, some Liberals praised Horwath for being “constructive” by offering an olive branch to the government on the rate.
“Let’s just say it was noticed,” said an official, cautioning against reading too much into the fact the Liberals and Progressive Conservatives banded together to defeat her motion in the Legislature.
Conservative Leader Tim Hudak wants the Liberals to continue with the cuts as scheduled even though the province is struggling with a $16 billion deficit and needs revenue.
“We need to create private-sector jobs so more people are working. What’s essential to that? Reducing the tax rates on employers — not increasing them like the NDP and the Liberals may want to do,” he said Friday.
Hudak was a cabinet minister in June 2002 when Eves and then-finance minister Janet Ecker were forced to delay scheduled corporate tax decreases because of 9/11.
“Here’s a lesson learned,” the Tory leader said wryly. “Shortly after that, I moved from the ministry of consumer and business services to an office on the third floor of the Legislature, firmly in opposition.”
While scrapping or postponing the reduction would not generate a massive windfall right away — the rate is scheduled to drop to 11 per cent next July 1 and 10 per cent the year after — by 2014-15 it would mean an additional $800 million in government coffers.
Liberals emphasize that such a change would mostly affect Ontario’s booming financial services industry — not struggling manufacturers whose tax rate has already been reduced to 10 per cent.
However, officials believe Bay Street, which has benefited from previous reforms such as the 13 per cent harmonized sales tax, could live with the 11.5 per cent rate provided they are offered “certainty” and “stability” from Queen’s Park.
As well, the Liberals stress last week’s “negative outlook” warning from Moody’s Investors Service that Ontario is at risk of a credit downgrade should be a wake-up call to anyone believing it can be business as usual.
One sentence in particular from Moody’s statement Thursday was pored over by provincial officials: “While Ontario retains sufficient fiscal flexibility inherent in the institutional framework to adjust its fiscal outcomes, thereby improving its financial position, difficult policy decisions are required.”
The Liberals are alarmed at the possibility of a Moody’s credit downgrade from the current level of Aa1 because it would lead to higher borrowing costs for Ontario, which has a $190 billion debt and is forecast to run deficits until 2017-18.
Origin
Source: Star
In a move that would also help Ontario’s tarnished image in the eyes of bond-rating agencies, Premier Dalton McGuinty’s administration could keep the corporate tax rate at 11.5 per cent instead of continuing to gradually lower it to 10 per cent by mid-2013.
Former Progressive Conservative premier Ernie Eves similarly delayed planned tax cuts in 2002 after the Sept. 11, 2001 terrorist attacks in the U.S.
McGuinty insisted Monday he is “trying to bring a balanced approach” by ensuring business taxes are competitive with other jurisdictions.
But the Liberals are mindful they need support from opposition MPPs to pass the budget next March and NDP Leader Andrea Horwath has been pressuring the government to reconsider its 2009 pledge on such tax rates.
“Reductions in corporate taxes are not the right way for Ontario to go,” Horwath said last week as she unveiled a motion in the House that was viewed as an NDP concession to the Liberals.
Compromising on her previous stance that the rate be increased to 14 per cent, where it stood until July 2010, the New Democrat leader urged “a moratorium” so the tax would be frozen at 11.5 per cent.
“I would suggest that the government actually look seriously at setting a pause on those corporate tax cuts. Put the money in the pockets of people for a change,” she said Thursday.
Privately, some Liberals praised Horwath for being “constructive” by offering an olive branch to the government on the rate.
“Let’s just say it was noticed,” said an official, cautioning against reading too much into the fact the Liberals and Progressive Conservatives banded together to defeat her motion in the Legislature.
Conservative Leader Tim Hudak wants the Liberals to continue with the cuts as scheduled even though the province is struggling with a $16 billion deficit and needs revenue.
“We need to create private-sector jobs so more people are working. What’s essential to that? Reducing the tax rates on employers — not increasing them like the NDP and the Liberals may want to do,” he said Friday.
Hudak was a cabinet minister in June 2002 when Eves and then-finance minister Janet Ecker were forced to delay scheduled corporate tax decreases because of 9/11.
“Here’s a lesson learned,” the Tory leader said wryly. “Shortly after that, I moved from the ministry of consumer and business services to an office on the third floor of the Legislature, firmly in opposition.”
While scrapping or postponing the reduction would not generate a massive windfall right away — the rate is scheduled to drop to 11 per cent next July 1 and 10 per cent the year after — by 2014-15 it would mean an additional $800 million in government coffers.
Liberals emphasize that such a change would mostly affect Ontario’s booming financial services industry — not struggling manufacturers whose tax rate has already been reduced to 10 per cent.
However, officials believe Bay Street, which has benefited from previous reforms such as the 13 per cent harmonized sales tax, could live with the 11.5 per cent rate provided they are offered “certainty” and “stability” from Queen’s Park.
As well, the Liberals stress last week’s “negative outlook” warning from Moody’s Investors Service that Ontario is at risk of a credit downgrade should be a wake-up call to anyone believing it can be business as usual.
One sentence in particular from Moody’s statement Thursday was pored over by provincial officials: “While Ontario retains sufficient fiscal flexibility inherent in the institutional framework to adjust its fiscal outcomes, thereby improving its financial position, difficult policy decisions are required.”
The Liberals are alarmed at the possibility of a Moody’s credit downgrade from the current level of Aa1 because it would lead to higher borrowing costs for Ontario, which has a $190 billion debt and is forecast to run deficits until 2017-18.
Origin
Source: Star
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