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Tuesday, April 13, 2010

Ontario's Salary Freeze

The 2010 Ontario budget has been presented and, in an era of provinces pulling themselves into recovery after battling the effects of the recent, economy-crushing recession, Ontario has delayed efforts to balance the budget. In fact, Ontario's budget is not projected to be back in the black until 2017-18. Instead, the provincial government has presented a budget that contains a whopping $110 billion in deficit spending over the next eight years. To offset this spending, the province has imposed a salary funding freeze for more than one million public sector employees.

And, thus, the battle lines have been drawn. In Ontario, more than half the government's spending is public sector compensation. The government is attempting to rally public opinion to support its decision, claiming that the public employees will certainly agree that a salary freeze will help pave the way for a brighter future. However, the unions see the decision as the opening volley in negotiation battles that will not be easy.

Ontario is not the only province juggling deficits. It does seem, though, to be the only province that is not tackling the issue head-on by slashing spending. One reason given is the fact that elections are on the horizon in 2011. Reducing spending would entail cutting the public labour force, which would be the responsible move, but would ultimately cost the Liberals votes at the polls.

Critics point out that an alternative savings would be a repeal of a corporate tax cut. But, it is easier to take the money from low-paid workers, many of whom are women.

There has been a good deal of criticism regarding irresponsible government spending. This past summer, the Liberal government came under fire for wasting more than $1 billion on the eHealth system. Designed to develop electronic health records, the only major winners of eHealth were the contracted consultants.

The steady increase of six-digit government salaries has also come under attack. The opposition parties point out that the Liberals really have done very little to keep government spending under control.

It would appear that the province's ailing economy is truly in need of a vital recovery program before the illness gets worse.

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Sunday, April 11, 2010

Ontario's Hidden Green Tax

If you reside in Ontario, you already know that Canada Day 2010 will also hail the inception of Ontario's new 13% Harmonized Sales Tax (HST). What you may not know is that you are most likely to begin paying another new tax as early as May.

While yet not formally announced, the Liberal government will be imposing a new levy on hydro bills throughout the province to help cover $53 million of the government's conservation and green energy program. Opponents of this measure call the levy a hidden tax that is unnecessary. While the Liberals claim that the average hydro bill will only increase by $4 annually, this claim fails to acknowledge that the HST will already increase hydro bills by an additional 8%.

Defending their decision, Liberals maintain that the only alternative is to continue operating the province's energy system by burning coal, thus contributing to an unhealthy environment. The money from the levy would pay for home audits and institute a program to help industrial and commercial firms convert to solar power. The focus of the program will be conservation, rather than merely converting to new infrastructures, which could prove to be extremely costly to taxpayers.

Critics of the government's green plan question whether all the affordable conservation options have been investigated, rather than turning immediately to the consumers' pockets. The most effective program would be one that will help the maximum number of hydro users conserve. Furthermore, producers of "green power" appear to be the prime beneficiaries of this new program, as opposed to actually transforming Ontario into a "green" province.

Whether the environment will win or lose in the long term is still most uncertain. What is certain, though, is that Ontario residents will begin paying more for hydro in the near future. Hopefully, they will be investing in their environment, not just in their government.

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Thursday, February 18, 2010

Ontario's Growth Spurt

Get ready, Canada! Ontario is about to set a new record.

With the country now emerging from the recession, it's time to take stock and assess the damages. As a province dependant heavily on its manufacturing sector, Ontario's GDP was one of the worst performing, matching those of Newfoundland and Labrador, contracting in 2009 by 3.5%. However, as many companies have a need to restock depleted inventories, Ontario is now benefiting from a business boom. Economic forecasts predict that Ontario's GDP will grow by 2.4% in 2010, outpacing the national rate that is projected at 2.3%. This will be the first time in eight years that Ontario has excelled in terms of national growth. This growth is expected to continue into 2011 and reach 2.8%, although national levels are expected to reach 3% next year. Economists fear, though, that restocking inventory will only provide temporary relief. As the warehouses and shelves are filled, orders will taper off and return to earlier levels.

The growth in the GDP is good news for a province that is burdened by a massive deficit, the largest of all the nation's provinces. Higher energy prices as well as competitive foreign markets are making it difficult to cope with the deficit. On the other hand, the HST, due to take begin on July 1, is expected to help ease the deficit burden. Combined with the HST, new, lower corporate taxes are expected to attract investments and new jobs to the province.

While manufacturing will experience a temporary post-recession growth spurt, Canada's abundant natural resources will still lead the way economically. Saskatchewan is expected to remain the leader among provinces, based on the strength of its oil, potash, agriculture and uranium sectors. British Columbia and Newfoundland, both of whom suffered during the recession, are also expected to experience significant economic expansion in the coming year.

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Tuesday, December 15, 2009

Ontario Justifies HST

The votes are in. Ontario's Liberal government passed legislation to create a single 13 per cent Harmonized Sales Tax (HST) beginning July 1, 2010. The final vote came after weeks of staunch opposition in the Ontario legislature. However, as NDP leader Andrea Horwath stated, the Liberal majority was able to "ram through the HST bill…with little debate as possible."

The Liberals are enthusiastic about the HST. In a province still reeling from massive unemployment due to the current recession, the government estimates that the new tax will help create 600,000 new jobs over the next decade. Blending the PST and the GST will lower costs for businesses. This, in turn, will allow businesses to lower prices for consumers and hire more staff.

The opposition parties are adamant that the public, if asked, would strongly oppose the new HST and, thus, the Liberals did not take the tax issue to the polls. The opposition feels that the tax bill was railroaded as a way to increase tax revenues for the province. While many businesses will, indeed, benefit from the new tax, consumers will ultimately pay more from their pockets. Current PST exempt items including gasoline, home heating fuel, and cable TV will now be taxed under the new HST.

The new tax legislation is not without compensation. January 1, 2010 will see the implementation of tax cuts to both corporate and income taxes. Furthermore, some families will be entitled to a one-time rebate of up to $1,000 to offset the tax impact.

Ontario is not the only province to implement the HST. New Brunswick, Quebec, Nova Scotia, Newfoundland and Labrador have already done so. British Columbia has passed legislation to implement the HST next year as well.

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Tuesday, October 13, 2009

Federal Government: $20 Million to Develop Eastern Ontario

The Canadian government's Economic Action Plan was designed and legislated earlier this year to provide economic stimulus and fiscal assistance to segments of the country in need as a result of the recent global recession. One such area that has received special government attention is the rural region of eastern Ontario.

Over the next two years, $20 million of stimulus funds will be provided by the Federal government for the Eastern Ontario Development Program (EODP). EODP will be administered by a new government agency, the Southern Ontario Development Agency, currently being established. EODP is designed to contribute to the successful development of business and job opportunities by supporting community-based initiatives in rural communities. These funded opportunities will hopefully attract and retain youth in the communities, support skills development, make capital available to new and existing businesses, and support technological enhancements in these communities located far from the major urban centres of the province.

The rural area of Eastern Ontario extends east from Durham Region and Algonquin Park and is bounded by the border of Quebec. Not included in this program are the cities of Kingston and Ottawa.

In order to make these funds available to a broad range of residents, EODP eligibility is open to non-profit organizations (including municipalities), Aboriginal organizations, community development associations and organizations, local entrepreneurs, and small to medium sized businesses within the administered region.

Organizations requiring detailed information on eligibility and applications should contact a local Industry Canada officer. Officer information can be obtained from the Industry Canada web site. 

Monday, October 5, 2009

100 Million Dollar Development Program For Southern Ontario

Prime Minister Stephen Harper's Economic Action Plan, officially released in January of this year, is the result of consultations and discussions with interest groups, business leaders, provincial and municipal governments and the Canadian public. The global recession has affected each province differently and, similarly, different communities have specific needs. As a result of the specific economic challenges faced by communities and businesses in Southern Ontario, a new federal agency was created to address those issues.

On August 13, Mr. Harper launched the new Federal Economic Development Agency for Southern Ontario (FedDev Ontario). As economic recovery begins in Canada and in nations around the world, FedDev Ontario will help workers, businesses and communities in Southern Ontario take advantage of various economic opportunities.

The new agency will use several new or existing programs to expedite the flow of funds to Southern Ontario. For example, $100 million will be available via the Southern Ontario Development Program to promote economic development and job creation. An additional $350 million from the Community Adjustment Fund (CAF) will provide short term economic stimulus to communities affected directly by the recession. The CAF will also provide $30 million to the Community Future Development Corporation which provides important services to businesses and entrepreneurs in Southern Ontario. The Business Development Bank of Canada will invest $50 million in Southern Ontario. And, finally, more than $67 million in grants will be available from the National Research Council (NRC) for technical innovation leading to wealth creation. And, the Industrial Research Assistance Program of the NRC will receive an additional $27.5 million to foster innovation among small and medium-sized businesses in Southern Ontario.

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Tuesday, August 11, 2009

Harmony in Ontario Tax System?

The HST – Harmonized Sales Tax – will become a way of life in Ontario. The new 13 percent tax, slated to begin July 2010, will harmonize the federal and provincial sales taxes. Provincial legislators claim that the HST is good for the province. It will ultimately save businesses money and these savings can be passed on to the consumer. Not everyone, though, is as optimistic as the province's leaders.

Some analysts and tax specialists predict that the HST will create an underground economy. It will negatively affect many small and medium-sized firms that provide services and were previously exempt from the provincial sales tax. This will force these businesses offshore or to other provincial jurisdictions that don't charge PST on services. Ontario will lose the competitive advantage that it had.

Not all analysts agree with this doomsday outlook, though. Citing the Atlantic Provinces that harmonized their sales taxes in 1997, no great revolution took place. There was no tremendous increase in business outsourcing their work, nor did businesses leave home to seek better tax systems across the nation.

Ontario legislators predict that, due to the HST, companies will save $500-million in tax compliance. The new tax will also improve cost efficiencies in government. The province does acknowledge that business will have to change their accounting and point-of-sale systems to accommodate the new tax. However, the province has set up a one-time $400-million fund that will provide tax credits to small businesses to offset the costs of these changes.

One final skeptical note that opponents point out. Previously, companies were compensated for collecting retail sales taxes. Under the new HST, businesses will provide the collection services for the province free of charge.

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