taxing for growth...15 october 2013 • ontario clean energy benefit (oceb) provides a benefit of 10...

Presentation of Tenth Annual Reportat Four Seasons Hotel

Roger L. Martin

November 15, 2011

TAXING FOR GROWTH:A close look at tax policy in Ontario

1 October 2013

To measure and monitor Ontario’s competitiveness, productivity, and economic progress compared to other provinces and US states and to report to the public on a regular basis

Task Force Mandate

2 October 2013

• Taxing Smarter Raises Prosperity

• Taxation Expenditures Are A Major Cost To Governments

• Personal Income Tax Credits Can Be Inequitable, Inefficient And Ineffective

• Business Support Measures Require Neutrality

• Smart Taxation Guides Tax Reform

Taxing For Growth

3 October 2013

A Smart Taxation System Is Efficient, Effective And Equitable

4 October 2013

• Taxing Smarter Raises Prosperity

• Taxation Expenditures Are A Major Cost To Governments

• Personal Income Tax Credits Can Be Inequitable, Inefficient And Ineffective

• Business Support Measures Require Neutrality

• Smart Taxation Guides Tax Reform

Taxing For Growth

5 October 2013

Federal Taxation Expenditures Increased, 2001-2009

6 October 2013

Retirement Savings Drove Increase In Value Of Expenditures

7 October 2013

Taxation Expenditures Represent Forgone Government Revenues

8 October 2013

• Taxing Smarter Raises Prosperity

• Taxation Expenditures Are A Major Cost To Governments

• Personal Income Tax Credits Can Be Inequitable, Inefficient And Ineffective

• Business Support Measures Require Neutrality

• Smart Taxation Guides Tax Reform

Taxing For Growth

9 October 2013

Children’s Fitness Credit: Provides a credit of up to $500 toward registration and membership fees for each child involved in qualifying fitness programs.

Children’s Art Credit: Introduced in the 2011 Budget and is similar to the fitness credit.

First-Time Home Buyers’ Credit: Affords first-time home buyers a $5,000 tax credit for the purchase of a new home.

Public Transit Tax Credit: Allows individuals to claim the cost of the public transit passes. A public transit user in Toronto would qualify for a tax credit of $1,542 in 2012.

Canada Employment Credit: Allows individuals to claim up to $1,095 in employment income. Individuals are entitled to this credit by simply being employed.

Home Renovations Tax Credit: Provided a temporary federal tax credit in 2009 for housing renovations with a maximum credit of $9,000.

Report Analyzes A Sampling Of Federal Personal Income Tax Credits

10 October 2013

Middle And Higher Income Tax Filers Claim Credits Disproportionately

Middle Income(22% Tax Filers in Ontario)

Higher Income(6% Tax Filers in Ontario)

Middle + Higher(28% Tax Filers in Ontario)

11 October 2013

Benefits Are Skewed Toward Middle And Higher Income Tax Filers

Middle Income(22% Tax Filers in Ontario)

Higher Income(6% Tax Filers in Ontario)

Middle + Higher(28% Tax Filers in Ontario)

12 October 2013

Awareness Of The Children’s Fitness Credit Is Greater Among Higher Income Canadians

13 October 2013

Higher Income Canadians Claim A Larger Amount Of The CFC

14 October 2013

• Revise the Basic Personal Allowance. This benefit is poorly targeted and disproportionately benefits middle and higher income groups.

• Convert Tuition and Education Credits to Grants.These credits could be more effective at encouraging Canadians to pursue higher education as student grants.

• Review Targeted Tax Policy Measures. • Review the effectiveness of the Children's Fitness

Credit• Eliminate the Ontario Clean Energy Benefit sooner

than 2015

Review Personal Income Taxation Credits

15 October 2013

• Ontario Clean Energy Benefit (OCEB) provides a benefit of 10 percent on the first 3,000 kilowatt hours of electricity consumed per month.

• Has cost the province approximately $2.3 billion dollars since its inception. Costs around $1 billion a year. To be eliminated in 2015.

• Benefit discourages conservation by subsidizing the price of energy.

Eliminate The Ontario Clean Energy Benefit Sooner Than 2015

16 October 2013

• Taxing Smarter Raises Prosperity

• Taxation Expenditures Are A Major Cost To Governments

• Personal Income Tax Credits Can Be Inequitable, Inefficient And Ineffective

• Business Support Measures Require Neutrality

• Smart Taxation Guides Tax Reform

Taxing For Growth

17 October 2013

Ontario’s Business Competitiveness Dramatically Increased, 2005 - 2012

• The combined federal and provincial corporate rate in Ontario declined from 36 percent in 2005 to 26.5 percent in 2012

• Capital tax was eliminated in 2010

• Provincial sales tax was replaced with a value added harmonized sales tax (HST)

18 October 2013

METR On Capital Investment Decreased Substantially, 2005 - 2012

19 October 2013

Direct And Indirect Business Support Increased, 2006-07 to 2010-11

20 October 2013

Tax Related Business Support Increased, 2005 - 2011

21 October 2013

Business Taxation Is Not Neutral

22 October 2013

General And Small Business Rates Converged, 1997 - 2013

23 October 2013

Small Business Deduction Discourages Business Growth

24 October 2013

Capital Investment Is Treated Differently In A Cash-Flow System

purchase

25 October 2013

• Pursue taxation neutrality as a guiding principle

• Phase out the small business deduction

• Implement a cash-flow system of corporate taxation

Re-evaluate Business Support Measures

26 October 2013

Smart Taxation• Equity• Efficiency• Effectiveness

Review Personal Income Taxation Credits• Revise Basic Personal Allowance• Convert tuition and education credits into grants• Review targeted tax policy measures

Re-evaluate Business Support Measures• Pursue taxation neutrality as guiding principle• Phase out small business deduction• Implement a cash-flow system of corporate taxation

Smart Taxation Guides Tax Reform

Presentation of Tenth Annual Reportat Four Seasons Hotel

Roger L. Martin

November 15, 2011

TAXING FOR GROWTH:A close look at tax policy in Ontario