Ontario Chamber of Commerce180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222

occ.on.cataxharmonization.ca

Stuart JohnstonVice President Policy & Government RelationsT: 416-482-5222, ext 232E: stuartjohnston@occ.on.ca

Sales Tax HarmonizationOCC Comprehensive Tax Reform Package

Greater Kingston Chamber of CommerceNovember 25, 2009

OCC Comprehensive Tax Reform Package

Sales Tax Harmonization

• OCC Tax Reform Package• What is a Single Sales Tax?• Key Points• Sales Tax Details• Other Tax Reforms• Case Studies

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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The status quo is not good enough.

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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OCC Comprehensive Tax Reform Package• 2004 & 2007 – network approval

2006 – tax consolidationBy 2010 – capital tax elimination

• 2007-2009 detailed 3rd party report on single sales tax2009 budget – sales tax harmonization

• RESULT? Businesses will be paying less tax in the years to come

• A more competitive Ontario

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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Elimination of Capital TaxesElimination of Capital Taxes

Corporate Income Tax

Consolidation

Corporate Income Tax

Consolidation

Sales Tax Harmonization

Sales Tax Harmonization

Income Tax ReductionsIncome Tax Reductions

Lower, Business

Education Tax Rate

Lower, Business

Education Tax Rate

Sales Tax Harmonization

What is a Single Sales Tax?

• July 1, 2010 – Retail Sales Tax eliminated

• Federal Government sole collector of single sales tax

• New tax will mirror the GST in virtually every aspect at new rate of 13%

• Provincial Government is getting ‘out of the sales tax business’

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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Sales Tax Harmonization

Impacts on Business• Administration Costs

$500 million1 tax, not 2

• Operating Costs

$5 billion PSTHidden in

supplychain

Businesses will be ‘sales tax free’

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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Sales Tax Harmonization

Impact on Business... cont’d

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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• Business Investment

New equipment & machineryMore staffLower prices for consumers

Atlantic Provinces – consumer price index lower

Sales Tax Harmonization

Impact on Consumers

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Change in Taxable Status for Consumers

17%

No Change in Taxable / Exempt

Status for Consumers

83%

Note: * Proportion of consumer spending. Tax status is based upon whether the good or service is currently taxed to the consumer. Diagram is for illustrative purposes. Based on 2005 provincial Input-Output tables. Detailed tax treatment is set out in the 2009 Budget, this paper and Single Sales Tax Information Notice 2 — June 18, 2009.Source: Ontario Ministry of Finance.

Sales Tax Harmonization

Business Tax Reductions

Corporate Income Tax Rate ReductionsRates (Per Cent)

Date General M&P Small Business

Small Business Deduction Surtax

Current 14 12 5.5 4.25July 1, 2010 12 10 4.5 0July 1, 2011 11.5 10 4.5 0July 1, 2012 11 10 4.5 0July 1, 2013 10 10 4.5 0

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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•Business Education Tax Rate: 1.52% by 2014•Personal Income Tax Reductions: to 5.05% from 6.05%

Sales Tax Harmonization

Impact on Business... cont’d

Cutting Ontario's Marginal Effective Tax Rate on New Investment in Half*

32.8

18.6 17.3 16.2

0

5

10

15

20

25

30

35

2009 2010 2013 2018

Per Cent

* Includes the Ontario CIT rate cuts and single sales tax proposed in the 2009 Budget, the phase-out of Ontario’s capital tax by July 1, 2010, and the reduction in the general federal CIT rate to 15 per cent by 2012.Sources: Ontario Ministry of Finance and Finance Canada.

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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Sales Tax Harmonization

Impact on Business... cont’d

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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11.6 10.8 9.7 9.7

8.26.8 6.5 6.5

10.4

1.11.0

0

5

10

15

20

25

30

35

2009 2010 2013 2018

Ontario Sales TaxOntario Capital Tax

Ontario CITFederal CIT

(Per Cent)

* Includes the Ontario Corporate Income Tax (CIT) rate cuts and harmonized sales tax proposed in the 2009 Budget, the phase-out of Ontario’s capital tax by July 1, 2010, and the reduction in the general federal CIT rate to 15 per cent by 2012.Sources: Ontario Ministry of Finance and Finance Canada.

Cutting Ontario’s METR on New Business Investment in Half*

U.S. average (2012)

OECD average (2012)

17.3 16.2

32.8

18.62.6

OCC Comprehensive Tax Reform Package

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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Elimination of Capital

Taxes

Elimination of Capital

Taxes

Corporate Income Tax

Consolidation

Corporate Income Tax

Consolidation

Sales Tax Harmonization

Sales Tax Harmonization

Income Tax ReductionsIncome Tax Reductions

More Competitive

Ontario

More Competitive

Ontario

Lower Business Education

Taxes

Lower Business Education

Taxes

Sales Tax Harmonization

Impact on Business... cont’d

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Total Business Tax Relief by Sector — Annual Savings1,2 ($ Millions)

Sector HST Corporate

Income Tax Capital

Tax3 Total

Agriculture 30 15 s 45

Forestry, Fishing and Hunting 15 s s 15

Mining, Utilities, Oil and Gas 105 110 100 315

Construction 2,335 120 40 2,495

Manufacturing 510 405 305 1,220

Wholesale Trade 440 245 100 785

Retail Trade 265 100 55 420

Transportation and Warehousing 500 60 35 595

Information and Cultural Industries 565 80 85 730

Financial Services (except Insurance) (900) 535 520 155

Insurance (160) 150 5 (5)

Real Estate (20) 135 75 190

Renting and Leasing 105 25 40 170

Professional, Scientific and Technical Services 395 270 120 785

Other Services (except Public Administration) 280 170 75 525

Total Business 4,465 2,420 1,555 8,440 1 Represents the annual savings following the full phase-in of the tax measures. Savings do not include more than $700 million

annually in Business Education Tax reductions, targeted tax incentives proposed in the 2009 Budget and the enhancement to the Ontario Production Services Tax Credit announced on June 29, 2009, over $500 million in annual compliance cost savings from a single HST administration and up to $100 million in annual compliance cost savings from a single corporate tax administration.

2 Annual savings of less than $5 million are denoted by the letter “s” (small). 3 Capital Tax savings compared to the Capital Tax structure before the 2004 Budget measures.

OCC Comprehensive Tax Reform Package

Case Example: Dry Cleaner

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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$5,090 $5,030

$60

$1,100

$900

$290

$200$290

(Dollars)

Sales Tax CIT Embedded RST

• Excludes reductions in the Business Education Tax and compliance cost savings from the single sales tax administration.• Sales tax payable after July 1, 2010 is due to the continued application of sales tax on insurance premiums.• The illustrated company is fictitious, however, figures are based on actual corporate administration data and Statistics Canada Survey data.

Current Tax + Embedded RST Burden (2009)

$6480

Tax Payable (2010)$960

Net Tax onBusiness

$5,520

Revenue: $200,000Taxable Income: $20,000

Annual Savings

OCC Comprehensive Tax Reform Package

Case Example: Manufacturer

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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$14,150 $13,440

$710

$6,600

$32,710

$ 1,2001,200

$5,400

$32,710

Sales Tax CIT Embedded RST

• Excludes reductions in the Business Education Tax and compliance cost savings from the single sales tax administration.• Sales tax payable after June 30, 2010 is due to the continued application of sales tax on insurance premiums.• The illustrated company is fictitious, however, figures are based on actual corporate administration data and Statistics Canada Survey data.

Current Tax + Embedded RST Burden (2009)

$53,460

$47,350

Tax Payable (2010)$6,110

Revenue: $5 MTaxable Income: $120,000

(Dollars)

Annual Savings

Net Tax onBusiness

OCC Comprehensive Tax Reform Package

Case Example: Retailer

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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$4,300

$3,500

$800

$2,200

$400

$1,800

$1,060

$1,060

Sales Tax CIT Embedded RST

• Excludes reductions in the Business Education Tax and compliance cost savings from the single sales tax administration.• Sales tax payable after June 30, 2010 is due to the continued application of sales tax on insurance premiums.• The illustrated company is fictitious, however, figures are based on actual corporate administration data and Statistics Canada Survey data.

Current Tax + Embedded RST Burden (2009)

$7,560

Tax Payable (2010)$2,600

$4,960

Revenue: $600,000Taxable Income: $40,000

(Dollars)

Annual Savings

Net Tax onBusiness

OCC Comprehensive Tax Reform Package

Case Example: Coffee Shop

• Excludes reductions in the Business Education Tax and compliance cost savings from the single sales tax administration.• Sales tax payable after June 30, 2010 is due to the continued application of sales tax on insurance premiums.

• The illustrated company is fictitious, however, figures are based on actual corporate administration data and Statistics Canada Survey data.

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$5,080 $4,830

$250

$2,750

$500

$2,250

$1,470

$1,470

Sales Tax CIT Embedded RST

Current Tax + EmbeddedRST burden (2009)

$9,300

Tax Payable (2010)

$ 2,500

$6,800

• Excludes reductions in the Business Education Tax and compliance cost savings from the single sales tax administration.• Sales tax payable after June 30, 2010 is due to the continued application of sales tax on insurance premiums.

• The illustrated company is fictitious, however, figures are based on actual corporate administration data and Statistics Canada Survey data.

Revenue: $ 1 M Taxable Income: $ 50,000

(Dollars)

Annual Savings

Net Tax onBusiness

OCC Comprehensive Tax Reform Package | Sales Tax Harmonization

• To obtain additional information on the OCC’s efforts, go to:

www.occ.on.ca

• To obtain more information on harmonization, please go to:

www.taxharmonization.ca

180 Dundas Street W., Suite 505 Toronto, ON M5G 1Z8 T: 416-482-5222 www.occ.on.ca

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