With companies up in arms over a looming hike to Ontario’s minimum wage and an election barely six months away, the Wynne government is offering small businesses a tax cut and new incentives to hire and retain young workers.
Ontario will cut its corporate tax rate on the first $500,000 of profits to 3.5 per cent effective Jan. 1, down from the current level of 4.5 per cent, Finance Minister Charles Sousa announced Tuesday.
Small businesses with fewer than 100 employees will get an incentive of $1,000 to hire a young person aged 15 to 29 and another $1,000 if the company retains that worker for six months.
Sousa made the pledges in his fall economic statement. The statement is typically a mid-year tweak to the budget, but this edition takes on extra significance with election day set for June 7 and the Ontario Liberals trailing in the polls after 14 straight years in power.
At the same time, Sousa signalled the government has no intention of slowing down the timetable for boosting the minimum wage from the current $11.60 per hour to $14 effective Jan. 1, then to $15 per hour in January 2019.
“We will not back down from these commitments,” Sousa said in his speech to the legislature. “An increase to minimum wage cannot wait. People cannot wait. Delaying an increase is denying an increase.”
The hiring incentives and tax cuts for small business will cost the treasury about $500 million over the next three years.
The tax cut announced Tuesday leaves Ontario with the third-highest small business tax rate among the provinces. The corporate tax rate, which applies to profits above $500,000, is 11.5 per cent, which is second-lowest in Canada. (See chart below)
Figures provided with the economic statement show the government is still on track to balancing its budget in 2017-18, which would make it the first time Ontario is not in the red in a decade.
Despite his corporate tax break, Sousa is adjusting upward his forecast for corporate tax revenue in 2017-18 to $15.4 billion. That is $1.6 billion higher than projected when he delivered his budget in April and is a result of “stronger growth in corporate profits,” according to the statement.
Sousa is reducing his forecast for land transfer tax revenue by $270 million, because of the drop in home sales over the past six months.
The statement also revises the forecast for provincial economic growth in 2017 to 2.8 per cent, up by 0.5 per cent from the budget
Sousa spent most of his speech showcasing changes the Wynne government has already introduced, such as free prescription drugs for children and young adults, a 25 per cent cut to hydro bills, expanded rent control and larger grants for college and university students.
Provincial corporate tax rates
|Province||Small business rate (on first $500,000 profit)||Corporate tax rate|
|Ontario||3.5% (starting in 2018)||11.5%|