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Working with our membership, ITAC establishes and sets targets for where Canada's knowledge economy should be compared to key peer/competitor nations. Where we fall short, ITAC determines what we need to do to get there and ensure we do what is needed in areas such as: skills, capital, tax, science & technology, and collaboration.
ITAC believes Canadian businesses should be leaders in the use of ICT for competitive advantage, productivity and growth. Use of ICT by small and medium enterprises should increase towards that of our US counterparts. By partnering with other associations, as well as with Government, we work to ensure public policy supports these goals.
ITAC strives to ensure Federal, Ontario and other Canadian Governments are leaders in ICT use. ITAC positions itself as a trusted advisor to Government. We gather industry leaders and Government together and work to make it easier for our industry to sell to government.
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ITAC believes that in order for Canada to continue to compete worldwide, we need to promote policies that will ensure a steady supply of talented men and women for our local ICT industry. We work with industry as well as with Federal, Provincial and local governments to establish initiatives to support this goal.
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At Last … Ontario Will Harmonize Sales Tax
Posted March 27, 2009
Ontario made a major breakthrough in tax policy with its decision to harmonize its retail sales tax with the Goods and Services Tax by July 1, 2010. ITAC, along with many other business organizations, has repeatedly called upon the Provincial Government to harmonize sales tax and upon the Federal Government to help it do so. The Federal Government is contributing $4.3 billion. The harmonized tax will replace the 5% GST and 8% RST with one harmonized 13% tax. When fully implemented (and there is a lag), the most important aspect of harmonization for Ontario businesses is that as a value-added tax it will allow them to recover the provincial portion of sales tax on inputs. This reduces the cost of investments and of products sold. There is also a big saving on compliance costs, to the tune of $500 million.
The RST is particularly problematic for ICT companies. The complexities of its rules, particularly as applied to custom software, have posed significant burdens on our industry. So the move to harmonization is great news for us. Audrey Diamant (PWC) has worked with ITAC’s Tax and Finance Committee to advocate for reform. Here is her analysis of the impact of harmonization:
“On the sales side, the complexity of the RST rules as they currently apply to the industry has been the subject of much debate and concern. Since the RST rules on software were revamped in 1997, the industry has struggled to understand and apply the rules on a consistent and coherent basis. In particular, properly defining exempt custom software; determining the non-taxable service elements of a software implementation project; applying RST to access charges where software was loaded on a server in Ontario; and trying to support exemption for service charges under certain SaaS models, all represent RST issues that have plagued local industry. Consequently, implementation of the HST will effectively remove these issues and simplify the application of tax. It will also remove the RST-driven incentive for certain suppliers to move their servers outside of Ontario, an unfortunate result of Ontario’s taxing software access charges based on the location of the software, as opposed to that of the user. Importantly, business consumers may see the effective cost of IT services decrease with the advent of a harmonized tax.”
Corporate taxes are also scheduled to fall from 14% to 10% by 2013 and for small business from 5.5% to 4.5% as of 2010, and the small business earnings threshold is going to $500k from $400k. With harmonization and corporate tax reductions, Ontario is cutting its marginal effective tax rate on investment in half. This will be a tremendous boost for investment and growth.
The Budget also contains many useful measures to bolster Ontario’s innovative capacity including research infrastructure and digital media. The Budget also contains a temporary 100% accelerated capital cost allowance rate on computers and software that matches the CCA measure in the January Federal Budget and it reaffirms the $250 million Emerging Technologies Fund announced the previous week.
Ontario’s Budget caps a month of provincial government announcements that contain a number of improvements to R&D credits and methods to incent investment. The most significant move to address the financing crisis facing growth tech ventures is in Québec which established the $500 million EFRB (Emergency Fund for Small Business), the $825 million FFSUC (Fund to Finance Sectoral Venture Capital Funds) and three funds for start-ups totalling $125 million. It establishes Stock Savings Plan II, a retail investment tax credit for SMEs with assets up to $200 million. The Québec Budget also contains a provision for a 10-year tax holiday for new corporations dedicated to the commercialization of intellectual property from Québec universities and public labs.
ITAC is requesting its members comments on the Ontario budget. Please send commentary to ITAC CEO and President, Bernard Courtois.
Please click the following links to view our correspondence to government
The Honourable Jim Flaherty, Minister of Finance
The Honourable Dalton McGuinty, Premier of Ontario
The Honourable Dwight Duncan, Minister of Finance and Minister of Revenue
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