TORONTO - Ontario ignored calls from the federal finance minister to cut corporate taxes across the board in Tuesday's provincial budget in favour of $750 million in targeted tax breaks over four years, reserved mostly for the technology, resource and manufacturing sectors.
The province's fiscal plan flies in the face of federal Finance Minister Jim Flaherty, who has waged a war of words with Premier Dalton McGuinty over the future of Ontario's economy.
Flaherty has travelled across the country warning that Ontario could become a have-not province in the next two or three years if the Liberals don't slash corporate taxes across the board to attract investment and create jobs.
Instead, the provincial budget outlines a plan to offer assistance to the struggling manufacturing sector as well as boost the province's profile in the tech industry.
The budget will also exempt new corporations from corporate taxes as long as they are working with qualifying Canadian universities, colleges or research institutes to create technology that can eventually be brought to the commercial market.
The move comes as the Liberals speed up plans to cut taxes in the manufacturing and resource sectors, a project that was announced last year but has been accelerated in the latest plan.
The Ontario government has set a deadline of July 1, 2010 to completely eliminate capital taxes.
Over the past year, manufacturers have been pummelled by a loonie that spent the final months of 2007 above parity and left the sector laying off workers in an attempt to counter lower exports.
Under the latest budget, only manufacturing and resource companies get an early break. Last year, the Liberals announced plans to eliminate capital tax for both sectors by Jan. 1, 2008.
In Tuesday's budget, that deadline reaches back another year to refund companies starting on Jan. 1, 2007.
The retroactive pay is a much faster way to pay back corporations, Finance Minister Dwight Duncan said.
"As soon as this budget bill is passed we can get the money out to these firms," Duncan said. "If we had gone down the corporate tax path, it would have taken a lot longer."
The government said it expects the new cuts will give companies another $190 million in rebates.
NDP leader Howard Hampton said that the Liberals should've followed the lead of manufacturing tax credit plans in Manitoba, Quebec and Saskatchewan.
"In the case of those three provinces, they put in place a manufacturing investment tax credit to ensure that... companies can afford to continue to operate and invest for the future," he said.
"We believe we need to implement a refundable manufacturing investment tax credit now - not two or three years from now - now is a critical time."
The latest budget offered few surprises to big businesses, though it did outline plans for a 10-year income tax exemption to new corporations that commercialize intellectual properties.
The commercial development tax exemption will cover corporations established between March 24, 2008 and March 25, 2012, and favours companies that commercialize products tied to environmental, health, telecommunications and computer technology.
The government has also committed $550 million towards research and development costs and related tax credits.
Manufacturers will get a capital cost allowance break on new equipment purchases made before 2012.
"This would save Ontario businesses some $433 million over three years and encourage Ontario manufacturers and forestry companies to invest in new equipment," Duncan said in the budget speech.
Conservative Leader John Tory echoed the federal government, saying that the Liberals are ignoring growing economic problems in the province.
"I think Ontario is on track to be in a deep, deep set of difficulties - much of it being at the making of this provincial government," he said. "The chances of us ending up as a have-not province are much higher than they should be and they're very real."
