Provincial vote will determine capital tax fate

Frank Gunn/cp

From left, Ontario NDP Leader Howard Hampton, Liberal Leader Dalton McGuinty and PC Leader John Tory square off during the recent provincial election debate.

Q: I am one of several owners that invest in real estate properties through a corporation. In the past year, the company acquired two new holdings but incurred a larger than normal loss. However, we incurred thousands of dollars that my accountant referred as a capital tax. Why are we paying tax on capital?

—Michael, Toronto

A: Corporations that employ millions of dollars of capital may be subject to capital tax. Taxable capital is comprised of debt and shareholders equity that is reported on your financial statements. Your recent acquisitions and increase debt may have surpassed the threshold and be subject to capital tax. Our federal government imposes a 0.2 per cent capital tax on corporations that employ taxable capital in excess of $10 million. The province of Ontario also wants their piece and imposes a 0.3 per cent provincial capital tax on taxable capital tax in excess of $2.3 million. Depending which party gets into power, capital tax may be phased out.

The upcoming provincial election will be of interest to all of Ontario. Our electoral candidates squared off on Sept. 20 to put forth their party platforms. Here are some highlights proposed by the three parties:

Capital Tax — The Liberals and Conservatives propose to eliminate the capital tax, while the NDP would increase the general corporate tax rate to 14.5 per cent.

Ontario Health Premium (Tax) – John Tory would phase out this premium (tax), Howard Hampton will eliminate it for working families and reduce it for middle income and Dalton McGuinty (architect of OHP) will maintain the status quo.

Minimum wage – The Liberals would continue to raise minimum wage to $10.25 by 2010 while NDP would raise minimum wage to $10 immediately. Business owners are keeping a close watch, as this may affect their competitiveness and bottom line.

Public education – The NDP would provide an additional $400 million and extend junior and senior kindergarten to full-day. Liberals would invest an additional $3.1 billion annually by 2011, expand kindergarten programs to full-day and will not fund religious private schools. The Conservatives will provide funding to religious private schools that adhere to the Ontario curriculum and provide more than $800 million new funding for public education.