Corporations in Ontario would no longer be able to claim private boxes for Toronto Raptors games and other sporting events as a tax deduction, as the cash-strapped province looks at slashing billions of dollars in business subsidies.
Ontario Finance Minister Dwight Duncan said the government is reviewing support programs for businesses as part of a review of all program spending. The government is aiming to erase its deficit by fiscal 2018 without cutting funding for health care and education, its two key priorities.
Mr. Duncan has written to his federal colleague, Jim Flaherty, asking him to work with the province to help get rid of subsidies for businesses. “It is not clear that taxpayers should be subsidizing certain business expenses for income and sales tax purposes, such as private boxes and corporate seats at sporting events,” the letter says.
Mr. Flaherty has not yet responded to the letter, Mr. Duncan said. The province’s review is in response to a key recommendation of economist Don Drummond, who said many of the business subsidies are no longer needed now that the corporate tax rate has dropped in Ontario.
Mr. Duncan said he is not at all worried about any backlash from the corporate sector if the province abolishes subsidies for sporting events.
“I know when a mom and dad take their kids out to a Leafs game, they don’t get a tax break,” he told reporters on Wednesday.
The government announced on Tuesday that it is reviewing all of its business supports, eliminating or reducing some of them and making sure that those remaining are geared to economic growth and job creation.
Mr. Drummond’s report said the government spends about $1.3-billion in direct support for business and $2.3-billion more in indirect tax support.
Premier Dalton McGuinty said his government wants to ensure that it has enough funding to support his flagship full-day kindergarten program, which costs $1.5-billion a year. The government must cut program spending elsewhere and raise new sources of revenue to reduce its $16-billion deficit.
“We’ve entered into a different era here now,” Mr. McGuinty told reporters on Wednesday. He suggested that his government had created a tax “loophole” for businesses by allowing them to claim the cost of sporting events as an expense.
“My sense is in this era, given where we find ourselves right now, there’s a better use for those monies,” he said. “In another age and time, we could have afforded that as a luxury, but now we can’t.”
However, cancelling the subsidy for sporting events will actually end up having little impact on the corporate sector’s bottom line. As part of the harmonized sales tax agreement Ontario signed with the federal government in 2009, large corporations will get a sales tax rebate on certain expenses, including meals and entertainment, beginning in 2015, according to the New Democratic Party.
During the recent Ontario election, the NDP platform proposed that the province not move ahead with those tax breaks, which would save the province more than $1-billion a year by 2018.
If Mr. Duncan is so concerned about subsidies for sporting events, asked NDP Leader Andrea Horwath, why did he sign the HST deal with Mr. Flaherty that allows for those very same deductions.
“The Liberals seem to be talking out of both sides of their mouth on this,” she told reporters.