The Ontario NDP has pledged to maintain existing restrictions preventing large businesses from claiming HST rebates on corporate entertainment expenses – a small and convoluted move, but one calculated to cement Leader Andrea Horwath’s image as a champion of the little guy and a slayer of “freebies for bigwigs.”
The policy, announced Monday morning in a luxury suite in Toronto’s Rogers Centre, would simply keep the status quo on restrictions that otherwise expire starting in four years, allowing the province’s largest corporations to claim the HST rebate on now-restricted corporate expenses, including entertainment.
The planned phase-out starts in 2015-16. Ms. Horwath’s policy would mean $215-million in projected revenue that would otherwise be lost that fiscal year, and more in future years for an eventual projected $1.3-billion a year in otherwise foregone revenue in 2018-19.
“Ontarians can elect a premier who will give CEOs tax breaks for luxury suites, or they can elect a premier who can create jobs,” Ms. Horwath said. “If we’re going to be giving away tax dollars, then those tax dollars should be getting something for us – not just getting bigwigs at big companies free wining and dining at a big facility like this.”
Small- and medium-sized businesses (any of those making less than $10-million a year) can already claim all these expenses.
It’s an incremental and complex plan that won’t win her many friends on the corporate side, though. Ms. Horwath is already under fire for planning to raise corporate tax rates back to the 14 per cent they were at pre-June 2010, in exchange for rolling back the HST on certain consumer expenses.
She characterized this as an “across-the-board corporate tax giveaway.” Bringing those corporate tax rates back up would net the government an additional $1.4-billion in revenue in its first year.
Ms. Horwath’s gamble is to avoid appearing anti-business by appealing to consumers’ wallets, and promising corporations of all sizes financial incentives if they show they’re creating permanent, full-time jobs, or investing in training or equipment. In addition to a jobs-creation tax credit that would cost an estimated $100-million a year, tax credits for companies investing in training and equipment would cost the province about $350-million a year.
Targeted tax credits are popular as fiscal carrots and to target key demographics during elections. But economists aren’t enthused – they argue they make for inefficient and convoluted taxation schemes that tend to achieve their intended result at a high price.
For Ms. Horwath, though, “it’s about how do you use tax dollars in the best way? What choices do you make?”