Ontario is looking to clamp down on tax-dodging corporations, reform its system of credits and drag the black market into the light of day – all in a bid to raise more revenue.
As he wrestles with an $11.7-billion deficit, Finance Minister Charles Sousa is waging a multi-front war to replenish the treasury without hiking taxes.
Among the measures he's considering are tougher rules to stop companies from moving money overseas to avoid paying taxes on it, an overhaul of business supports to make sure they are serving their intended purpose, and new machines in businesses that track sales to ensure merchants are paying the correct amount of tax. He is also considering tying education taxes to the rate of inflation.
"We have a number of companies who choose to come to Ontario, who set up shop, do their business – and then find themselves competing against other companies operating here and not paying their fair share. We've got to find ways of how those mechanics work so there's an equal playing field," Mr. Sousa said Tuesday in a meeting with The Globe and Mail's editorial board. "I have to find a way to make sure everyone's on the same level."
Perhaps the most ambitious push is to untangle the complicated manoeuvres multinational companies use to move their money around. Fighting this will net the province an estimated $300-million over the next four years.
Mr. Sousa will push new legislation to put in place disclosure rules that require people to report when companies are trying to avoid paying Ontario taxes. The province is also implementing a more effective auditing system that is expected to net tens of millions of dollars more. And Ontario is working with the federal government, which collects most taxes on its behalf, to consider further rule changes to stop companies from shifting money around.
"[There are] loopholes that are in the system," Mr. Sousa said. "The Minister of Finance federally and I have been working on ways to curb that activity."
Mr. Sousa is also mulling changing a system that has seen the provincial component of property tax bills fall steadily in real terms over the last 13 years. Under his plan, the tax rate would be frozen, and then increase at the rate of inflation in future years.
The province has already started moving on reforming tax credits. When it discovered that call centres were misusing a rebate meant to encourage apprenticeships, it put a stop to the practice.
And Mr. Sousa said changes to other credits could be on the way. The government is undertaking a review of all other credits to see if others are needlessly costing the treasury money without fulfilling their policy objectives.
"What is the net benefit of those tax credits? The review's under way to assess some of those: which ones need to be curbed, and which ones aren't working to their full extent," he said.
Mr. Sousa is also installing a technical panel to examine all business supports, which include grants as well as rebates, to determine if they are effective.
The province is hoping to recoup more revenue – roughly $100-million annually – from the underground economy by forcing black market businesses to pay their taxes. Ontario is asking the federal government for a national strategy to help provinces and territories share information on enforcement techniques and clamp down.
"People are working without coverage, they're working for cash and they're not getting the same benefits that they should be," Mr. Sousa said. "We're trying to find ways to curb that activity."
One idea Mr. Sousa points to are Quebec's so-called "black boxes." These devices connect to cash registers and tills, and record sales data, preventing business owners from short-changing the government on tax. More than 30,000 of the boxes were installed two years ago in Quebec's restaurants, and the government is looking to expand the program. Revenu Québec says the program brings in $300-million a year that would otherwise go uncollected.