Ontario rejects federal government’s changes to passive investment income taxes

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WATCH ABOVE: Ontario Finance Minister introduced the Fall Economic Statement in the Ontario legislature on Thursday. The province says it has cut the deficit by $500 million in its first few months in office – Nov 15, 2018

OTTAWA — The Ontario government is refusing to follow the federal Liberals’ lead with a controversial tax change related to passive investment income in personal corporations.

Federal Finance Minister Bill Morneau‘s office has maintained the change was about ensuring wealthy people didn’t start tiny corporations just to get a better tax rate than people in the middle class.

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The federal tax change was part of Morneau’s package of reforms last year, which he eventually watered down following a backlash from small-business owners and incorporated professionals, such as doctors and lawyers.

In its fall economic update today, the province’s Progressive Conservative government says it will introduce new legislation to reverse a plan by its Liberal predecessors to parallel the federal changes in Ontario.

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Ontario Premier Doug Ford‘s fall update says implementing the measure in the province would increase taxes on small businesses by about $160 million per year by 2020-21.

Other provinces have also been skeptical about Ottawa’s plan. Last summer, finance ministers from Manitoba and Saskatchewan said they intended to press Morneau to find out how complicated it would be if their provinces ultimately decided against implementing Ottawa’s plan.

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