Annex: Details of Tax Measures and Other Legislative Initiatives

Overview

This Annex contains detailed information on tax measures and other legislative initiatives proposed in this document.

Enhancing the Ontario Harmonized Sales Tax Rebate for Purpose-Built Rental Housing

The Ontario Harmonized Sales Tax (HST) New Residential Rental Property Rebate is available for the eight per cent provincial portion of the HST paid on certain purchases of a newly constructed or substantially renovated residential rental property. The current rebate is equal to 75 per cent of the provincial portion of the HST paid, up to a maximum rebate of $24,000.

To encourage the construction of more purpose-built rental housing, the government is taking steps to enhance the rebate so that it is equal to 100 per cent of the provincial portion of the HST paid, with no maximum rebate amount, for qualifying new purpose-built rental housing. This would mirror the proposed enhancements to the federal Goods and Services Tax/Harmonized Sales Tax (GST/HST) New Residential Rental Property Rebate of the 5 per cent federal portion of the HST, and together would remove the full 13 per cent HST on qualifying new purpose-built rental housing in Ontario.

Eligible new residential units would be those that qualify for the existing GST/HST New Residential Rental Property Rebate and are in buildings with at least:

• Four private apartments (i.e., a unit containing a private kitchen, bathroom and living areas), or 10 private rooms or suites; and
• Ninety per cent of residential units designated for long-term rental.

The enhanced provincial rebate would apply to qualifying projects that begin construction on or after September 14, 2023, and on or before December 31, 2030, and complete construction by December 31, 2035. This timeframe would be aligned with the newly enhanced federal rebate.

Substantial renovations of existing residential complexes would not be eligible for the enhanced rebate but would remain eligible for the existing rebate.

Changes to Ontario’s rebate require federal regulatory changes. The Ontario government will work closely with the federal government to ensure the coordinated and timely implementation of the enhancement.

Extending the Temporary Gas Tax and Fuel Tax Cuts

The Ontario government temporarily cut the Gasoline Tax by 5.7 cents per litre and the Fuel Tax (diesel) by 5.3 cents per litre on July 1, 2022. The Gasoline Tax and Fuel Tax rates are currently 9 cents per litre. These tax reductions are set to end on December 31, 2023, when the tax rates would return to 14.7 cents per litre for gas and 14.3 cents per litre for fuel.

The government is introducing legislation that would amend the Gasoline Tax Act and the Fuel Tax Act to extend the rate cuts so that the rate of tax on gas and fuel would remain at 9 cents per litre for an additional six months until June 30, 2024.

Entering into a Coordinated Vaping Product Taxation Agreement

Research suggests youth vaping can lead to smoking. According to research published in the Canadian Medical Association Journal, for every six non-smokers who use vaping products, one person will begin smoking cigarettes. Using taxation is a proven and well-established approach to deterring the consumption of products that pose health risks. Public health experts, the World Health Organization, and organizations like the Canadian Cancer Society have stated that taxation is a critical public policy tool to reduce vaping, especially among young people, and helps manage the associated health risks.

In fall 2022, the federal government implemented a federal vaping tax. Subsequently, the federal government has invited all provinces and territories to participate in that tax. Ontario is responding to this invitation to enable the federal government to levy an additional excise duty on vaping products intended for sale in Ontario at the same rate as the existing federal excise duty. Ontario would receive the revenue from the additional excise duty.

Joining the agreement with the federal government aligns with existing policies in most other provinces and territories. British Columbia, Saskatchewan, Newfoundland and Labrador, and Nova Scotia have already instituted a provincial tax on vaping products, while several other provinces and territories have indicated interest in entering into agreements with the federal government.

Further information on the implementation of the coordinated agreement will be available in the coming months.

Enhancing the Ontario Focused Flow-Through Share Tax Credit

The Ontario Focused Flow-Through Share Tax Credit is intended to stimulate mineral exploration in the province and improve access to capital for small mining exploration companies. It provides eligible individuals with a refundable tax credit of five per cent of eligible Ontario expenses.

The government is proposing to enhance the credit by expanding eligibility to include specified critical mineral exploration expenditures that are eligible for the federal Critical Mineral Exploration Tax Credit¹ and renounced on or after January 1, 2023.

This proposed change would result in an additional $12 million per year in tax credit support to the critical minerals mining industry.

Summary of Measures

Technical Amendments

Amendments are being proposed to various statutes administered by the Ontario Minister of Finance, or other statutes, to improve administrative effectiveness or enforcement, maintain the integrity and equity of Ontario’s tax and revenue collections system, or enhance legislative clarity or regulatory flexibility to preserve policy intent.

Proposed legislative amendments include:

• Amendments to the Gasoline Tax Act to extend the International Fuel Tax Agreement (IFTA) registration, reporting, and audit requirements to Ontario-based interjurisdictional carriers (e.g., long-haul truckers) who use alternative fuels. These changes would ensure that Ontario can meet its obligations under IFTA.
• Amendments to the Taxation Act, 2007 to update the calculation of the Ontario Health Premium so that it is payable on split income, in addition to taxable income.
• Amendments to the Taxation Act, 2007 to remove the rounding rule used in determining an individual’s tax credit for the Minimum Tax.
• Amendments to the French version of the Taxation Act, 2007 to use proper and accurate terms that are consistent with the English version.
• Amendments to the Securities Act and Commodity Futures Act to change the names of certain self-regulatory organizations, correct a French term, and update a reference to “person or company.”
• Amendments to the Ministry of Revenue Act in support of the expansion of enforcement of Ontario’s child support orders in international jurisdictions.
• Amendments to the Ministry of Training, Colleges and Universities Act to enable the implementation of enhanced collection tools for defaulted Ontario student loans.

Other Legislative Initiatives

Pooling of Assets of Broader Public Sector Funds

The Investment Management Corporation of Ontario (IMCO) provides pooled asset management services for Ontario’s broader public sector (BPS). Operating at arm’s length from the government, IMCO aims to provide its BPS members with access to world-class investment expertise on a cost-effective basis.

Municipalities are eligible to be members of IMCO; however, under the Municipal Act, 2001, municipalities that opt into the prudent investor standard are required to delegate their investment authority to an investment board or joint investment board. The government is proposing a technical amendment to the Investment Management Corporation of Ontario Act, 2015, to update eligibility provisions and clarify that municipal investment boards and joint investment boards are eligible to become IMCO members.

General Anti-Avoidance Rule

On August 4, 2023, the federal government released for consultation proposed amendments to the general anti-avoidance rule (GAAR) in its Income Tax Act. Once implemented, Ontario intends to mirror the changes to the federal GAAR in the Taxation Act, 2007.

Footnotes

[1] See the federal Budget 2022 for information on critical minerals eligible for the federal credit.