Waters & Meredith - Provincial Budget 20010

ONTARIO BUDGET

May 9, 2001

The expected growth in the economy for Ontario is 2.2% for 2001. This follows four (4) years where the annual growth was over 5%.

Ontario's economic performance is expected to strengthen in the second half of 2001.

Employment is expected to increase by 2 to 2 1/2% in 2001 and by 2 1/2% to 3% in 2002.

The Ontario CPI inflation is expected to average 2.8% in 2001 and 2.0% in 2002.

Ontario housing starts are expected to total 72,000 in 2001.

The land transfer tax rebate for first-time buyers of new homes will continue.

Ontario's share of North American automotive assembly rose from 14.6% in 1995 to 16.3% in 2000. Employment increased by 8.7% to 74,000 in 2000.

Employment in the high-tech sector has increased to approximately 305,000 in early 2001.

Communications equipment and parts employment has declined from a year earlier, but employment in other parts of the high-tech sector, accounting for 90% of the sector's jobs, has continued to grow.

Ontario Revenues (millions):

	Interim 2001	Projected 2002
Taxation:
-Personal income tax	$ 18,975	$ 18,010
-Retail sales tax	13,757	14,340
-Corporation tax	9,130	8,340
-Other taxes	7,800	8,130
Federal payments	6,232	7,359
Income from government enterprises	3,968	3,424
Other	5,065 ---------	4,667 ---------
Total	$ 64,927 =====	$ 64,270 =====

Income from Government Enterprises (millions):

Ontario Lottery and Gaming	$ 2,150	$ 2,000
Liquor Control Boad	875	890
Ontario Power Generation	918	524
Other	25 -------	10 -------
Total	$ 3,968 ====	$ 3,424 ====

Budget Surplus was $3.19 billion for 2001 and is expected to be $0.14 billion for 2002.

Expenditures - 2002 (billions):

Health Care (5% increase)	$ 23.9
Schools	11.7
Interest	9.4
Other	18.3 ------
Total	$ 63.3 ===

Legislation requires that net provincial revenue generated from charity casinos and race track slot machines support priority services, including health care, the gambling-problem program and funding for charitable organizations through the Ontario Trillium Foundation.

In 2002 $529 million from charity casinos and slot machines at race tracks will be dedicated to support health care priorities.

20% of gross race track slot machine revenue is provided directly to the horse racing industry to preserve the 45,000 jobs in Ontario's horse racing industry. This will be $228 million in 2002.

Approximately $55 million of gross slot machine revenue is being provided to benefit municipalities that host charity casinos and slot operations at race tracks.

The government has developed a long-term plan to retire the obligations of the Ontario Electricity Financial Corporation (OEFC) by approximately $1 billion in each of 2001, 2002 and 2003. The plan is to have the entire debt retired between 2010 and 2017. The obligations of the OEFC, including the stranded debt of Ontario Hydro, is $38.1 billion. A Debt Retirement Charge took effect June 1, 2001 to be paid by ratepayers based on electricity consumption.

Corporate income tax rates are being reduced as follows:

	Provincial			Federal and Provincial Combined
	General	M & P	Small Business	General	M & P	Small Business
2001	14.0%	12.0%	6.5%	42.12%	34.12%	19.62%
2002	12.5%	11.0%	6.0%	38.62%	33.12%	19.12%
2003	11.0%	10.0%	5.5%	35.12%	32.12%	18.62%
2004	9.5%	9.0%	5.0%	31.62%	31.12%	18.12%
2005	8.0%	8.0%	4.0%	30.12%	30.12%	17.12%

The combined Federal and Provincial rates of 30.12% will be the lowest tax rate for corporations in North America, when compared to current rates in Canada and the United States.

The capital tax exemption for small businesses rises to $5.0 million effective January 1, 2002.

The Provincial personal income tax rates will be:

	2001	2002	2003
Up to $30,814	6.20%	6.05%	5.65%
$30,814 to $61,929	9.24%	9.15%	8.85%

The combined Federal and Provincial tax rates will be approximately:

	2001	2002	2003
Up to $30,814	22.2%	22.1%	21.7%
$30,814 to $61,929	31.2%	31.1%	30.9%
$61,930 to $100,000	43.4%	43.4%	43.4%
Over $100,000	46.4%	46.4%	46.4%

To provide a greater incentive for the development of new affordable rental housing, municipalities are able to lower the tax rate to newly-built rental apartment buildings for 35 years, up from 8 years.

The Greater Toronto Area and the Central Ontario Region, including Simcoe, Waterloo and Hamilton, represents about 2/3 of the population of Ontario. It is expected 85% of the population growth in Ontario will be in this area.

The information herein is provided for your general information and action should not be taken on the basis of this budget memo, but only on the advice of your own individual advisor, applying this advice to your individual situation. Please call if you have any questions.

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