Consultations: TRANSITIONING TO FEDERAL TAX POOLS

Information Bulletin
Bulletin d'information

Ministry of Finance Ministère des Finances
Gouvernement de l'Ontario

October 27, 2006

CONSULTATION PAPER ON TRANSITIONING TO FEDERAL TAX POOLS UNDER FEDERAL ADMINISTRATION OF ONTARIO'S CORPORATE INCOME TAX


On October 6, 2006, Ontario and the federal government signed an agreement that would transfer administration of Ontario's corporate income tax to the federal government, effective for taxation years ending after 2008.

Moving to a single corporate income tax administration would save Ontario businesses up to $100 million a year in compliance costs from one tax return, one tax administration and one set of tax rules.  Businesses would spend less time on paper work and more time creating jobs and fostering a strong, prosperous economy.  In addition, business would save $90 million annually in Ontario corporate income tax from measures proposed in the 2006 Ontario Economic Outlook and Fiscal Review.

Under the single corporate income tax administration, Ontario would parallel the federal definition of taxable income.  Therefore, the amount of a tax deduction claimed in computing federal taxable income would also apply for Ontario tax purposes.  Where tax deductions are based on the balances in tax pools (e.g., undepreciated capital cost balances and unclaimed losses), achieving common deductions requires that the federal tax pool balances also apply for Ontario purposes.

Some corporations have historically claimed higher or lower deductions from their federal tax pools than their Ontario pools, resulting in differences between the Ontario and federal pool balances.  Transitional provisions are required to address the Ontario tax gains and losses that would otherwise result from the adoption of the federal tax pools.

To solicit input on the proposed transitional provisions, a consultation paper is available on the Ministry of Finance's website at www.fin.gov.on.ca.  

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