TORONTO, Ont. – The McGuinty government didn’t break any promises to the trucking industry when it tabled its budget, but it didn’t make many either. And the few it did make were short on specifics.
In a nutshell, that’s the industry’s view of the Ontario Liberals’ first budget, according to industry insiders. For instance, the government says it will save carriers money by switching the way interest is calculated on fees and taxes owed to Ontario and other jurisdictions by International Registration Plan (IRP) participants.
The way interest is calculated has been a longstanding concern of the Ontario Trucking Association, said OTA (and CTA) chief David Bradley.
“They’ve switched it from compound to simple interest,” said Bradley, explaining that means trucking companies who owe money on the plates that allow them to operate across jurisdictions won’t have to pay interest on their interest.
But the budget also announced increases to its fees, including drivers’ licences. Effective September 2004, the driver’s licence fee will be increased from $50 to $75 per five-year period. The portion of the driver’s license fee earmarked for the Motor Vehicle Accident Claims Fund will rise from $5 to $15 per five-year period.
But the budget was vague about other fee increases. OTA officials warned that could mean fee increases in the trucking industry as well. At the budget lock-up, OTA staff asked finance ministry officials if the trucking industry should expect fee increases. The answer was that the government would let all concerned parties know in the near future if such fees have been impacted. OTA officials said they will be seeking clarity on this issue from the MTO.
“It was an odd budget,” said Bradley. “There was an anticipation that the increases in fees would have been already determined and it leaves us somewhat concerned now to have to wait for the other shoe to drop. The government has indicated all fees are on the table, including commercial vehicle registration and commercial driver’s permits. But we’ve always felt the fees charged should be a fair reflection of the efficient provision of the service, not used as a revenue generator.”
The fear that fee hikes may indeed become a way for Queen’s Park to generate revenue increases when you consider the government also announced plans to recoup $1,350 million in savings (by flat lining or cutting the budgets of 15 ministries) between now and 2008. (To be fair, the budget did not specify the MTO was one of the targeted 15, but chances are, services could be significantly less efficient if it were.)
Infrastructure and traffic congestion
The good news is, the budget continues the province’s commitment to highway spending: nearly a billion in total for upkeep of the province’s 16,500 km of highways, $168 million for the Strategic Highways Infrastructure Plan, as well as its continued commitment to the Windsor Gateway Action Plan ($300 million over five years, jointly funded by the federal government).
To reduce traffic congestion in Toronto, the Ontario government (jointly with the federal government) has committed $1 billion to the TTC and another billion (jointly again) to GO Transit.
Gas taxes will pay for a portion of the public transit bill – in October, one cent on every tax dollar will go to public transit. That amount will increase to 1.5 cents in October 2005 and two cents in October 2006, according to the budget. One would hope this doesn’t mean gas taxes will increase. But there were certainly no guarantees on that score.
The budget also provided for the creation of new bureaucratic entities and projects that will supposedly have an impact on congestion in the GTA and other areas of the province – Greater Toronto Transportation Authority (GTTA), Strategic Infrastructure Financing Authority (SIFA), growth management plan for the Golden Horseshoe; and, a 10-year strategic infrastructure plan. How all these initiatives and new entities will co-exist and impact highway spending and traffic flow is not known at this time. But the overall news when it came to infrastructure spending was positive, according to Bradley.
“All in all, the fact that highway spending was maintained in the $900 million to a $1billion range was a very good thing, and even surprising under the circumstances,” said the trained economist. “I think that given the fiscal imbalance the government is facing there was clearly a major focus on transit. We were concerned we might see cutbacks in highway spending.
Not to mention that there was no discussion of tolls, thankfully, although we still have to be wary of that.”
OTA officials were happy with the news that capital tax will be reduced and eventually eliminated by 2012. Starting Jan. 1, 2005, the current $5 million deduction from taxable paid-up capital will be increased by 2.5 million each year until the deduction reaches $15 million on Jan. 1, 2008. By that time, in addition to small businesses that do not pay capital tax, more than 13,000 medium-sized corporations would no longer pay capital tax. Starting Jan. 1, 2009, capital tax rates would be reduced each year until the capital tax is fully eliminated on Jan. 1, 2012. (As for credits, the budget proposed allowing for faster write-offs on allowances for newly acquired computer and data network infrastructure.)
The government’s move to eliminate the capital tax was positive, said Bradley.
“But I would have liked to see some movement on the taxing of tractors and trailers, what has become known as the multijurisdictional vehicle tax,” he said.
“Ontario motor carriers have a competitive disadvantage when it comes to the purchase of business inputs. We pay more tax on trucks and trailers compared to most other jurisdictions, especially compared to our major trading partners in the U.S., but also compared to Quebec and the Atlantic provinces – they get a tax credit.”
Employer Health Tax Act (EHT)
OTA officials warn the government is planning to amend the existing EHT so that as long as a person reports to work at a permanent establishment in Ontario, all of that employee’s remuneration is subject to EHT. This measure, pending appeal of an April 27, 2004 court case, would be retroactive to Jan. 1, 1990. Many changes were also made to the list of OHIP covered health care services in Ontario, some of which may impact carriers’ benefit, including the delisting of such services as optometry exams, chiropractic services and physiotherapy services.
The budget included a number of announcements that could impact the availability of technicians, O/Os and drivers.
Firstly, a new Apprenticeship Training Tax Credit, whereby companies could be eligible for a minimum 25 per cent refundable tax credit on wages paid to apprentices. For companies with a $400,000 payroll, the credit would be increased to 30 per cent. An employer could be eligible for a tax credit of up to $5,000 per year per eligible apprentice to a maximum of $15,000 over the first 36 months of the apprenticeship.
Also, 1,500 scholarships, each worth $1,000, are going to be made available annually for high school dropouts to return high school and enter apprenticeships. Under this scholarship program, employers hiring these apprentices would receive a $2,000 per apprentice signing bonus.
The budget also promised the government would take action to remove barriers faced by internationally trained individuals that prevent them from pursuing their profession or trade in Canada.
The province promised to provide $12 million annually by 2004-2005 to work with professional regulatory bodies and employers to increase access and eliminate barriers to credential recognition and job entry; expand training and employment services to help internationally trained individuals make the transition to Ontario’s work force; and improve information on employment opportunities and requirements for individuals considering immigration to Ontario.
All in all, summed up Bradley, “From the trucking industry point of view, the news wasn’t bad, the highw
ay funding was maintained, but we’re still waiting for the other shoe to drop.”