Ontario Finance Minister Dwight Duncan Tuesday unveiled a five-point budget which had as its centrepiece a retroactive extension of the capital tax elimination for the manufacturing and resource sectors, putting some $190 million into the hands of the ailing primary industries.

Despite being light on broad-based tax increases or decreases, Mr. Duncan's budget contained a sop to federal finance minister Jim Flaherty, who has been calling for the province to cut corporate tax rates and save the ailing manufacturing industry to make Ontario more competitive.

"Make no mistake about it, despite what anybody says; the best place to invest and create jobs is right here in Ontario," Mr. Duncan said Tuesday evening.

The provincial government said it would be eliminating and rebating the capital tax, retroactive to Jan. 1, 2007, as part of tax measures worth $750 million over four years, although the change does not apply for businesses that aren't primarily engaged in manufacturing and resource activities.

As well, the province is adopting federal enhancements to equipment investment writeoffs for manufacturing and processing companies, which means $433 million in cash tax savings for companies in the sector looking to upgrade their equipment.

Of particular interest to Ottawa's high-tech sector is the 10-year income tax exemption for new corporations that commercialize intellectual property developed by qualifying Canadian universities, colleges or research institutes. These new firms would not have to pay the provincial corporate income tax and corporate minimum tax for their first 10 taxation years.

As well, the government is enhancing the Ontario Innovation Tax Credit to parallel the federal budget changes, and investing $250 million over five years in the Ontario Research Fund.

Meanwhile, businesses in the northern Ontario region will profit from an acceleration of Business Education Tax rate cuts, which were announced in last year's budget. Revenues from the tax are distributed to local school boards across Ontario.

In the 2007 budget, the province had said it would be cutting the tax by 2014, but Mr. Duncan announced that 30,000 businesses in 85 northern municipalities would see reductions by 2010, with total savings of more than $70 million over the next three years.

SKILLS TO JOB ACTION PLAN

Another highlight of the 2008 budget is a three-year, $1.5-billion Skills to Jobs Action Plan to boost the flagging Ontario employment scene by helping people "get well-paying, stable jobs through programs that support new skills for new careers, increase access to post-secondary education and build places to learn."

The biggest part of the plan is a $355-million investment to help 20,000 unemployed workers get long-term training for their careers. As well, the provincial government is earmarking $75 million to expand apprenticeship training.

Observers were pleased by many of the changes, particularly the capital tax refund for manufacturers, but pointed out the lack of broad-based tax cuts as a weakness in Mr. Duncan's budget.

MORE CUTS WANTED

"It's a measure of hope for small business but more remains to be done," said Canadian Federation of Independent Business (CFIB) executive vice-president Garth Whyte, although he conceded that it "looks like a balanced budget with no tax hikes, wild spending or deficit."

However, he said that with the minimum wage hike scheduled for next week and the "costly" effects of the new Family Day holiday, the province was "giving with one hand and taking away with the other."

"We would have liked to see corporate income tax reductions similar to Manitoba's, eliminating the small business rate over time," he commented.

As well, he added that while it's good that Ontario is pouring more money into the apprenticeship program, it doesn't necessarily mean more people will be trained because of the provincial law that limits the number of apprentices per journeyman in the skilled trades.

"It's missing a big piece of the puzzle ... it doesn't matter if you're putting more money into training if there's only one journeyman per apprentice. You need to enhance this to deal with the shortage in qualified labour," he said.

However, Mr. Whyte did add that he was "excited" about the province's reference to the CFIB's input to its new "cap-and-trade policy," which calls for a one-for-one elimination of regulations whenever new ones are enacted.

Meanwhile, Ernst and Young's executive director of the tax knowledge network Bob Neale noted that the lack of broad-based tax changes could be attributed to the significant cost for such measures.

"A number of organizations were hopeful that the Ontario Liberals would be on side with the federal government for longer-tem tax reductions, but this was not something announced (although) the minister did suggest that if the tax decreases proposed by Flaherty were brought in, they would cost $2.3 billion," Mr. Neale said.

"However, the criticism might be that a year ago the province expected revenues of $91 billion and revenues this year came in at $96 billion, but they found specific programs to spend all of that money on, so the question is whether it was wisely spent."

Mr. Duncan added that the provincial government is expecting a surplus of $600 million.

Other budget highlights:

$110 million for to improve tourism marketing.

With files from Roman Zakaluzny

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