Commission on the Reform of Ontario's Public Services

Indirect taxes, the kind people pay as a consequence of some other activity, constitute the
most important source of revenues for Ontario. In addition to the provincial sales tax (or more
precisely, the provincial portion of the HST), this category includes gasoline taxes, payroll
taxes, gaming profits and motor vehicle licence fees. Collectively, these accounted for about
38 per cent of the Ontario government’s total revenues in the latest decade, compared with a
national average of 32 per cent. Ontario relies more on indirect taxes than any other province;
next in line are British Columbia and Quebec, at just over 35 per cent. Alberta, with no
provincial sales tax, relied least on indirect taxes –– less than 18 per cent of its total revenues.
Direct taxes on persons are the next biggest revenue source; in the latest decade, they
accounted for 28 per cent of the Ontario government’s total revenues, compared with a
national average of 24.5 per cent.
Direct taxes on corporations 9 are another significant income source for Ontario, accounting for
8.5 per cent of total revenues on average during the last decade, second only to Alberta’s 8.6
per cent. Depending on the price of oil and gas, which in high-price years naturally makes
Alberta-based energy companies more profitable, Ontario and Alberta take turns as the
province with the greatest reliance on direct business taxes. These two are well ahead of other
provinces in this category, primarily because they have more head offices than the others.
Social insurance taxes (workers’ compensation levies are the biggest example) have
accounted for another 3.7 per cent of Ontario’s revenue in the latest decade. Ontario and
Quebec are the leaders in this category.
When it comes to spending, Ontario is very much on the low end of the scale. In the latest 10
years for which there are data, Ontario spent an average of only 14.7 per cent of GDP on
government programs. Only Alberta, at 13.1 per cent, spent less. Averages do not tell the
whole story, however. As a share of GDP, program spending by the Ontario government
peaked at 18 per cent in 1992, fell to 12.8 per cent in 2000 and since then has been rising
steadily –– to 17.7 per cent in 2009, close to the national average of 19.3 per cent.
9 This category includes government business enterprises and provincial taxes on mining and forestry.
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