Just one day before the Ontario Liberals are set to announce their budget, Canada's finance minister has spoken out once again about the province's economic plan.

At a news conference on Easter Monday -- a government holiday -- Jim Flaherty told reporters he would continue to push Ontario to lower corporate taxes to steady the impact of an economic downturn.

"We are facing some daunting challenges, the volatility of the Canadian dollar, rising energy prices and increased competition from abroad but here in Ontario, the manufacturing heartland of Canada, there is the added challenge of high business taxes," he said.

Flaherty repeated a comment he made weeks ago that Ontario runs the risk of becoming a "have-not" province, losing out to other provinces like Quebec, because of its reluctance to cut corporate taxes.

"Ontario needs to be more competitive for business investment and the issue that sticks out like a sore thumb is the issue of high business taxes," he said.

He called for Ontario to implement three strategies in the budget:

  • reduce the business income tax rate;
  • commit to eliminate capital taxes for all business in all sectors of Ontario; and
  • take steps toward harmonizing Ontario's retail sales tax with the GST.

For weeks, Flaherty has used the public domain to speak out about his desire to see Ontario lower corporate taxes to give a break to the province's ailing manufacturing sector and help steady the effects of an economic slow down south of the border.

His actions have fuelled speculation that he is looking to run one more time for a seat in Ontario's legislature -- perhaps taking over the top job from current Opposition Leader John Tory.

However, at the news conference, the finance minister dismissed the suggestion he is picking on Ontario.

"We have been encouraging all the provinces to do what they need to do," he said. "Other provinces have been responsive. Ontario has not been, to date."

Flaherty said Ontario should aim to reduce its corporate taxes to 10 per cent by 2012. At that point, he said, the federal government will cut their corporate taxes to 15 per cent, presenting investors with a total tax rate of 25 per cent.

"We can brand Canada in that way going forward -- a low business tax jurisdiction to encourage investment," he said.

A 'stunt'

Flaherty's provincial counterpart is dismissing the minister's news conference as nothing more than a "stunt."

Ontario Liberal Finance Minister Dwight Duncan said his province has already seen the negative effects of tax cuts, such as hospital and school closures, lack of water inspectors. Those tax cuts took place during the previous Conservative provincial government, where Flaherty served as finance minister for a time.

"The people of Ontario rejected that approach on two occasions,'' Duncan said, referring to the Liberals two election wins over the Conservatives in 2003 and again in 2007.

"We listen to a lot of people, not just Mr. Flaherty.''

In Tuesday's budget, the Liberals are expected to announce major investments in skills training development.

Duncan, along with Premier Dalton McGuinty, has said that loans and grants will help the manufacturing sector more, especially for those companies that do not make enough of a profit to pay taxes.

Instead of squabbling, Duncan said, the two sides should be working together to battle economic hardships.

"When you hear our budget tomorrow, it's not about Jim Flaherty and me -- it's about what's best for Ontario," he told reporters earlier Monday. "It's not about stunts, it's about important public policy decisions governments have to make. It's about a balanced pragmatic approach to what we need."

"What we need is a partner," he continued. "I would like to work with Mr. Flaherty in a partnership with people of Ontario. Our government would like to. We might not agree on everything and we're not going to agree on everything. We're going to take the approach we're going to take and we would like a federal partner and that is missing."

Flaherty says he can sympathize with some of the challenges the Liberals are facing.

"McGuinty can't do anything about rising price of oil or the high value of Canadian dollar but he can take action to reduce business taxes," he said.

"In a time of limited economic growth, it's difficult for a finance minister and a premier to control spending and make those decisions," he said. "But that's why we get elected. It's our job to do that."

Ontario needs to do more

Don Drummond, the chief economist with TD Bank, told CTV Newsnet's Mike Duffy Live Monday night that Ontario needs to cut down its corporate taxes to be in line with their competitors.

"They might be able to sustain a two percentage point higher tax rate than our main competitors, but we've got Alberta at 10, British Columbia at 10 -- at some point they have to go down to 12," he said.

Drummond said the decision comes down to money and priorities. He said McGuinty has chosen to invest in education and infrastructure -- two areas that suffered under the previous Conservative government.

Even though the Liberals have yet to cut down the corporate tax, the government is making an effort to cut taxes, he said.

"We have to point out (the Liberals) are phasing out the capital tax and I can tell you form the perspective of a corporation in Ontario that was most damaging tax," he said. "And also, they have substantially lowered the provincial portion of the business property tax so that's two important step. It is a $3-billion tax relief."

Meanwhile, NDP Leader Howard Hampton told reporters Monday that tax cuts won't get to the root of the problem. He said both parties have done little to address the amount of jobs that have been lost in the manufacturing industry.

"The problem is this: Mr. Flaherty and Mr. Harper are worried, Mr. McGuinty says he's worried, (but) none of them are doing anything to address the issues,'' said Hampton.

"Harper blames McGuinty while McGuinty blames Harper, and neither of them have done anything to help sustain manufacturing jobs, to address issues like long-term care and the tough spot that municipalities are in. Neither of them do anything to address issues like poverty.''

With a report from CTV Toronto's Paul Bliss and files from The Canadian Press