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Ontario has reduced its small business corporate income tax rate to 3.2% from 3.5%, as proposed in the province’s fall fiscal update, Ontario’s finance department said in a release Monday.

The tax cut, effective Jan. 1, will result in up to $1,500 in annual savings to more than 275,000 businesses, the release said.

Small businesses represent almost 98% of all business in the province and provide about one-third of private-sector employment.

The Ontario government also noted that small businesses already benefit from accelerated write-offs of capital investments, as well as its decision not to parallel the federal passive income rules for business owners. These measures, along with the tax cut, are expected to result in $255 million in tax relief to small businesses in 2020, the release said.

The province says it continues to consult with business leaders to inform its small business success strategy.

Along with the tax cut, a $1.3-billion spending boost was announced in Ontario’s fall fiscal update to help reverse cuts to programs and services that were included in last year’s spring budget.