McGuinty government invests $3 billion to support a competitive Ontario

Archived Release

McGuinty government invests $3 billion to support a competitive Ontario

Ministry of Finance

Ontario's strong and resilient economy continues to grow QUEEN'S PARK, Dec. 13 - The McGuinty government is taking immediate action to strengthen Ontario's economic advantage through a $3-billion package of business tax measures and investments in skills, training and infrastructure announced today. This package moves forward on the government's five-point plan for economic competitiveness and will particularly help people and communities facing economic challenges. "The Ontario economy has proven resilient in an increasingly challenging global economic environment. However, certain key sectors, such as manufacturing, forestry, agriculture and tourism, face serious challenges," said Finance Minister Dwight Duncan. "We are helping these sectors adjust to a changed economic environment." Ontario's economy has been challenged by external factors, including a slowing U.S. economy, record-high oil prices and a stronger Canadian dollar. In response, the McGuinty government proposes a package of tax measures and infrastructure investments to enhance competitiveness, strengthen Ontario's communities and create jobs. In the 2007 Economic Outlook and Fiscal Review released today, the government is proposing $1.1 billion in tax reductions for business over three years that would support manufacturers and other sectors, including: - eliminating the Capital Tax on January 1, 2008 for corporations primarily engaged in manufacturing and resource activities; - providing a 21 per cent Capital Tax rate cut for all businesses retroactive to January 1, 2007, on the way to full elimination in 2010; and - increasing the small business deduction threshold to $500,000 from $400,000 - retroactive to January 1, 2007. The package introduced today would also provide: - $1.4 billion in new funding to build strategic infrastructure; - almost $300 million over three years to expand the Land Transfer Tax Refund Program for First-time Homebuyers to include purchases of resale homes; - $150 million to strengthen competitiveness and help cattle, hog and horticulture farmers; - $50 million in strategic investments in innovation; - $40 million to provide skills development and rapid re-employment services for laid-off workers through the $1-billion Employment Ontario training system; and - $30 million to expand the Ministry of Tourism's successful festivals and events promotion and marketing campaign in the domestic and international markets. In spite of external factors, the Economic Outlook indicates Ontario's economy is on track to outperform the 2007 Ontario Budget forecast. Ontario's continued economic strength allows the government the flexibility to implement targeted measures, particularly for manufacturers, and to invest in our communities through improved infrastructure. Despite inheriting a structural deficit of $5.5 billion in 2003-04, the Economic Outlook confirms that the Province's budget is balanced. If the reserve is not required, a $750 million surplus is projected for 2007-08. Despite weaker projections for economic growth in 2008 and 2009, Ontario is on track for continued balanced budgets. "The people of Ontario want us to be prudent fiscal managers and to pursue real progress at the same time," said Duncan. "The people of Ontario are counting on us to move Ontario forward. That is what our plan is about." Contact: Steve Erwin Scott Blodgett Minister's Office Ministry of Finance 416 325-3645 416-325-0324 Disponible en français For more information visit www.fin.gov.on.ca ONTARIO EXPANDS LAND TRANSFER TAX REFUND PROGRAM First-time buyers of resale homes to benefit from new tax measure TORONTO - The McGuinty government is giving all first-time homebuyers a break on land transfer tax by proposing to expand the Land Transfer Tax Refund Program to include purchases of resale homes, Finance Minister Dwight Duncan announced today. "Expanding this Land Transfer Tax refund is an important part of our government's commitment to helping Ontarians buying their first home," Duncan said. Effective midnight tonight, first-time buyers of resale homes, as well as newly constructed homes, would be eligible for a refund from the provincial government of up to $2,000 of the Land Transfer Tax paid. The expanded Land Transfer Tax Refund Program for First-time Homebuyers is part of a package of new tax initiatives announced in the 2007 Fall Economic Outlook and Fiscal Review that would provide $1.4 billion in provincial tax relief for business and people over three years. The government is making strategic investments in people, communities and infrastructure to strengthen Ontario's economic advantage and help manufacturers and other sectors challenged by current economic conditions. Contact: Steve Erwin Scott Blodgett Minister's Office Ministry of Finance 416 325-3645 416-325-0324 Disponible en français For more information visit www.fin.gov.on.ca Backgrounder ------------------------------------------------------------------------- STRENGTHENING ONTARIO'S ECONOMIC ADVANTAGE AND PROVIDING SUPPORT TO KEY SECTORS In the 2007 Ontario Economic Update and Fiscal Review, the Ontario government today announced more than $3 billion in investments and tax reductions to further strengthen Ontario's economic advantage and help the manufacturing, forestry, agriculture and tourism industries adjust to economic challenges. This package moves forward on the government's five-point plan for economic competitiveness and will particularly help people and communities facing economic challenges. These measures will boost Ontario employment by an estimated 30,000 additional jobs over the next three years and will improve Ontario's ability to compete in the global economy by: - enhancing competitiveness through immediate tax reductions; - investing in people and communities; and - investing in infrastructure. Enhancing Competitiveness Through a $1.1-Billion Tax Reduction Package Supporting Manufacturers and Resource Industries The government is proposing new tax measures that support manufacturers and other sectors in Ontario challenged by current economic conditions. These measures would provide immediate tax relief for businesses, particularly for Ontario's manufacturing and resource industries, to invest and help to create and preserve jobs. The new measures, totalling $1.1 billion in tax reductions over three years, include: - eliminating Capital Tax on January 1, 2008 for corporations primarily engaged in manufacturing and resources activities; - providing a 21-per-cent Capital Tax rate cut for all businesses, retroactive to January 1, 2007, on the way to full elimination in 2010; and - increasing the small business deduction threshold to $500,000 from $400,000, retroactive to January 1, 2007. Contact Info For details about these new measures, see the "Enhancing Ontario's Business Tax Competitiveness" Backgrounder. Investing in Tourism and Film To assist Ontario's tourism industry, the government is investing an additional $30 million this fiscal year to expand the Ministry of Tourism's successful promotion and marketing campaign in the domestic and international markets. This new funding will also more than double the funding available for economy-boosting festivals and special events to promote tourism throughout the province. The government is proposing further steps to support growth and increased jobs in Ontario's film and television sector. Effective for labour expenditures incurred after December 31, 2007 and before January 1, 2010, the Ontario Film and Television Tax Credit would increase to 35 per cent from 30 per cent, and the Ontario Production Services Tax Credit would increase to 25 per cent from 18 per cent. These proposed enhancements would provide an additional estimated $50 million in financial support in 2008-09. Encouraging Innovation The government is investing $90 million in the Ontario Venture Capital Fund, and has signed a letter of intent with leading Canadian corporate and institutional investors for the $165-million first round of the fund. This will help attract the capital and investment expertise needed to bring new discoveries to market faster so they can create high-value jobs in the knowledge economy. The Ministry of Research and Innovation will be making $50 million in additional strategic investments in 2007-08 to further strengthen Ontario's environment for world-class scientific research that leads to new discoveries, higher quality of life and new jobs. In addition, the government is proposing to extend the phase-out of the Labour Sponsored Investment Fund tax credit to the end of the 2011 tax year, and to increase the maximum qualifying investment to $7,500 from $5,000. These proposed changes will provide an estimated $38 million in additional financial support to the industry over three years. Investing in People and Communities Helping Workers and Communities Adjust to Competitive Challenges The government will invest an additional $40 million this year in skills development through Employment Ontario, its nearly $1-billion jobs and training strategy. This focuses on help for Ontario workers and communities adjusting to current competitive challenges through additional funding for the Rapid Re-employment and Training Service. The new investment will assist workers in sectors such as manufacturing with training and other employment supports so they can move to growing sectors of the economy. It will also increase the availability of skilled workers. The government will also provide an additional $5 million in 2007-08 to the Communities in Transition program. This program helps communities facing significant challenges, such as the loss of a major employer, build a successful future. To help strengthen the competitiveness of Ontario's agricultural sector, the government is providing $150 million in new funding for transformation and for cattle, hog and horticulture farmers to help them manage the effects of lower returns due to higher input costs, the stronger Canadian dollar and lower market prices. This funding builds on the $135 million provided earlier this year to assist grain and oilseed farmers compete and succeed in the global economy. Helping First-time Homebuyers As part of the government's commitment to helping Ontarians who are starting out, it is proposed that the Land Transfer Tax Refund Program for First-time Homebuyers be expanded to include purchases of resale homes. This measure would be effective for agreements of purchase and sale entered into after December 13, 2007. As a result of this change, first-time homebuyers of newly constructed and resale homes would be able to receive a refund from the provincial government of up to $2,000 of the land transfer tax paid. Investing in Infrastructure To encourage economic activity, help municipalities and enhance Ontario's competitiveness, the government is investing an additional $1.4 billion to build strategic infrastructure. Of this funding, some $500 million will be allocated for transit projects and to assist municipal transit systems across Ontario in dealing with immediate demands. This will help increase ridership, address state-of-good-repair needs, manage congestion and support the efficient movement of people and goods. A $300-million investment will be provided for municipal infrastructure priorities - for projects that stimulate local economies, such as roads, bridges, community infrastructure and water and wastewater systems. Projects to be funded will be chosen through a competitive application process. In addition, $100 million will be dedicated to priority MoveOntario 2020 projects - the $17.5-billion transit and transportation plan for the Greater Toronto Area and Hamilton. This will help municipal transit projects that have been identified as priorities by Metrolinx, formerly the Greater Toronto Transportation Authority. The government will also continue to make progress on the Highway 407 East extension and the Windsor border because they are particularly important to the manufacturing sector. The Detroit River International Crossing study team will soon present its preferred alternative for the new access road, plaza and crossing. Ontario will fully fund its share of the costs associated with that new access road, subject to the successful completion of all approval processes. Federal Government Has a Role to Play Since 2005, with the support of Ontarians across the province, the government has worked with the federal government to achieve greater fiscal fairness for Ontario. However, this work is not complete as issues remain that affect the fairness of federal transfers to Ontario. Ottawa has the financial means to do more to invest in and support Ontarians, their communities and businesses. Ontario will continue urging the federal government to do its part for Ontarians, including: - extending the temporary capital cost allowance incentive for three years, to 2012, which would provide manufacturers with a significant incentive to increase productivity and contribute to job creation; - addressing significant inequities for Ontario workers within the Employment Insurance program, which would result in an unemployed Ontario worker receiving, on average, an additional $4,000 in annual benefits; - matching Ontario's strategic investments in the $1.15-billion Next Generation Jobs Fund and the Advanced Manufacturing Investment Strategy; - providing $1.9 billion for funding public transit and infrastructure projects as soon as possible; and - funding the Canada Health Transfer on an equal per-capita basis immediately, rather than in 2014. Contact: Scott Blodgett Ministry of Finance 416-325-0324 Disponible en français www.fin.gov.on.ca Backgrounder ------------------------------------------------------------------------- ENHANCING ONTARIO'S BUSINESS TAX COMPETITIVENESS The government is proposing new tax initiatives, announced today in the 2007 Ontario Economic Update and Fiscal Review, which would provide businesses with $1.1 billion in provincial tax relief over three years. The measures would further enhance Ontario's tax competitiveness, provide support to the manufacturing sector and stimulate economic growth through increased investment and job creation. The proposed new business tax package consists of: - Eliminating Capital Tax for Ontario companies primarily engaged in manufacturing and resource activities, effective January 1, 2008; - Cutting Capital Tax rates for all businesses by 21 per cent, retroactive to January 1, 2007, on the way to full elimination in 2010; - Increasing the small business deduction threshold to $500,000 from $400,000 retroactive to January 1, 2007; - Increasing the film tax credit rates, effective January 1, 2008; and - Extending the phase-out of the Labour-Sponsored Investment Fund tax credit and increasing the maximum eligible investment. Sectors feeling the impacts of the strong Canadian dollar, high oil prices and the slower U.S. economy, in particular, stand to benefit from these proposed initiatives. These measures are in addition to the business tax cuts that the government has announced since 2004, which will provide more than $2 billion annually when fully implemented. For manufacturing and resource industries, previously announced and proposed new tax measures would mean an estimated cumulative benefit of more than $1 billion in tax relief from 2007-08 to 2009-10. Eliminating Capital Tax for Manufacturing and Resource Activities The government proposes to eliminate Capital Tax effective January 1, 2008 for Ontario companies primarily engaged in manufacturing or resource activities. Capital Tax would be fully eliminated for corporations whose salaries and wages relating to manufacturing and processing, mining, logging, farming and fishing activities in Ontario represent 50 per cent or more of their total salaries and wages in Ontario. For corporations whose salaries and wages in Ontario for these activities are less than 50 per cent, but more than 20 per cent of their total salaries and wages in Ontario, Capital Tax would be reduced proportionately on a straight-line basis. For example, a corporation whose Ontario salaries and wages for these activities are 35 per cent of total Ontario salaries and wages would have one-half of its Capital Tax eliminated. Cutting the Capital Tax for all Corporations The government proposes to accelerate the 21-per-cent Capital Tax rate cut to January 1, 2007, two years ahead of schedule. As previously legislated, on January 1, 2008 the Capital Tax deduction will rise from $12.5 million to $15 million, and Capital Tax will be fully eliminated on July 1, 2010. Providing a Two-Year Write-Off for Manufacturing Equipment On April 20, 2007, the government announced that it will parallel federal 2007 Budget changes to provide an accelerated write-off for investment in manufacturing and processing machinery and equipment made after March 18, 2007 and before January 1, 2009. Paralleling this measure will provide Ontario businesses with more than $400 million in provincial tax relief over three years for investments in manufacturing machinery and equipment. Ontario is calling on the federal government to extend this needed incentive for three years - to 2012. Expanding Eligibility for the Small Business Income Tax Rate The government proposes to increase the small business deduction threshold to $500,000 from $400,000, effective January 1, 2007. This would immediately extend the preferential small business Corporate Income Tax rate to the first $500,000 of business income. In addition, the small business deduction would be phased out once income reaches $1,500,000, rather than $1,128,519. These measures would reduce taxes for small businesses by over $100 million over four years. More than 20 per cent of this tax relief would go to small Ontario businesses in the manufacturing and resource industries. Enhancing Tax Support for Ontario's Film and Television Industry To support growth and job creation in Ontario's film and television sector, the government is proposing enhancements to two film tax credits. The government proposes to increase the Ontario Film and Television Tax Credit rate from 30 to 35 per cent for labour expenditures incurred after December 31, 2007 and before January 1, 2010. The 10 per cent regional bonus would continue to be available for filming outside the Greater Toronto Area, and first-time producers would remain eligible for an enhanced rate of 40 per cent on the first $240,000 of labour expenditures. The government also proposes to increase the Ontario Production Services Tax Credit rate from 18 to 25 per cent for labour expenditures incurred after December 31, 2007 and before January 1, 2010. The government will also be working with the film industry to explore ways of advancing financial support for producers to the start of a production. Extending the Phase-out of the Labour-Sponsored Investment Fund Tax Credit The government is announcing steps to extend the phase-out of the Labour-Sponsored Investment Fund (LSIF) tax credit by one year, by: - Maintaining the 15-per-cent tax credit rate until the end of the 2009 tax year; - Lowering the rate to 10 per cent for the 2010 tax year; - Lowering the rate to five per cent for the 2011 tax year; and - Eliminating the credit for tax years after 2011. In addition, the government is proposing to increase the maximum investment that qualifies for the provincial tax credit from $5,000 to $7,500. The proposed changes would provide an estimated $38 million in additional financial assistance to the industry over three years. These measures are intended to assist LSIFs in the development of their investment strategies and in providing continuing support to the portfolio of companies in which they have invested. Contact: Scott Blodgett Ministry of Finance 416-325-0324 Disponible en français www.fin.gov.on.ca Backgrounder ------------------------------------------------------------------------- MID-YEAR UPDATE OF FINANCIAL RESULTS FOR 2007-08 The government is currently projecting a balanced budget in 2007-08. This represents an in-year improvement of $400 million from the 2007 Budget Plan and is consistent with the outlook presented in the 2007-08 First Quarter Ontario Finances. ------------------------------------------------------------------------- 2007-08 Fiscal Outlook - In-Year Change ($ Millions) ------------------------------------------------------------------------- Budget Plan Current Outlook In-Year 2007-08 2007-08 Change ------------------------------------------------------------------------- Revenue 91,503 94,100 2,597 ------------------------------------------------------------------------- Expense ------------------------------------------------------------------------- Programs 82,030 84,283 2,253 ------------------------------------------------------------------------- Interest on Debt 9,123 9,067 (56) ------------------------------------------------------------------------- Total Expense 91,153 93,350 2,197 ------------------------------------------------------------------------- Reserve 750 750 - ------------------------------------------------------------------------- Surplus/(Deficit) (400) 0 400 ------------------------------------------------------------------------- Source: Ontario Ministry of Finance ------------------------------------------------------------------------- Total revenue in 2007-08 is currently projected at $94,100 million, a net increase of $2,597 million from the 2007-08 Budget Plan. This increase is primarily due to higher corporate and personal income tax revenue, and to a lesser extent, higher federal transfers. The total expense outlook at $93,350 million is a net $2,197 million higher than the 2007 Budget Plan and up $2,014 million from the 2007-08 First Quarter Ontario Finances. This is mainly due to increased spending associated with the government taking decisive action to strengthen Ontario's economic advantage by enhancing Ontario's competitiveness, and investing in its people, communities and infrastructure. SUMMARY OF REVENUE OUTLOOK The revenue outlook reflects the best use of available information, including the Ministry of Finance's economic outlook, the estimated impacts of government policy decisions and current federal-provincial funding arrangements and formulas. Since the 2007 Ontario Budget, stronger 2007 economic growth and higher revenues related to prior years' tax return processing have increased the revenue forecast for 2007-08 and beyond. Key changes to the 2007-08 revenue forecast since the 2007 Budget include: - Personal Income Tax revenue increasing by $1,033 million due to stronger 2007 wages and salaries growth and higher revenues from processing 2006 tax returns. - Corporations Tax revenue increasing by $816 million due to stronger 2007 corporate profit growth and higher revenues from processing prior-year tax returns. - Canada Health and Canada Social Transfers increasing by $464 million due to revised estimates of current and past-year entitlements, and 2007 federal budget changes to the calculation of entitlements under these programs. - All other revenues combined increasing by a net $284 million mainly because of increased revenues from Land Transfer Tax, other Federal Transfers and the Ontario Health Premium, partially offset by decreased revenues from Tobacco Tax and Gasoline Tax. SUMMARY OF ECONOMIC PERFORMANCE Since the 2007 Budget, there have been significant unanticipated changes in the economic environment, notably a weaker U.S. economic outlook, record-high oil prices and a stronger Canadian dollar. Despite these external challenges, Ontario's economy continues to be resilient. Private sector forecasts for growth have been revised upward to 2.0 per cent in 2007. The Ministry of Finance projects Ontario's real GDP to grow by 1.9 per cent in 2007, ahead of the 1.6 per cent projection in the 2007 Budget. Employment is now expected to grow by 1.6 per cent - 0.5 percentage points above the 2007 Budget forecast. Other changes from the 2007 Budget are identified in the table below. Moderate growth is expected to continue through 2008 as U.S. demand remains soft and the higher Canadian dollar and oil prices create challenges for Ontario businesses. Growth is expected to strengthen in 2009 and 2010 due to Ontario's strong economic fundamentals and an expected rebound in U.S. demand. ------------------------------------------------------------------------- The Ontario Economy in 2007 (Per Cent Change) ------------------------------------------------------------------------- 2007 Budget 2007 Fall Update ------------------------------------------------------------------------- Real Gross Domestic Product 1.6 1.9 ------------------------------------------------------------------------- Nominal Gross Domestic Product 3.1 5.0 ------------------------------------------------------------------------- Other Economic Indicators Retail sales 3.6 3.6 Personal income 3.9 5.3 Corporate profits 1.1 7.0 Consumer Price Index 1.3 1.8 Employment 1.1 1.6 Job creation (000s) 71 103 ------------------------------------------------------------------------- Source: Ontario Ministry of Finance. ------------------------------------------------------------------------- So far in 2007, the Ontario economy has created 102,800 net new jobs, with full-time positions accounting for almost 60 per cent of the increase. Since October 2003, almost 418,000 net new jobs have been created. Over 95 per cent of these jobs were in occupations that paid an average over $19.50 per hour. Contact: Scott Blodgett Ministry of Finance 416-325-0324 Disponible en français www.fin.gov.on.ca For further information: Steve Erwin, Minister's Office, (416) 325-3645; Scott Blodgett, Ministry of Finance, (416) 325-0324 HELP | CONTACT US | PRIVACY | IMPORTANT NOTICES © Queen's Printer for Ontario, 2008-2009 — Last Modified: February 15, 2009 For further information: Steve Erwin, Minister's Office, (416) 325-3645; Scott Blodgett, Ministry of Finance, (416) 325-0324