Rapid Policy Update on the 2019 Ontario Economic Outlook and Fiscal Review

On November 6, the Government of Ontario released its 2019 Fall Economic Statement entitled, “2019 Ontario Economic Outlook and Fiscal Review: A Plan to Build Ontario Together,” which provides an update on the government’s finances and announces commitments for the upcoming 2020 Budget.

SMALL BUSINESS

The government announced plans to:

  • Cut the small business Corporate Income Tax (CIT) rate to 3.2 percent from 3.5 percent, starting January 2020. 
  • Develop an “Ontario Small Business Success Strategy” in which it will host consultations to better identify the needs of small businesses.

OCC Response:
We would have preferred to see a revenue-neutral restructuring of the Small Business Deduction (SBD) to encourage scaling up of small businesses. This would provide businesses with the right incentives while avoiding a loss in government revenues. The OCC and Ontario Chamber Network look forward to participating in the consultations as the government works to develop and “Ontario Small Business Success Strategy.”

COMPETITIVENESS

The government announced plans to:

  • Form a Premier’s Advisory Council on Competitiveness to consult with business and make recommendations on improving Ontario’s competitiveness. 
  • As part of the Province’s upcoming Forestry Strategy, the government is investing $10 million annually to support the sector through the renewed  Forestry Growth Fund (FGF). The redesigned FGF will use an open and competitive rounds‐based application process that predominantly uses loans and loan guarantees to support business.

OCC response:
The OCC looks forward to participating in these consultations with government. The OCC has also asked for a Forestry Strategy. We are pleased to see movement on supporting innovation and competitiveness in this industry.

REGIONAL ECONOMIC DEVELOPMENT

The government announced plans to:

  • Consult on ways to encourage investment into rural and undercapitalized areas of the province. 
  • The government plans to engage with rural stakeholders on the proposed Ontario Regional Immigration Pilot.
  • Beginning with a session at the 2020 Rural Ontario Municipal Association conference, the government will conduct a series of consultations with rural stakeholders on economic development challenges and opportunities in their regions.

OCC response:

The OCC supports measures to improve access to capital for businesses in rural regions. In The Great Mosaic: Reviving Ontario’s Regional Economies, we recommend introducing a Rural Investment Tax Credit (RITC). The OCC supports efforts to encourage immigrants to live and work in rural and Northern communities, adding more skilled workers to communities where they are needed most. 

The OCC and the Ontario Chamber Network look forward to participating in the government’s consultations with rural stakeholders to address economic development challenges and opportunities.

INDUSTRIAL ELECTRICITY

The government has announced plans to:

  • The Government of Ontario is proposing to simplify industrial electricity billing and introduce advisory services to assist businesses with navigating regulatory approvals and connection issues. The government will also direct the IESO to retain an independent third party to undertake a targeted review of existing generation contracts for opportunities to reduce electricity system costs.

OCC response:
Industrial electricity rates are one of the top factors affecting business competitiveness in Ontario. While the OCC is pleased with commitments to review existing generation costs and help businesses navigate the electricity system, more can be done to reduce industrial electricity rates. In particular, we would like to see the government consider revisions to industrial rate structures to support businesses that have not benefited from the program, as recommended in our submission on industrial electricity rates.

TRANSPORTATION

The government has announced plans to:

  • The Government of Ontario will propose legislation to reduce the aviation fuel tax rate in North Ontario to 2.7 cents per litre from the current 6.7 cents per litre, returning it to 2014 levels. This change would take effect on January 1, 2020.

OCC response:
Between 2014 and 2016, Ontario’s aviation fuel tax increased by nearly 150 percent, making it the highest in Canada. This acts as a financial barrier to many of Ontario’s attractions, particularly in northern and remote communities, where other forms of travel may be infeasible for visitors. While this announcement is a good first step, the OCC would like to see the aviation fuel tax in all communities be lowered to match other Canadian provinces.

CLIMATE CHANGE

The government announced plans to:

  • The Government of Ontario announced that it will begin its first‐ever assessment of how climate change will affect Ontario’s economy, infrastructure, communities, public health and safety, and ecosystems.

OCC response:
The OCC applauds this decision. An assessment of climate change impacts will enable the province to take meaningful steps to protect Ontarians and the economy.

CANNABIS

The government has announced plans to:

  • The Government of Ontario announced that it will amend legislation to allow authorized cannabis retail stores to sell cannabis online or over the phone, with pick-up by the consumer in-store (also known as click-and-collect).

OCC response:
As recommended in our recreational cannabis report, Supporting Ontario’s Budding Cannabis Industry, the OCC supports this decision as it offers a consumer-friendly option to purchase legal cannabis, allows retailers to better serve customers, and will help combat the illegal market.

CONTRABAND TOBACCO

The government announced plans to:

  • The Government of Ontario announced that the Ministry of Finance will consult with representatives from industry, retail associations, public health, and First Nations communities to address contraband tobacco.

OCC Response:
The OCC applauds this decision given that contraband takes away revenue from the Province, Ontario accounts for the lion’s share of contraband tobacco in Canada, and the profits are used to fund organized crime. The OCC is undertaking a comprehensive report on the tobacco and vaping industries and looks forward to providing the Province with analysis in December 2019.

BEVERAGE ALCOHOL

The government plans to:

  • Introduce legislation to pause wine and beer tax increases.

OCC Response:
In our beverage alcohol report, Refreshing the Sale of Beverage Alcohol in Ontario, the OCC undertook a comprehensive analysis on the tax issues facing all four categories – wine, beer, cider, and spirits. While the OCC is pleased that the government will introduce legislation that, if passed, would pause wine and beer tax increases, we encourage them to take a comprehensive approach to reforms. Neglecting to consider taxation as it pertains to cider and spirits would serve to reinforce inequities between producers in Ontario.

WHAT’S MISSING?

The OCC would have liked to have seen new announcements in the following areas:

  • Considerable new infrastructure investments, especially in rural and Northern Ontario, as well as the development of adaptable and resilient infrastructure standards.
  • A commitment to streamlining public funding programs and removing regulatory barriers that limit private sector investment in high-speed broadband internet
  • Meaningful transformation in health care, particularly related to value-based care, digital health, and modernizing procurement and supply chain processes.
  • A clear commitment and timeline on the government’s plan to implement an open allocation model for licenses for retail cannabis based on demand. 
  • With the dissolution of the Ontario College of Trades, further details on what the stewardship process looks like for apprentices and journeypersons.

READ THE OCC’S STATEMENT.

READ THE FULL 2019 FALL ECONOMIC STATEMENT.