: BUDGET 2014
Creating a Dynamic Business Climate and Employment

May 1, 2014

Ontario’s new 10-year plan for the economy and its investments today will ensure the Province remains one of the most attractive places to do business. The plan focuses on leveraging business investment, fostering a culture of innovation and entrepreneurship and creating high-quality jobs. Initiatives that support the plan include:

  • Introducing a new $2.5 billion Jobs and Prosperity Fund
  • Maintaining a competitive tax system to increase business investment
  • Investing in Ontario’s dynamic and innovative sectors
  • Providing programs to help businesses manage electricity costs
  • Reducing regulation to enhance business productivity
  • Going Global — expanding Ontario’s exports to emerging economies
  • Supporting small businesses and entrepreneurship
  • Fostering a culture of innovation and entrepreneurship
  • Supporting communities to help all regions grow and create jobs.

A New $2.5 Billion Jobs and Prosperity Fund

This Province’s new 10-year, $2.5 billion Jobs and Prosperity Fund will improve Ontario’s ability to attract significant business investments and support the province’s future economic growth as regions around the world compete for these investments. It will secure business investments that focus on job-creating innovation, productivity and going global, as recommended by the Jobs and Prosperity Council, and will invest in Ontario’s key sectors.

With the new fund, the Province would have the flexibility to offer strategic incentives where necessary to secure key anchor investments in Ontario’s interest, help support growth and create well-paying jobs at home.

Improving the Competitive Tax System to Increase Business Investment

Ontario’s tax system is highly competitive internationally. Since 2009, the marginal effective tax rate on new business investment in Ontario has been cut in half, making Ontario significantly more attractive for business investment. Recent measures Ontario has taken to support a more competitive tax system include tax cuts totalling more than $9 billion per year:

  • The Harmonized Sales Tax (HST) will remove $4.7 billion per year in embedded sales taxes paid by businesses when fully implemented.
  • Corporate Income Tax cuts deliver $2.3 billion of tax relief per year.
  • Elimination of the Capital Tax provides $2.1 billion of tax relief per year.

In addition, harmonization with the federal Corporate Income Tax and Goods and Services Tax has reduced business compliance costs by more than $635 million per year.

Investing in Ontario’s Dynamic and Innovative Sectors

The Province will capitalize on its competitive advantages supporting its key sectors.

Providing Programs to Help Businesses Manage Electricity Costs

As part of Ontario’s efforts to support a dynamic business climate, drive local economic growth and support job creation, the government is expanding two industrial electricity rate programs and offering more conservation programs for small businesses.

Rate Mitigation for Business

Many programs and incentives are available to support industrial consumers:

  • The Province extended the Northern Industrial Electricity Rate Program with $360 million over three years (2013–14 to 2015–16) to provide a rebate of two cents per kilowatt-hour to qualifying large northern industrials.
  • In 2011, the government implemented the Industrial Conservation Initiative, which encourages large companies to conserve during peak hours, saving money for the entire electricity system.
  • Companies have the opportunity to participate in Demand Response programs administered by the Ontario Power Authority (OPA).
  • Industrial companies could be eligible for a significant reduction in electricity rates through the Industrial Electricity Incentive program if they start or expand operations and create jobs.

Five-Point Business Energy Savings Plan

Ontario’s five-point business energy savings plan is designed with the busy small business owner in mind, to help local entrepreneurs stay focused on growing their businesses.

  1. Roving Energy Managers will support small businesses’ energy-savings projects every step of the way — from applying for incentives to installing energy-efficiency measures. The government will promote the use of Roving Energy Managers by working with energy agencies, local distribution companies and the Retail Council of Canada.
  2. The saveONenergy for Business Conservation program will be better tailored to ensure small businesses can benefit from programs to help manage and reduce energy bills.
  3. The saveONenergy for Business Conservation program is also being expanded to provide increased incentives to businesses by simplifying and automating application processes.
  4. To help small businesses cover the upfront capital costs of conservation projects, the Province will work to make on-bill financing available for the sector, beginning in 2015, and allow repayment through the utility bill.
  5. To ensure conservation incentives continue to be available for small businesses, Ontario will commit to another six years of conservation programs through the new Conservation and Demand Management Framework.

Industrial Electricity Incentive Program

As part of Ontario’s efforts to support a dynamic business climate, drive local economic growth and support job creation, the government will direct the OPA to run a new Industrial Electricity Incentive (IEI) program stream to accept applications for discounted electricity rates.

The IEI assists with the management of electricity demand by encouraging increased industrial production through sharply discounted electricity rates for local job creators. In this way, Ontario is using the current surplus baseload generating capacity to support domestic job creation and economic growth.

  • The new stream will make available up to four terawatt hours of electricity per year.
  • Eligibility criteria will be expanded to encourage participation.
  • Contracts will be available for a longer term, with an end date of December 31, 2024.
  • The stream will build on previous successful intakes, and the OPA will aim to award contracts by December 31, 2014.

Expanding the Industrial Conservation Initiative

Ontario is committed to providing competitive industrial electricity rates while promoting the conservation of energy, including electricity.

To support these priorities, in 2011, the Province implemented the Industrial Conservation Initiative (ICI). The ICI charges the largest consumers in the province, termed Class A consumers, a global adjustment rate based on their contribution to peak demand.

The Ministry of Energy will expand the definition of Class A consumers, lowering the threshold from five megawatts (MW) to three MW, which will increase the number of Ontario businesses eligible to participate in the ICI.

This will save participants on average 15 to 20 per cent on their energy bill.

Vision Extrusions, an extrusions manufacturing company in York Region employing 325 workers, could expect to save approximately $560,000, or 17 per cent, on its annual electricity costs under proposed changes to the Industrial Conservation Initiative, assuming the company reduces its electricity consumption by 15 per cent during times of highest system demand.

The ICI program expansion will support increased business competitiveness as well as the government’s conservation goals by:

  • Enhancing the efficiency and competitiveness of a larger number of industrial firms
  • Helping reduce emissions by promoting energy conservation during peak demand periods
  • Improving the reliability of the electricity system, especially during critical peak demand periods
  • Reducing the need for and costs associated with the building of new electricity power plants in the future to cope with periods of high demand.

Reducing Regulation to Enhance Business Productivity

Ontario is building a regulatory environment that encourages business growth. As part of the recent Open for Business renewal initiative, Ontario is finding ways to further reduce regulatory burdens, adopting smarter regulatory practices and facilitating ongoing business-to-government connections. The government has introduced legislation that, if passed, would create a better business climate by reducing burdens for business.

  • Each year, ministries would identify, measure and report on at least one initiative that can help further reduce the regulatory burden on businesses.
  • Through this initiative, the government would help stakeholders save millions of hours and $100 million in costs by 2016–17.
  • A smart and targeted effort at red tape reduction would ensure a better business climate without putting public safety at risk. This work follows the government’s achievement of eliminating 80,000 regulatory burdens or 17 per cent of red tape since 2008.

Going Global — Expanding Ontario’s Exports to Emerging Economies

The Province continues to move forward with its Going Global Trade Strategy, which will expand the reach of Ontario’s exports, including to fast-growing emerging markets that are quickly increasing their share of the global economy. It will help Ontario companies — especially small and medium-sized enterprises — increase their success in exporting to global markets and creating jobs.

  • Opening Ontario’s newest international trade office in São Paulo, Brazil, and:
    • expanding representation to include South Korea, Chongqing in China, and Israel
    • adding to the existing offices in New York, San Francisco, Mexico City, London, Paris, Munich, Beijing, Shanghai, Tokyo and New Delhi (including a satellite office in Mumbai)
  • Expanding the number of trade missions to increase exports and increase employment by connecting more Ontario businesses to more foreign buyers
    • Last year alone, Ontario led over 70 trade missions in priority sectors and emerging markets
  • Hosting more foreign buyers and international delegations, such as at the Global Export Forum focused on opportunities in the Asia Pacific region that was held in Ontario last fall. Another Global Export Forum, focused on Latin America, will be held in May 2014
    • As part of such initiatives, Ontario has hosted over 80 foreign buyers and international delegations.

The Province ranked third in North America for foreign direct investment, after New York and California.

It is projected that, over the next 10 years, Canada will negotiate a diverse collection of comprehensive trade agreements with most of its major trading partners, including India and Japan. Ontario will continue to support trade agreements that benefit its economy.

Supporting Small Businesses and Entrepreneurship

Small and medium-sized enterprises (SMEs) are the leading source of business entrepreneurship and account for more than 60 per cent of private-sector employment.

To help foster a healthy and growing SME sector, the Ontario government is:

  • Saving 60,000 smaller employers up to $975 per year by raising the Employer Health Tax exemption to $450,000 from $400,000 of annual Ontario payroll
  • Ensuring small businesses have the tools they need to understand their bill, conserve energy, manage costs and save money through the Five-Point Business Energy Savings Plan
  • Increasing productivity by decreasing regulation and red tape through the proposed Open for Business renewal initiative. Each year, every government ministry will move forward on one initiative to reduce regulatory burdens on businesses. This will help stakeholders save millions of hours and $100 million in costs by 2016–17. Since 2008, Ontario has eliminated 17 per cent or 80,000 regulations
  • Providing opportunities for Ontario’s small businesses to diversify exports beyond the U.S. to fast-growing markets, through the Going Global Trade Strategy
  • Maintaining a low Corporate Income Tax (CIT) rate for small business at 4.5 per cent, a full seven percentage points below the general CIT rate. Small and medium-sized enterprises also continue to benefit from enhanced tax credit rates for employee training and a 10 per cent refundable R&D tax credit.

Fostering a Culture of Innovation and Entrepreneurship

Ontario is committed to supporting a business environment where small businesses, entrepreneurs and investors can thrive to create the technologies and well-paid jobs of the future. Access to capital is a driver of growth and innovation for entrepreneurial firms. That is why the Province, with the federal government and private-sector partners, recently launched the Northleaf Venture Catalyst Fund.

The fund had its first closing in January 2014 at more than $217 million, and could grow to $300 million with additional private-sector commitments. To support early-stage financing, it will invest in high-potential firms as well as other venture capital funds. To date, the fund has already invested in two Ontario-based venture capital funds.

The Province will continue to support the activities of world-leading researchers through the Ontario Research Fund, including $250 million over the next three years to invest in leading-edge research infrastructure.

Supporting Regional Investments to Create Jobs

Each region of the province has unique advantages to specific industries and economic activities that form a strong base to build resilient local economies. Ontario has created three regionally focused funds to support these communities.

  • Since launching in 2008, the Eastern Ontario Development Fund has partnered on 126 projects, leveraging business investment of more than $670 million and helping to create and retain 15,400 jobs.
  • Since October 2003, the Northern Ontario Heritage Fund Corporation has approved more than $897 million in spending, leveraging more than $3.2 billion towards 5,933 projects, creating or retaining about 22,900 local jobs.
  • Since its launch in October 2012, the Southwestern Ontario Development Fund has committed support of more than $40 million for 32 projects, leveraging more than
    $400 million in business investment, helping to create and retain 9,800 jobs.

As well, through the Communities in Transition program, the government helps communities and industries facing sudden economic challenges such as closures, job losses and industry-wide restructuring. The government also offers assistance for drafting new economic strategies to build strong communities.

Since 2006, the Ontario government has committed more than $17 million in Communities in Transition funding to assist 67 communities and industry groups.

Although major closures are a normal part of the economic cycle, the government will engage early to help prevent closures, where possible. In the event of a closure, the government will work to mitigate the impact on workers and communities.

FOR MEDIA INQUIRIES ONLY:
Susie Heath, Minister’s Office, 416-325-3645
Scott Blodgett, Ministry of Finance, 416-325-0324

FOR PUBLIC INQUIRIES CALL:
1-800-337-7222
TTY: 1-800-263-7776

ontario.ca/finance-news
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Chart Descriptions

Strengthening Ontario’s Sectors

Aerospace

2nd largest aerospace sector in Canada.

Partnering with industry and academia to help build a leading aerospace cluster around Downsview Park in Toronto.

Agri-Food

6th largest in food and beverage processing in North America.

Supporting farmers through funding for business risk management and innovation programs while partnering with manufacturers, like Dr. Oetker in London, to add value to Ontario-grown food.

Auto

A top sub-national NAFTA jurisdiction in vehicle assembly.

Working with major auto companies to support assembly facilities that will anchor the automotive cluster in Ontario, including support for Ford Motor Company in Oakville.

Chemistry

Sarnia-Lambton is Canada’s largest chemistry cluster.

Supporting the production of innovative and new products including basic organic and inorganic chemicals, synthetic resins and fertilizers.

Clean Tech

Ontario’s clean tech sector has 10,100 jobs and 200 firms.

Working with industry on research and development and manufacturing of bio-based technologies, processes and products. Also, Ontario’s Water Sector Strategy will help to strengthen the water sector and help innovative firms compete in global markets and provide solutions to global water challenges.

Financial Services

Toronto is 2nd largest by employment in North America.

Working with industry and other levels of government to implement a financial services sector growth and competitiveness strategy. Ontario, British Columbia and the federal government have signed an agreement in principle to establish a Cooperative Capital Markets Regulatory System (CCMR). Ontario is working with British Columbia and the federal government to meet the milestones set out in the agreement.

Forestry

In 2013, forest products exports were valued at $3.6B.

Supporting the transformation of the forest sector towards production of higher value-added products to preserve and create jobs through existing funding programs and reforms to the tenure and pricing system for Crown forest resources.

Information and Communications Technology

2nd in ICT in North America.

Partnering with Cisco Canada to launch the largest job-creating investment in the history of the province’s technology sector and working with Communitech to support entrepreneurial activity in Kitchener-Waterloo.

Life Sciences

2nd in life sciences in North America.

Fostering health care advancements and their commercialization by establishing the Ontario Health Innovation Council with private and public partners as well as funding research in genomics and personalized medicine in partnership with the Ontario Genomics Institute.

Mining

Top 10 world producer of nickel and platinum metals.

Providing incentives and special deductions through the mining tax system to encourage investment.

Entertainment and Creative Cluster

Largest in Canada and 3rd largest in North America.

Growing Ontario’s music production and distribution through the new Ontario Music Fund and providing support to the film industry to ensure that Ontario remains a top location for film production.

Return to Strengthening Ontario’s Sectors chart