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.

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