What you need to know about the provincial budget

4/17/2019

On Thursday, April 11, 2019 the provincial government released its first budget.
There are a number of areas of interest to the Peterborough business community:

Fiscal Position
Taxation
Electricity
Workforce Training
Housing Supply
Agriculture
Tourism
Provincial-Federal Relations

Below is a more in-depth look at these areas. Please take some time to read through the details.

Any feedback is appreciated and can be sent to:
Sandra Dueck, Policy Analyst sandra@peterboroughchamber.ca

The full budget document can be found here.

Fiscal Position

The provincial government has announced the following plans:

Budget 2019 outlines a fiscal recovery plan that “will prioritize investments that generate the greatest returns for the people of Ontario (…) Programs will be continually reviewed to ensure that they are efficient, effective and modern, relying on best practices from around the world.”

The government is projecting a deficit of $11.7 billion in 2018-19, but lays out a plan to return to a balanced budget by 2023-2024.
In running its forecasted course to a balanced budget, the Province projects economic growth to average 3 percent, in contrast to an average 1 percent forecast increase in program spending. This represents an approximately 11 percent divergence between the average annual economic growth rate and the program expense, by 2024.
The fiscal recovery plan includes a variety of spending cuts and tax decreases, in addition to limitations on future spending growth and organizational consolidations.
Through such measures, the government estimates that Ontario taxpayers will save approximately $26 billion between now and 2024.

With respect to debt repayment, the government is forecasting a net debt‐to‐GDP of 38.6 percent by the end of their recovery plan (vs. the forecast 40.8 percent for 2018-19). The Budget acknowledges that, “When debt is used to make long‐term investments, such as taking out a mortgage to purchase a home, it can have a beneficial long‐term impact.”

The Budget also introduces the Fiscal Sustainability, Transparency and Accountability Act, 2019. This legislation applies the principles of sustainability, transparency, responsibility, flexibility, and equity to government administration. It legislates that government be required to provide:

The fiscal year in which it projects it will achieve a balanced budget;
Major revenue and expense estimates for the period of the recovery plan, including underlying forecasts and assumptions;
Details of a reserve to protect against unexpected negative changes in revenue and expenses; and
The projected net debt‐to‐GDP ratio for the period of the plan.

The proposed bill also includes the “Premier and Minister’s Accountability Guarantee” which requires the Premier and the Minister of Finance to pay a penalty of 10 percent of their salaries for each missed public reporting deadline, along with an explanation and revised deadline.

Read more on Fiscal Position.

Comment:
These fiscal responsibility commitments encourage a spend smarter attitude rather than an austerity approach. This is inline with the recommendations made through the policy resolution process and reports from the Ontario Chamber of Commerce.

Taxation

The government has announced the following plans:

Ontario Job Creation Investment Incentive

A 100 percent write-off for manufacturing and processing machinery and for clean energy equipment, and an accelerated write-off for many other assets.
This is equivalent to $3.8 billion in tax relief over six years.

Accelerated Investment Incentive

A business can deduct an amount equal to three times the former first year depreciation rate in the first year that equipment is put into use (in subsequent years, the existing depreciation rate applies).

Combatting Tax Evasion
The government is also creating a special unit of tax experts to combat tax evasion and avoidance, in collaboration with federal officials.

Read more on Taxation.

Comment:
The Ontario Job Creation Investment Incentive mirrors the federal Accelerated Capital Cost Allowance program and will help with competitiveness. Increasing revenue without punishing law-abiding businesses and residents is key.

Electricity