2022 Fall Economic Statement

On November 14, 2022, the Government of Ontario released its 2022 Ontario Economic Outlook and Fiscal Review. The following is a summary of highlights from the perspective of Ontario’s business community.

Small Businesses
The government announced plans to:

• Propose $185 million over the next three years in income tax relief for small businesses by expanding the small business Corporate Income Tax (CIT) rate. The new upper end of the phase-out range would be $50 million of taxable income (previously $15 million).
• Automatically match property tax reductions for all municipalities that adopt the small business subclass.

OCC analysis: As small businesses grapple with inflation and economic uncertainty, support from the Province will help protect the sector from further closures and ensure they can continue to grow. Additional tax relief through the CIT is welcome as it will make scaling more cost-effective for businesses. Further, the matching of the small business property tax subclass should help incentivize more municipalities to roll out the program outside Toronto and Ottawa.

Other Business Tax Measures
The government announced plans to:

• Provide $675 million over three years to temporarily allow eligible businesses to expense up to $1.5 million per year for certain capital expenses.
• Propose to expand eligibility for Ontario’s film and television tax credits to professional productions distributed exclusively online, and expand eligible expenses for the Production Services Tax Credit to include location fees.

OCC analysis: The proposed tax measures will encourage further business investment in Ontario, including in the tourism industry as it struggles to recover from the pandemic. We encourage the government to work with stakeholders on aligning further tax incentives around key opportunities for business investment in Ontario, such as zero-emission vehicles, clean energy, and mining.

Workforce Development
The government announced plans to:

• Provide an additional $30 million to the Skills Development Fund, prioritizing training programs that support people facing barriers to employment such as people with disabilities and Indigenous people. Funding will also support priority housing and infrastructure projects across the province.
• Provide an additional $4.8 million over two years to expand the Dual Credit program to encourage more secondary students to take apprenticeship and technological education courses, as well as attract more students into the Early Childhood Educator career pathway.
• Add additional services to the one‐window digital portal, launched in partnership with Skilled Trades Ontario.

OCC analysis: Widespread labour shortages coupled with ambitious provincial housing and infrastructure targets will require significant action toward workforce development, recruitment, and retention strategies. The OCC welcomes ongoing efforts to address gaps in the skilled trades and early childhood education, alongside opportunities to support greater workforce diversity and inclusion. While the Province continues to work with the federal government to increase Ontario’s allocation of skilled immigrants to meet the demand for labour across sectors (including health care), policymakers need to take further action to address skills mismatches and future workforce needs. This could include working with employers and post-secondary institutions to identify and promote in-demand skills and career opportunities, providing support for reskilling, upskilling, and micro-credentials, leveraging technology and bridging the digital divide.

Red Tape
The government announced plans to:

• Refocus its red tape reduction efforts towards attracting investment and job creation. This includes clearing provincial supply chain delays, accelerating industrial land approvals and permitting, supporting Ontario’s agri-food system, and removing interprovincial trade barriers.
• Establish consultation groups with representatives from key industries to support these efforts.

OCC analysis: Regulatory modernization is one of the most cost-effective tools to boost economic productivity. We are encouraged to see the government signal a renewed focus on high-impact barriers such as permitting and interprovincial trade barriers, which are currently deterring investment in Ontario. Consultation with a broad range of relevant stakeholders will be critical to the success of these reforms.

Cost of Living
The government announced plans to:

• Propose to extend gas and fuel tax rate reductions so that the tax rates would remain at 9 cents per litre until December 31, 2023.
• Propose to double the Guaranteed Annual Income System (GAINS) payment for all recipients (low-income seniors) for 12 months starting in January 2023.
• Increase the monthly earnings exemption from $200 to $1000 per month for Ontario Disability Support Program (ODSP) recipients. For each dollar earned above $1,000, the ODSP recipient would also keep 25 cents of income support.

OCC analysis: Record inflation and ongoing affordability challenges continue to impact Ontarians, disproportionately affecting marginalized groups. The OCC welcomes efforts to mitigate those costs in the short-term with targeted support for the hardest hit populations, and encourages the Province to explore additional opportunities to improve the cost of living, including by reinstating the Basic Income Pilot Program to assess program costs and benefits for Ontarians. The OCC and our members also look forward to providing feedback on the development of a provincial portable benefits program, as well as forthcoming consultations related to a target benefit pension plan framework for Ontario.

What’s Missing
We support the government’s emphasis on fiscally prudent investments targeted towards businesses and individuals in most need of relief. However, Ontario’s economy will require more urgent action on key issues – such as health care – and a clear and predictable path towards long-term growth, productivity, resilience, and competitiveness.

Specifically, in Budget 2023, we urge the Province to introduce measures around:

• Health: Develop a robust strategy to tackle the health human resources crisis (e.g. by leveraging technology and innovative scope of practice and patient care approaches). Implement Ontario’s life sciences strategy. Address the surgical backlog and deferred cancer treatments, diagnostics, procedures, and routine immunizations. Address the mental health action gap (including the opioid overdose crisis). Continue to expand virtual care and digital health. Support the aging population (e.g. through innovative models of care).
• Housing affordability: Preserve and build affordable housing options along the housing continuum. Safeguard sustainable growth. Plan infrastructure around complete communities. Address regional challenges in housing supply. Attract and retain skilled workers. Streamline the development and permitting process.
• Transportation and supply chains: Invest in land, air, rail, and marine infrastructure to support the efficient movement of goods and services, reduce gridlock, and protect against extreme weather events and other disruptions. Provide financial support to help small and medium-sized businesses adopt supply chain risk management and diversification strategies.
• Transit: Support municipalities in filling transit gaps and adjusting transit services based on long-term changes resulting from the pandemic. Address gaps that have resulted from the withdrawal of regional bus service by expanding GO transit, partnering with the private sector, and re-establishing Ontario Northland transit service.
• Broadband: Work with municipalities, the telecommunications industry, and local distribution companies to urgently address barriers to private sector broadband deployment (e.g., by exploring “dig once” strategies, future-proofing infrastructure, and identifying opportunities for better data sharing).
• Procurement: Modernize broader public sector procurement to focus on long-term value creation over short-term costs. Introduce more flexibility in contracting arrangements to attract more investments. Help small businesses access procurement opportunities.
• Energy planning: Adopt a more proactive approach to building transmission and distribution infrastructure. Optimize existing clean energy assets in the procurement and siting of new generation. Integrate low-carbon fuels and electricity solutions within the energy system.
• Climate adaptation: Implement a climate adaptation strategy and commit to providing communities with adequate and sustained funding for climate resilience. Support the federal Task Force on Flood Insurance and Relocation.
• Decarbonization: Support cleantech research and innovation at post-secondary institutions. Adopt a bold strategy for low-carbon exports. Support municipalities and businesses with electrification of their fleets. Fast-track investments in electric vehicle charging infrastructure.
• Energy efficiency: Expand conservation and demand-side management programs that help reduce energy costs and consumption for households and businesses, with a focus on small businesses.
• Small businesses: Help small business owners with succession planning as they age out of the workforce. Expand and scale small business digitization programs.
• Municipal fiscal capacity: Commission an independent review of municipal responsibilities to assess which order of government is best placed to manage them. Undertake a comprehensive review of the province’s property tax system. Commit to funding all municipal services in which the Province controls some aspect of the operation (i.e. the pay-for-say principle).
• Economic reconciliation: Support Indigenous partnerships, procurement, education, employment, and entrepreneurship by building on the innovative Three Fires Nations‐Ontario Southwestern Ontario Infrastructure and Economic Opportunities Table.
• Cannabis: Provide a comprehensive update on the implementation of the recommendations in the Auditor General’s 2021 value-for-money report on the Ontario Cannabis Retail Corporation. Allow licence holders and retailers to enter into direct commercial relationships with each other to negotiate their own product mixes, prices and delivery terms.
• Mining: Work with industry and Indigenous communities to develop critical mineral supply chains in Ontario. Further, streamline mining regulations. Increase the Ontario Flow-Through Tax Credit.

For more details, refer to the Ontario Chamber of Commerce’s 2022 provincial budget submission, Vote Prosperity, and Blueprint to Bolster Ontario’s Prosperity.