Archive for the ‘Economy’ Category

Ontario Budget 2018 Highlights

The Ontario 2018 Budget, tabled on March 28, 2018, projects a growing deficit over the next three years and is predicted to resume a downward trend in 2022 with accumulated deficit expected to decline from 23.2% of gross domestic product (GDP) in 2017-18 to 22.1% by 2022.

The Ontario Budget proposes several measures and investments that impact businesses, including:

Innovation

  • An increase to the Ontario Research and Development Tax Credit (ORDTC) from 3.5% to 5.5% for eligible R&D expenditures over $1M (per taxation year) incurred on or after March 28, 2018.
  • Enhancements to the Ontario Innovation Tax Credit (OITC) for eligible R&D expenditures incurred on or after March 28, 2018 based on the ratio of R&D expenditures to gross revenues. Companies with a ratio of R&D expenditures to gross revenue of:
    • 10% or less will continue to claim the OITC at a rate of 8%;
    • 10-20% will be eligible for an enhanced OITC rate that will increase from 8% to 12% on a straight-line basis; and
    • 20% or more will be eligible to claim the OITC at a rate of 12%.
  • Expansions to the Ontario Interactive Digital Media Tax Credit (OIDMTC) eligibility criteria to include broadcaster purchased or licensed film/television websites that host film, television, or Internet production content not previously assessed (before Nov 1, 2017).
  • A review of various tax incentives implemented in other jurisdictions such as preferential corporate income tax rates (i.e., patent boxes), tax refunds, tax deductions, and exemptions with the intention of developing a provincial incentive to encourage Intellectual Property (IP).
  • An additional $50M over 10 years for the New Transformative Technology Partnerships Fund for businesses, SMEs, and scale‐ups as well as post-secondary and research institutions to collaborate on new dynamic products and services in artificial intelligence (AI), 5G wireless communications, autonomous vehicles, advanced computing, and quantum technologies.

Business Growth

  • In parallel with the 2018 Federal Budget proposal to phase-out or grind the $500,000 small-business limit, the Ontario Budget proposes to phase out the small-business limit on a straight-line basis for CCPCs (and associated corporations) earning between $50,000 and $150,000 of passive investment income in taxation years beginning after 2018.
  • Ending the electricity debt retirement charge (DRC) for mid-sized commercial and industrial non-ICI or non-RRP, Class B consumers as of April 1, 2018.
  • An additional $100M over 10 years for the Eastern Ontario Development Fund (EODF) and the Southwestern Ontario Development Fund (SWODF) to support regional economic development by creating jobs, attracting private sector investment and promoting innovation, and encouraging collaboration and cluster development.
  • An additional $500M over 10 years for the New Economy Fund for investing in priority sectors such as advanced manufacturing, information and communication technology (ICT), life sciences, and clean-tech.
  • An additional $85M over 3 years for the Northern Ontario Heritage Fund to stimulate economic development and diversification across the region.
  • An additional $100M over 10 years for a new Greater Toronto & Hamilton Area Fund to support SMEs in the GTA and Hamilton area.

Export Market

  • Work to implement a Global Trade Strategy to diversify and promote trade in Ontario. This will include the Accelerate to International Markets program, the Global Growth Fund, and the Magnet Export Business Portal.

Startup Support

  • An additional $85M over 10 years for a new Venture Technology Fund to support a select number of very high‐potential, fast‐growing firms in expanding to become globally competitive.
  • An additional $15M over the next 3 years to NextAI, a Toronto based accelerator for early stage startups that leverage AI technologies.

Workforce Development

  • An additional $170M over 3 years for the new Ontario Apprenticeship Strategy to support transition into apprenticeship from high school, make the system easier to navigate, and to improve access for apprentices to high‐quality jobs upon completion.
  • Transforming the Apprenticeship Training Tax Credit (ATTC) into the new Graduated Apprenticeship Grant for Employers (GAGE) to encourage employers to ensure that apprentices complete their training.

Spring 2017 Newsletter- Canadian Business Growth and Innovation Funding

In our most recent Newsletter, we examine the performance of the Canadian economy, while comparing economic performance between provinces and the investments that each government has set aside to encourage business growth and innovation.  Provinces have proposed a variety of solutions to stimulate economic growth, including but not limited to tax rate reductions for small businesses, funding opportunities for early-stage start ups, tax credits to stimulate innovation, and funding for the development of technology clusters.

 

 

Federal Budget 2017 Highlights

Federal Finance Minister Bill Morneau’s second budget, tabled on March 22, 2017, forecasted an increase in the 2017-2018 deficit from $25.4B (projected in the fall) to $28.5B. Deficits are expected to decline gradually to $18.8 billion by 2021-2022.

There were no proposed changes to the corporate income tax rates or to the $500,000 Small-Business Deduction Limit for Canadian-controlled private corporations (CCPCs).

Budget 2017 provides a platform for the anticipated Innovation Agenda by proposing several new initiatives including:

Skills Development

  • $2.7B over 6 years for skills training programs through labour market transfer agreements with the provinces and to expand eligibility relating to Employment Insurance (EI) skills training/employment support;
    • Programming, and/or metrics to measure performance, will depend upon negotiations with provinces;
  • $225M over 4 years, starting with $75M in 2018 and an additional $75M per year thereafter, to establish a new agency to research and measure skills development;
  • $7.8M over two years, starting in 2017, to implement the new Global Talent Stream under the temporary Foreign Worker Program, and to introduce a new work permit exemption for short-duration work terms under the Global Skills Strategy;
  • $287.2M for a pilot project taking place over three years, starting in 2018-2019, to increase mature student access to government student grants and loans;
  • $395.5M, over three years for a youth employment strategy; and
  • $50M over two years to support initiatives aiming at teaching students to code.

Innovation

  • $950M, provided on a competitive basis over 5 years starting in 2017, to support business-led “superclusters” in clean technology, advanced manufacturing, digital technology, health/bio sciences, clean resources, and agri-food;
  • $125M to launch a pan-Canadian Artificial Intelligence Strategy to be administered by the Canadian Institute for Advanced Research (CIFAR); and
  • $2.2B to accelerate growth in Clean Technology, of which $1.4B will be provided through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC).

Startups and Small Businesses

  • $400M to BDC over 3 years, starting in 2017, for a new Venture Capital Catalyst Initiative to increase availability of late-stage venture capital;
  • Additional private funding available through the recently announced Canadian Business Growth Fund, which was created by Canada’s leading banks and other key financial institutions to provide long-term capital through minority interests in small- and medium-sized Canadian enterprises; and
  • A commitment to review the use of tax planning strategies involving private corporations, which can result in  tax advantages.

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Federal Budget 2016

The federal budget released on March 22, 2016 has made several changes that affect Canadian businesses, including announcements related to government funding programs and adjustments to the Small Business Deduction for Canadian-Controlled Private Corporations (CCPCs). Pertinent announcements are summarized below:

Reduced Small Business Tax Rate

  • Reduced small business income tax rate from 11 to 10.5% on first $500,000 of active business income. This reduction is in line with the reduction proposed in the 2015 Federal budget; however, reductions for future years have been deferred.

Trade Tariffs

  • Eliminated tariffs on several manufacturing inputs.  This is estimated to provide Canadian manufacturers in the consumer goods and transportation sectors approximately $9 million in tariff savings over the next five years.
  • Budget 2016 intends to launch public consultations on eliminating tariffs on food manufacturing ingredients other than supply-managed products.

Innovation (Investment of $137 million from 2016-2017)

  • $800 million over 4 years ($150 million in 2016-2017) to innovation clusters and networks as part of the government’s ‘Innovation Agenda.’  Further details will be provided in the coming months.
  • An additional $50 million to the Industrial Research Assistance Program (IRAP) to help small and medium sized companies to innovate and grow.
  • The Automotive Innovation Fund was extended to 2020-2021. Previously scheduled to close at the end of 2017-2018, the Automotive Innovation Fund was established in 2008 to support research and development projects to build more fuel-efficient vehicles.

Science and Research (Investment of $853 million in 2016-2017)

  • $4 million in 2016-2017 to the Growing Forward 2 (GF2) initiative. Budget 2016 provides continued support to Agri and food processing companies through the GF2 initiative in line with the current five year (2013-2018) $3 billion investment.
  • $30 million over four years, starting in 2016–17 to maintain Canada’s participation in the European Space Agency’s Advanced Research in Telecommunications Systems program.
  • Additional investments to strengthen science and research including $95 million on an ongoing basis to granting councils (including Canadian Institutes of Health Research, Natural Sciences and Engineering Research Council Social Sciences and Humanities Research Council and Research Support Fund); $237.2 million until 2020 for advancing Canadian leadership in Genomics; $32 million over two years for commercializing Canadian Health discoveries; $12 million over two years to strengthen stem cell research through the Stem Cell Network; $50 million over five years to the Perimeter Institute for theoretical physics; $20 million over three years to support brain research; and $14 million over two years to promote Canada as a premier destination to study and conduct research.

Workforce Development

  • $165.4 million for Youth Employment Strategy (YES). The federal Youth Employment Strategy contributes over $330 million annually to help youth gain the skills and experience necessary to thrive in Canada’s highly competitive labor market.
  • The YES investment is in addition to the $339 million announced in February 2016 for the Canada Summer Jobs program, which provides funding to help employers create summer job opportunities for students.

Clean Tech

  • $1B over four years, starting in 2017–18, to support development of clean technologies in the forestry, fisheries, mining, energy and agriculture sectors.
  • Further details about funding allocation will be provided in the coming months as part of the Innovation Agenda implementation.

Stay tuned as we continue to bring you the most recent developments in government funding and details on the new Canadian Innovation Agenda proposed in the 2016 federal budget.   

Update of Federal Economic and Fiscal Projections

On Friday November 20, 2015, Federal Finance Minister Bill Morneau released an Update of Economic and Fiscal Projections which placed an emphasis on providing a realistic, sustainable, prudent and transparent fiscal management approach.  The 2015 update reassesses the forecasts presented earlier this year in Budget 2015, and effectively reduces the projected budgetary balance by about $6.0 billion per year, on average, resulting in deficits of $3.0 billion in 2015–16 and $3.9 billion in 2016–17, and improving to surpluses of $1.7 billion in 2019–20 and $6.6 billion in 2020–21.

The recent economic and fiscal projections cover national and global GDP activity as well as commodity prices and financial market development, and are detailed below:

Canadian Economy
• Following a significant drop in Canadian business investment, the first half of 2015 saw reduced economic activity with a 0.8% decline in real GDP in the first quarter and a 0.5% decline in the second quarter.
• The decline in economic activity in the first half of 2015 was concentrated in the energy sector, which experienced 17.8% and 12.8% reductions of business investment in the first and second quarters of 2015, respectively, resulting from a significant decline in crude oil prices in mid-2014.
• Additional factors that negatively impacted GDP output in 2015 include weak U.S. economic activity in the first quarter of 2015, reduced consumption and increased global economic uncertainty.
• Output in non-energy sectors maintained growth despite declining overall economic output with a 0.4% and 13.3% growth in real GDP and non-energy merchandise respectively.
• Manufacturing sales and export are expected to continue growing with strong demand from the US and a lower Canadian dollar.
• According to private sector economists, real GDP growth in Canada over the next four years is expected to average 1.9% per year. This represents a 0.2% reduction from the figures projected in Budget 2015.

Global economy
• In 2015, the pace of global economic activity was at its slowest since the global recession in 2009.
• While the U.S. experienced weaker than anticipated growth resulting from the effects of reduced oil prices on capital spending as well as severe winter weather, real GDP growth is expected to pick up by 0.3% in 2016 as compared to 2014.
• Following high financial market volatility during the summer of 2015, global equity markets have somewhat rebounded but continue to demonstrate instability.

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