McGuinty government invests $3 billion to support a competitive Ontario



    Ontario's strong and resilient economy continues to grow

    QUEEN'S PARK, Dec. 13 /CNW/ - The McGuinty government is taking immediate
action to strengthen Ontario's economic advantage through a $3-billion package
of business tax measures and investments in skills, training and
infrastructure announced today.
    This package moves forward on the government's five-point plan for
economic competitiveness and will particularly help people and communities
facing economic challenges.
    "The Ontario economy has proven resilient in an increasingly challenging
global economic environment. However, certain key sectors, such as
manufacturing, forestry, agriculture and tourism, face serious challenges,"
said Finance Minister Dwight Duncan. "We are helping these sectors adjust to a
changed economic environment."
    Ontario's economy has been challenged by external factors, including a
slowing U.S. economy, record-high oil prices and a stronger Canadian dollar. 
In response, the McGuinty government proposes a package of tax measures and
infrastructure investments to enhance competitiveness, strengthen Ontario's
communities and create jobs.

    In the 2007 Economic Outlook and Fiscal Review released today, the
government is proposing $1.1 billion in tax reductions for business over three
years that would support manufacturers and other sectors, including:

    
    -   eliminating the Capital Tax on January 1, 2008 for corporations
        primarily engaged in manufacturing and resource 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.

    The package introduced today would also provide:

    -   $1.4 billion in new funding to build strategic infrastructure;
    -   almost $300 million over three years to expand the Land Transfer Tax
        Refund Program for First-time Homebuyers to include purchases of
        resale homes;
    -   $150 million to strengthen competitiveness and help cattle, hog and
        horticulture farmers;
    -   $50 million in strategic investments in innovation;
    -   $40 million to provide skills development and rapid re-employment
        services for laid-off workers through the $1-billion
        Employment Ontario training system; and
    -   $30 million to expand the Ministry of Tourism's successful festivals
        and events promotion and marketing campaign in the domestic and
        international markets.

    In spite of external factors, the Economic Outlook indicates Ontario's
economy is on track to outperform the 2007 Ontario Budget forecast.
    Ontario's continued economic strength allows the government the
flexibility to implement targeted measures, particularly for manufacturers,
and to invest in our communities through improved infrastructure.
    Despite inheriting a structural deficit of $5.5 billion in 2003-04, the
Economic Outlook confirms that the Province's budget is balanced. If the
reserve is not required, a $750 million surplus is projected for 2007-08. 
Despite weaker projections for economic growth in 2008 and 2009, Ontario is on
track for continued balanced budgets.
    "The people of Ontario want us to be prudent fiscal managers and to pursue
real progress at the same time," said Duncan. "The people of Ontario are
counting on us to move Ontario forward. That is what our plan is about."

    Contact:
    Steve Erwin                             Scott Blodgett
    Minister's Office                       Ministry of Finance
    416 325-3645                            416-325-0324

    Disponible en français

                 For more information visit www.fin.gov.on.ca


               ONTARIO EXPANDS LAND TRANSFER TAX REFUND PROGRAM

      First-time buyers of resale homes to benefit from new tax measure

    TORONTO - The McGuinty government is giving all first-time homebuyers a
break on land transfer tax by proposing to expand the Land Transfer Tax Refund
Program to include purchases of resale homes, Finance Minister Dwight Duncan
announced today.
    "Expanding this Land Transfer Tax refund is an important part of our
government's commitment to helping Ontarians buying their first home," Duncan
said.
    Effective midnight tonight, first-time buyers of resale homes, as well as
newly constructed homes, would be eligible for a refund from the provincial
government of up to $2,000 of the Land Transfer Tax paid.
    The expanded Land Transfer Tax Refund Program for First-time Homebuyers is
part of a package of new tax initiatives announced in the 2007 Fall Economic
Outlook and Fiscal Review that would provide $1.4 billion in provincial tax
relief for business and people over three years. The government is making
strategic investments in people, communities and infrastructure to strengthen
Ontario's economic advantage and help manufacturers and other sectors
challenged by current economic conditions.

    Contact:
    Steve Erwin                    Scott Blodgett
    Minister's Office              Ministry of Finance
    416 325-3645                   416-325-0324

    Disponible en français

                 For more information visit www.fin.gov.on.ca


    Backgrounder

    -------------------------------------------------------------------------

                 STRENGTHENING ONTARIO'S ECONOMIC ADVANTAGE
                     AND PROVIDING SUPPORT TO KEY SECTORS

    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

    Disponible en français

                              www.fin.gov.on.ca


    Backgrounder

    -------------------------------------------------------------------------

               ENHANCING ONTARIO'S BUSINESS TAX COMPETITIVENESS

    The government is proposing new tax initiatives, announced today in the
2007 Ontario Economic Update and Fiscal Review, which would provide businesses
with $1.1 billion in provincial tax relief over three years. The measures
would further enhance Ontario's tax competitiveness, provide support to the
manufacturing sector and stimulate economic growth through increased
investment and job creation.

    The proposed new business tax package consists of:

    -   Eliminating Capital Tax for Ontario companies primarily engaged in
        manufacturing and resource activities, effective January 1, 2008;
    -   Cutting Capital Tax rates for all businesses by 21 per cent,
        retroactive to January 1, 2007, on the way to full elimination in
        2010;
    -   Increasing the small business deduction threshold to $500,000 from
        $400,000 retroactive to January 1, 2007;
    -   Increasing the film tax credit rates, effective January 1, 2008; and
    -   Extending the phase-out of the Labour-Sponsored Investment Fund tax
        credit and increasing the maximum eligible investment.
    

    Sectors feeling the impacts of the strong Canadian dollar, high oil
prices and the slower U.S. economy, in particular, stand to benefit from these
proposed initiatives.
    These measures are in addition to the business tax cuts that the
government has announced since 2004, which will provide more than $2 billion
annually when fully implemented. For manufacturing and resource industries,
previously announced and proposed new tax measures would mean an estimated
cumulative benefit of more than $1 billion in tax relief from 2007-08 to
2009-10.

    Eliminating Capital Tax for Manufacturing and Resource Activities

    The government proposes to eliminate Capital Tax effective January 1,
2008 for Ontario companies primarily engaged in manufacturing or resource
activities.
    Capital Tax would be fully eliminated for corporations whose salaries and
wages relating to manufacturing and processing, mining, logging, farming and
fishing activities in Ontario represent 50 per cent or more of their total
salaries and wages in Ontario.
    For corporations whose salaries and wages in Ontario for these activities
are less than 50 per cent, but more than 20 per cent of their total salaries
and wages in Ontario, Capital Tax would be reduced proportionately on a
straight-line basis. For example, a corporation whose Ontario salaries and
wages for these activities are 35 per cent of total Ontario salaries and wages
would have one-half of its Capital Tax eliminated.

    Cutting the Capital Tax for all Corporations

    The government proposes to accelerate the 21-per-cent Capital Tax rate
cut to January 1, 2007, two years ahead of schedule.
    As previously legislated, on January 1, 2008 the Capital Tax deduction
will rise from $12.5 million to $15 million, and Capital Tax will be fully
eliminated on July 1, 2010.

    Providing a Two-Year Write-Off for Manufacturing Equipment

    On April 20, 2007, the government announced that it will parallel federal
2007 Budget changes to provide an accelerated write-off for investment in
manufacturing and processing machinery and equipment made after March 18, 2007
and before January 1, 2009.
    Paralleling this measure will provide Ontario businesses with more than
$400 million in provincial tax relief over three years for investments in
manufacturing machinery and equipment.
    Ontario is calling on the federal government to extend this needed
incentive for three years - to 2012.

    Expanding Eligibility for the Small Business Income Tax Rate

    The government proposes to increase the small business deduction
threshold to $500,000 from $400,000, effective January 1, 2007. This would
immediately extend the preferential small business Corporate Income Tax rate
to the first $500,000 of business income. In addition, the small business
deduction would be phased out once income reaches $1,500,000, rather than
$1,128,519.
    These measures would reduce taxes for small businesses by over
$100 million over four years. More than 20 per cent of this tax relief would
go to small Ontario businesses in the manufacturing and resource industries.

    Enhancing Tax Support for Ontario's Film and Television Industry

    To support growth and job creation in Ontario's film and television
sector, the government is proposing enhancements to two film tax credits.
    The government proposes to increase the Ontario Film and Television Tax
Credit rate from 30 to 35 per cent for labour expenditures incurred after
December 31, 2007 and before January 1, 2010. The 10 per cent regional bonus
would continue to be available for filming outside the Greater Toronto Area,
and first-time producers would remain eligible for an enhanced rate of 40 per
cent on the first $240,000 of labour expenditures.
    The government also proposes to increase the Ontario Production Services
Tax Credit rate from 18 to 25 per cent for labour expenditures incurred after
December 31, 2007 and before January 1, 2010.
    The government will also be working with the film industry to explore
ways of advancing financial support for producers to the start of a
production.

    Extending the Phase-out of the Labour-Sponsored Investment Fund Tax
    Credit

    The government is announcing steps to extend the phase-out of the
Labour-Sponsored Investment Fund (LSIF) tax credit by one year, by:

    
    -   Maintaining the 15-per-cent tax credit rate until the end of the 2009
        tax year;
    -   Lowering the rate to 10 per cent for the 2010 tax year;
    -   Lowering the rate to five per cent for the 2011 tax year; and
    -   Eliminating the credit for tax years after 2011.

    In addition, the government is proposing to increase the maximum
investment that qualifies for the provincial tax credit from $5,000 to $7,500.
    The proposed changes would provide an estimated $38 million in additional
financial assistance to the industry over three years. These measures are
intended to assist LSIFs in the development of their investment strategies and
in providing continuing support to the portfolio of companies in which they
have invested.

    Contact:
    Scott Blodgett
    Ministry of Finance
    416-325-0324

    Disponible en français

                              www.fin.gov.on.ca


    Backgrounder

    -------------------------------------------------------------------------

               MID-YEAR UPDATE OF FINANCIAL RESULTS FOR 2007-08

    The government is currently projecting a balanced budget in 2007-08. This
represents an in-year improvement of $400 million from the 2007 Budget Plan
and is consistent with the outlook presented in the 2007-08 First Quarter
Ontario Finances.

    -------------------------------------------------------------------------
    2007-08 Fiscal Outlook - In-Year Change
    ($ Millions)
    -------------------------------------------------------------------------
                                  Budget Plan    Current Outlook     In-Year
                                      2007-08            2007-08      Change
    -------------------------------------------------------------------------
    Revenue                            91,503             94,100       2,597
    -------------------------------------------------------------------------
    Expense
    -------------------------------------------------------------------------
      Programs                         82,030             84,283       2,253
    -------------------------------------------------------------------------
      Interest on Debt                  9,123              9,067         (56)
    -------------------------------------------------------------------------
    Total Expense                      91,153             93,350       2,197
    -------------------------------------------------------------------------
    Reserve                               750                750           -
    -------------------------------------------------------------------------
    Surplus/(Deficit)                    (400)                 0         400
    -------------------------------------------------------------------------
    Source: Ontario Ministry of Finance
    -------------------------------------------------------------------------

    Total revenue in 2007-08 is currently projected at $94,100 million, a net
increase of $2,597 million from the 2007-08 Budget Plan. This increase is
primarily due to higher corporate and personal income tax revenue, and to a
lesser extent, higher federal transfers.
    The total expense outlook at $93,350 million is a net $2,197 million
higher than the 2007 Budget Plan and up $2,014 million from the 2007-08 First
Quarter Ontario Finances. This is mainly due to increased spending associated
with the government taking decisive action to strengthen Ontario's economic
advantage by enhancing Ontario's competitiveness, and investing in its people,
communities and infrastructure.

    SUMMARY OF REVENUE OUTLOOK

    The revenue outlook reflects the best use of available information,
including the Ministry of Finance's economic outlook, the estimated impacts of
government policy decisions and current federal-provincial funding
arrangements and formulas. Since the 2007 Ontario Budget, stronger 2007
economic growth and higher revenues related to prior years' tax return
processing have increased the revenue forecast for 2007-08 and beyond.

    Key changes to the 2007-08 revenue forecast since the 2007 Budget include:

    -   Personal Income Tax revenue increasing by $1,033 million due to
        stronger 2007 wages and salaries growth and higher revenues from
        processing 2006 tax returns.
    -   Corporations Tax revenue increasing by $816 million due to stronger
        2007 corporate profit growth and higher revenues from processing
        prior-year tax returns.
    -   Canada Health and Canada Social Transfers increasing by $464 million
        due to revised estimates of current and past-year entitlements, and
        2007 federal budget changes to the calculation of entitlements under
        these programs.
    -   All other revenues combined increasing by a net $284 million mainly
        because of increased revenues from Land Transfer Tax, other Federal
        Transfers and the Ontario Health Premium, partially offset by
        decreased revenues from Tobacco Tax and Gasoline Tax.

    SUMMARY OF ECONOMIC PERFORMANCE

    Since the 2007 Budget, there have been significant unanticipated changes
in the economic environment, notably a weaker U.S. economic outlook,
record-high oil prices and a stronger Canadian dollar. Despite these external
challenges, Ontario's economy continues to be resilient. Private sector
forecasts for growth have been revised upward to 2.0 per cent in 2007. The
Ministry of Finance projects Ontario's real GDP to grow by 1.9 per cent in
2007, ahead of the 1.6 per cent projection in the 2007 Budget. Employment is
now expected to grow by 1.6 per cent - 0.5 percentage points above the 2007
Budget forecast. Other changes from the 2007 Budget are identified in the
table below.
    Moderate growth is expected to continue through 2008 as U.S. demand
remains soft and the higher Canadian dollar and oil prices create challenges
for Ontario businesses. Growth is expected to strengthen in 2009 and 2010 due
to Ontario's strong economic fundamentals and an expected rebound in U.S.
demand.

    -------------------------------------------------------------------------
    The Ontario Economy in 2007
    (Per Cent Change)
    -------------------------------------------------------------------------
                                        2007 Budget       2007 Fall Update
    -------------------------------------------------------------------------
    Real Gross Domestic Product                 1.6                    1.9
    -------------------------------------------------------------------------
    Nominal Gross Domestic Product              3.1                    5.0
    -------------------------------------------------------------------------
    Other Economic Indicators
      Retail sales                              3.6                    3.6
      Personal income                           3.9                    5.3
      Corporate profits                         1.1                    7.0
      Consumer Price Index                      1.3                    1.8
      Employment                                1.1                    1.6
      Job creation (000s)                        71                    103
    -------------------------------------------------------------------------
    Source: Ontario Ministry of Finance.
    -------------------------------------------------------------------------

    So far in 2007, the Ontario economy has created 102,800 net new jobs, with
full-time positions accounting for almost 60 per cent of the increase.  Since
October 2003, almost 418,000 net new jobs have been created. Over 95 per cent
of these jobs were in occupations that paid an average over $19.50 per hour.

    Contact:
    Scott Blodgett
    Ministry of Finance
    416-325-0324

    Disponible en français

                              www.fin.gov.on.ca
    





For further information:

For further information: Steve Erwin, Minister's Office, (416) 325-3645;
 Scott Blodgett, Ministry of Finance, (416) 325-0324

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