The Ontario government released its 2022 Fall Economic Statement this week, with Doug Ford’s Conservatives touting improved fiscal news just as the province edges closer to a likely recession next year. Strong GDP performance, higher government revenue and near-full employment have put Ontario on a stronger financial footing—which could be compromised if the economy begins contracting in early 2023.
Ontario’s deficit for 2022-23 is projected at $12.9 billion, nearly $7 billion less than projected in the 2022 provincial budget. That shortfall is expected to drop to $8.1 billion in 2023–24 and $0.7 billion in 2024–25. However, widespread uncertainty prompted Minister of Finance Peter Bethlenfalvy to include slower growth scenarios alongside his more optimistic forecasts, which could see the deficit spike to $14.6 billion in 2022–23, $13.9 billion in 2023–24 and $8.5 billion in 2024–25 if growth is slower than expected. The fast-growth outlook could deliver a surplus of $9.2 billion in 2024-25, but that scenario seems rather unlikely given current economic forecasts.
The bulk of the Tories’ message in the 2022 Fall Economic Statement was about fiscal prudence. Much to the opposition’s chagrin, for example, no new funding was earmarked for the province’s healthcare system, despite system-wide strains due to ongoing COVID-19 cases, the re-emergence of the flu and other outbreaks such as RSV—an illness that largely impacts children. Bethlenfalvy announced that the government would, for the most part, keep its powder dry on major new spending announcements, taking a wait-and-see approach as darker economic clouds loom.
Some new spending measures were proposed, including several that would impact the province’s business community. The 2022 Fall Economic Statement would:
- Launch a voluntary clean energy credit (CEC) registry, a move designed to boost competitiveness, attract jobs to the province and “provide businesses with more choice in how they pursue their environmental and sustainability goals”
- Expand access to the small business Corporate Income Tax rate, extending the phase out (currently set at a limit of $500,000 of income that phases out between $10 million and $15 million of taxable capital employed in Canada) to between $10 million and $50 million of taxable capital. The government estimates that the measure could deliver more than $36,000 in income tax relief each year to approximately 5,500 eligible small to medium-sized corporations across the province
- Provide matching property tax reductions for small businesses within municipalities that adopt the small business property subclass, which provides municipal tax reductions of as much as 35 per cent to eligible small businesses
- Temporarily allow eligible businesses to expense as much as $1.5 million per year in certain capital investments, with total tax relief for SMEs estimated at $650 million over three years
- Expand eligible expenditures under the Ontario Production Services Tax Credit to include location fees, with the goal of attracting film production to the province
- Provide an addition $4.8 million over two years to expand the Dual Credit Program to encourage more students to pursue careers in the trade sector
- Commit an additional $40 million in 2022-23 to enhance the Skills Development Fund to help companies across the province hire, train and retrain workers
- Extend a reduction of the provincial gas tax (of 5.7 cents per litre) and the fuel tax (of 5.3 cents per litre) until December 31st, 2023
- Double the Guaranteed Annual Income System for seniors for 12 months beginning in January 2023, which would increase the maximum payment to $166 per month for single seniors and to $332 per month for couples
- Make significant changes to the Ontario Disability Support Program, allowing recipients to increase their monthly earnings exemption to $1,000 from $200 per month. In addition, the maximum monthly amount for the Assistance for Children with Severe Disabilities program would be adjusted to inflation, while core allowances under the ODSP would also be adjusted annually to inflation, beginning in July 2023
As far as Economic Statements go, this one offered mostly minor tweaks around the fiscal policy margins. The 2023 budget will be far more indicative of economic realities if a downturn is more (or less) pronounced than expected. Until then, the government appears comfortable with a cautious approach, offering some tax breaks to help prepare the small business community for a recession that might be coming around the corner.
For more information on Ontario’s 2022 Fall Economic Statement 2022, contact a member of our team.
Armando Iannuzzi, Co-Managing Partner