The Ontario government has embraced one of the key recommendations of economist Don Drummond’s report on the province’s fiscal difficulties, vowing to radically revamp its support programs for business in order to save hundreds of millions of dollars.
Ontario’s Minister of Economic Development and Innovation, Brad Duguid, said Tuesday that the government agrees with the general approach floated by Mr. Drummond, who suggested the hodgepodge of business-support programs be killed off and a new system designed from scratch.
The government will review all its business supports, Mr. Duguid said, eliminating or reducing some of them and making sure that those remaining are geared to economic growth and job creation.
Mr. Drummond’s report said the Ontario government spends about $1.3-billion in direct support for business and $2.3-billion more in indirect tax support. Those fragmented programs lack coherent objectives, it said, and many are not needed because corporate tax rates have dropped.
Mr. Duguid agreed that many of the 50 or so business-support programs were put in place at a time when Ontario had an uncompetitive tax environment. “We’ve since made significant progress in reducing the tax burden on businesses,” he said, “so some of those programs are likely no longer necessary.”
He noted that there are eight different ministries that administer the programs, which include agricultural supports, aboriginal grants, energy subsidies and tourism-development funds. The government will attempt to co-ordinate them better, and put in place a “one-window” approach to make it easier for business to understand what is available and navigate the paperwork.
Business supports will be maintained only if they fit into the government’s “razor-sharp focus on job creation and economic growth,” Mr. Duguid said, although the province has not yet chosen the specific sectors that will continue to get government help.
Ontario Finance Minister Dwight Duncan told reporters Tuesday that “the only ones we won’t touch are the film tax credits.”
Cutting the supports could generate a backlash from parts of the business community. Some sectors – including farmers, mining companies and the racetrack industry – reacted negatively to the Drummond report’s suggestion that their supports be scaled back.
But Mr. Duguid said he thinks that “the bulk of the business community understands the need for the province to improve our fiscal situation.”
There has been speculation that the government might halt its plans to cut the provincial corporate income tax further, in order to help deal with its difficult fiscal situation. The tax has been falling in regular increments, and is currently at 11.5 per cent. It is scheduled to move to 11 per cent on July 1, then to 10 per cent on July 1, 2013.
Progressive Conservative Leader Tim Hudak criticized Premier Dalton McGuinty in Question Period Tuesday for signalling that he might scrap the future rounds of corporate tax cuts. “If this is a trial balloon, it’s full of lead,” Mr. Hudak said.
With a report from Karen Howlett.