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Ontario's Economic and Fiscal Outlook 2020

March 26, 2020

The Minister of Finance Rod Phillips released the Ontario Government’s economic and fiscal outlook for 2020 based on current economic projections. The 2020-2021 Ontario Budget was originally slated to be released today, but was postponed due to the COVID-19 outbreak. Phillips has said the official Budget will be released by November.

The fiscal plan devotes significant resources to dealing with the virus with both short and long-term financial outlooks on significant areas of government spending, including a $3.3 billion increase in funding to various healthcare projects. $2.1 billion will be allocated towards new COVID-19 response measures such as increased beds, critical medical supplies, public health initiatives, and a $1 billion contingency fund for any future urgent needs. A major $1.2 billion is being dedicated to improvement of the healthcare and long-term care sectors as a whole, to bolster the system’s capacity for the future.

These measures announced by the province today are in addition to measures announced by the federal government. The projected provincial deficit in the coming fiscal year as a result of these measures is in excess of $20 billion.

$3.7 billion is being dedicated to supporting people and jobs, supporting indigenous, low-income, seniors and vulnerable persons by providing funds for annual income, childcare costs and utility bills to ensure essential needs are met wherever possible. Electricity costs have been reduced to the lowest possible time-of-use rate for the next 45 days for all small businesses, residences and farmers in Ontario. Municipalities and regions are granted immediate funding and tax breaks to support their local community projects and initiatives. $100M is being granted to Employment Ontario to offer skills training for workers affected by COVID-19.

$10 billion is being allocated to improving cash flow, including matching the federal government’s 5-month interest and penalty-free period to pay provincial taxes for both individuals and businesses. The Employer Health Tax is increasing the exemption threshold to $1 million for 2020, and providing a 10% refundable Corporal Income Tax credit for businesses that invest in regions with lower-than-average employment growth.

Measures Related to Ontario Businesses

Electricity Relief

The government is supporting people and businesses with the costs of electricity during the COVID‐19 outbreak. That is why the government is:

  • Supporting more affordable electricity bills for eligible residential, farm and small business consumers, by providing approximately $5.6 billion for electricity cost relief programs in 2020–21.
  • The Province is also setting electricity prices for residential, farm and small business time‐of‐use customers at the lowest rate, known as the off‐peak price, 24 hours a day for 45 days to support ratepayers in their increased daytime electricity usage as they respond to the COVID‐19 outbreak, addressing concerns about time‐of‐use metering.

Employer Health Tax

The government is cutting taxes by $355 million for about 57,000 employers by proposing a temporary increase to the Employer Health Tax (EHT) exemption from $490,000 to $1 million for 2020. With this plan, more than 90 per cent of private‐sector employers would not pay EHT in 2020. Eligible private‐sector employers with annual payrolls up to $5 million would be exempt from EHT on the first $1 million of total Ontario remuneration in 2020. The maximum EHT relief from the exemption would increase by $9,945 to $19,500 for 2020 for eligible employers. About 57,000 private‐sector employers would pay less EHT, including about 30,000 who would not pay any EHT for 2020, effectively eliminating EHT for these employers for one year. The exemption would return to its current level of $490,000 on January 1, 2021.

Regional Opportunities Investment Tax Credit

  • To support business investment in regions of the province where employment growth has been significantly below the provincial average, Ontario is proposing a new 10 per cent refundable Corporate Income Tax credit.
  • The Regional Opportunities Investment Tax Credit would be available to eligible businesses that construct, renovate or acquire qualifying commercial and industrial buildings in designated regions of the province, saving them up to $45,000 in the year.

$6 Billion in Tax Deferrals

To help support Ontario businesses when they need it most, the government is providing a five‐month interest and penalty‐free period for businesses to make payments for the majority of provincially administered taxes. Beginning April 1, 2020, the Province is providing flexibility to about 100,000 businesses in Ontario to help manage their cash flows during this challenging time. This will continue for a period of five months, up until August 31, 2020, and is expected to make available $6 billion to improve the cash flows of Ontario businesses. For this period, the Province will not apply any penalty or interest on any late‐filed returns or incomplete or late tax payments under select provincially administered taxes, such as the Employer Health Tax, Tobacco Tax and Gas Tax. The initiative and relief period complement the relief from interest and penalties from not remitting Corporate Income Tax owing that was announced by the federal government on March 18, 2020.

$1.9 Billion in Workplace Safety Expenses

Working in conjunction with the government of Ontario, the Workplace Safety and Insurance Board (WSIB) will allow employers to defer payments for a period of six months. This will provide employers with $1.9 billion in financial relief. All employers covered by the WSIB’s workplace insurance are automatically eligible for the financial relief package. Schedule 1 employers with premiums owed to the WSIB will be allowed to defer reporting and payments until August 31, 2020. The deferral will also apply to Schedule 2 businesses that pay WSIB for the cost related to their workplace injury and illness claims. In addition, no interest will be accrued on outstanding premium payments and no penalties will be charged during this six‐month deferral period.

Personal Support Measures

Several measures were announced, including:

  • $75 million in additional support for 194,000 low-income seniors by doubling the Guaranteed Annual Income System (GAINS) maximum payment to $166 per month for individuals and $332 per month for couples for six months, starting in April 2020
  • Helping families pay for extra costs associated with school and daycare closure during the COVID 19 outbreak by providing a one-time $200 payment per child up to 12 years of age, and $250 for those with special needs, including kids enrolled in private schools
  • Providing six months of Ontario Student Assistance Program (OSAP) loan and interest accrual relief for student borrowers, in partnership with the federal government
  • Providing new, additional support of $26 million to Indigenous peoples and communities, including emergency assistance for urban Indigenous people in financial need and costs for health care professionals and critical supplies to reach remote First Nations
  • $200 million in new funding to provide temporary emergency supports for people in financial need as well as funding to municipalities and other service providers so they can quickly respond to local needs
  • $9 million in direct support to families for their energy bills by expanding eligibility for the Low income Energy Assistance Program (LEAP) and ensuring that their electricity and natural gas services are not disconnected for nonpayment during the COVID 19 outbreak

Source: IBAO