2013 Ontario Budget – Rumblings Over Tax Credits

May 2, 2013 SRED

Reference Article (>5 Years Old)

Please note that the information herein may be outdated, links could be inactive, and policies discussed may have evolved. For the most current data, consult our latest publications. If you would like us to refresh this article as it is of interest to you, please contact us.

Ontario Budget 2013 - What was the impact on Ontario's Tax Credits? — Ontario Budget 2013 – What was the impact on Ontario’s Tax Credits?

Today, at 4pm EST, the Ontario government released its proposed budget to the public. A number of different initiatives were announced this year, but we want to focus on both the Scientific Research and Experimental Development and Ontario Interactive Digital Media Tax Credit programs.

A copy of the budget can be found from this page: Ontario Budget

SR&ED

No changes to the provincial portion of the SR&ED program were indicated at this time. Both the Ontario Innovation Tax Credit (OITC) and the Ontario Research and Development Tax Credit (ORDTC) remained at 10% (refundable) and 4.5% (non-refundable) at this time. The budget did include a chart (below) indicating that ~$250,000,000 in government assistance was provided for R&D tax credits. This amount has experienced relatively low growth in the past 10 years, growing from $180 million to the current $260 million dollars.

OIDMTC

The Ontario Media Development Corporation (OMDC) is the organization which supports and funds the Ontario Interactive Digital Media Tax Credit (OIDMTC). It was barely mentioned at all in the budget, and as such there are no immediate changes to the OIDMTC. Media spending (including film credits and other programs), is expected to exceed $400 million this year. This is a huge jump compared to the F2012 budget, which allocated ~$300 million to the media assistance programs.

Other R&D

The government has indicated it would like to expand research capacity through the Research Infrastructure program at the Ontario Research Fund. Specific details were not provided in this budget however. In addition, the government has been focusing a lot of attention on Youth Employment programs, some of which are targeted for research activities such as the Ontario Youth Innovation Fund. No specific details on this were included in this budget.

Chart 1.26: Refundable Business Tax Credits

This bar chart shows that Ontario’s refundable business tax credits support media production, research and development, and training. In 2003–04, business tax credits provided almost $270 million in business support and in 2012–13 they are estimated to have grown to over $940 million — representing an average annual growth rate of 15 per cent.

Looking to the Horizon

Interestingly, the government included a rather forboding quote from a recent study that was conducted. The Commission on the Return of Ontario’s Public Services released its report in February of 2012 called Public Services for Ontarians: A Path to Sustainability and Excellence.

The level of support provided through tax credits may have made sense at a time when provincial tax rates were high and credits could help make Ontario more competitive for business investment. It makes less sense when Ontario’s tax system is already competitive for business investment because of major tax reforms.

Although no changes are indicated in this budget, by including this recommendation, it may indicate that the Ontario government is looking at revising some (or all) of its generous tax credit program.