Canadian Manufacturing

$2 billion in biz subsidies on Ontario’s chopping block

More than $2 billion in direct business subsidies are on the line as Ontario's cash-strapped Liberal government looks to trim a $16-billion deficit.



TORONTO—More than $2 billion in grants, tax credits and other direct business subsidies are on the line as Ontario’s cash-strapped Liberal government looks to trim a $16-billion deficit.

The government is reviewing at least 50 business support programs worth about $1.3 billion a year, plus another $1 billion annually in business tax credits, Economic Development Minister Brad Duguid said Tuesday.

“Until we complete this deep dive into these programs and identify which we want to retain and which ones we want to discontinue, and until we rejig the administration process and make it more efficient, we won’t know exactly how much savings,” Duguid said in an interview.

“But we know hundreds of millions of dollars should be there in savings.”

Economist Don Drummond, who was hired by the Liberals to review all government programs and services to find efficiencies, said “business subsidies are often not an efficient use of public resources and have done little to raise living standards.”

“The outcomes of these programs are often vague and difficult to measure,” concluded Drummond.

Many of the tax credits and grants for businesses were introduced before Ontario reduced its corporate and capital tax rates and introduced the HST, which also lowered costs for businesses, said Finance Minister Dwight Duncan.

“What Drummond told me was Ontario now has a very competitive tax system at 11.5 per cent and therefore you should start getting rid of some of these tax credits,” said Duncan.

The Progressive Conservatives said the government should stop using business subsidies to pick winners and losers, and implement all of Drummond’s cost-saving recommendations.

“We haven’t seen where the $200 million or $300 million in cuts is coming from, but we think the government could go further and eliminate corporate welfare altogether in Ontario,” said Opposition economic development critic Monte McNaughton.

Drummond specifically targeted the $345 million a year that goes to Ontario’s horse racing industry as a share of slot machine revenue as a “subsidy” that could be cut.

The economist also called for the elimination of tax credits and breaks for Ontario’s mining sector, but Duncan said people would have to wait until next month’s budget to see exactly which credits would survive.

Drummond pointed out that 60 per cent of all film and television production spending in Ontario was subsidized by federal and Ontario film tax credits and grants, but Duncan said they will be protected.

“The only ones we won’t touch are the film tax credits,” said Duncan.

“They actually work. Toronto has had the best year they’ve ever had and people in the industry attribute it to those (tax credits).”

Drummond also recommended Ontario make a clean break from all its business support programs and start over. But Duguid suggested they may not go that far.

One goal of the review will be to house all the business support programs under one office, making it much easier for people to navigate their way through the system, said Duguid.

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