Ontario budget 2023 offers small, medium suppliers tax credits

While Ontario Finance Minister Peter Bethlenfalvy delivered a rousing speech that took MPPs on a virtual winding road trip — a victory lap, of sorts — of automotive investment in the province, the budget he tabled Thursday was light on new money, incentives and tax breaks for the industry.

Bethlenfalvy highlighted virtually every auto investment announced in the province over the last three years or so. From the $5-billion EV battery plant being built by Stellantis and LG Energy Solution in Windsor, to Magna’s nearly $500-million expansion of several plants announced earlier this year, to Volkswagen’s March 13 announcement that it will build its EV battery plant in St. Thomas, the minister didn’t miss an opportunity to pat his government on the back for a number of investments.

Frank Notte, government relations director for the Trillium Automobile Dealers Association, which represents 1,100 franchised, new-car dealers in Ontario, praised the recap on Twitter.

But once the budget was available for public perusal, there was but one new item designed to help the auto industry. And even it was announced a day before Bethlenfalvy tabled the document.

Ontario manufacturers, which include some in the auto sector, would be able to get up to $2 million a year through a new tax credit the government is proposing in its budget.

The 10-per-cent, refundable corporate income tax credit could be used by Canadian-controlled private corporations with a permanent location in Ontario on qualifying investments in buildings, machinery and equipment for use in manufacturing or processing.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, said the credit is another piece of a larger economic puzzle that makes Ontario attractive to manufacturers. 

“Major, prospective auto investors look at the long-term cost of doing business, the stability of the region’s finances, labour market availability, and how clean its energy mix is,” he said. “This is a balanced budget that doesn’t raise red flags about future tax increases, a budget with an Ontario-made manufacturers tax credit that reduces the cost of capital investment for small- and medium-sized companies, a major reinvestment in the skills development fund and progress towards utility battery storage and cost reduction to industrial users of renewable sources of energy.”

Volpe said the budget item proves the Ontario government “continues to show how serious it is about reducing the cost of business” and called it “a real-life action that works.”

Canadian Vehicle Manufacturers’ Association CEO Brian Kingston, who represents the interests of the Detroit Three automakers in Canada, also says the credit will help the auto industry.

Kingston called the measure "a good first step in Canada’s response the U.S. Inflation Reduction Act (IRA), and we look forward to further actions to keep Canada competitive.” 

He’s looking for more countermeasures in the next federal budget, to be tabled March 28.

Premier Doug Ford, along with his finance and economic development ministers, announced the tax credit Wednesday in Oakville, Ont., one day before the budget was set to be tabled.

"This new tax credit will help local manufacturing companies grow, innovate, become more competitive, and most importantly, create good-paying jobs," Ford said.

The government estimates the Ontario Made Manufacturing Investment Tax Credit would cost $780 million over three years. It would be available for qualifying investments of up to $20 million a year.

Dennis Darby, president and CEO of Canadian Manufacturers & Exporters, said his group supports the new tax credit.

"This new credit will go a long way to broadening our industrial strategy _ providing predictable funding for essential equipment purchases and increased productivity to enable business growth," Darby wrote in a statement.

Ontario is also investing an additional $6 million over the next two years into a program that helps junior mining companies finance mineral exploration and development.

The investments build on the government's critical minerals strategy, which aims to grow the sector and make Ontario a leading producer of critical minerals — including those in the Ring of Fire in the province's north.

The budget says critical minerals are essential for products Ontarians rely on, like cell phones, electric vehicles and semiconductors in goods.

With files from the Canadian Press.