The Future of Incentives in Ontario

The Future of Incentives in Ontario

An article in Wednesday’s Globe and Mail discussed the statistics surrounding the Ontario Interactive Digital Media Tax Credit (OIDMTC) and how Ontario is looking at adjusting this credit. The adjustment to the credit stems around the fact that the results of the OIDMTC are not aligned with the goals of the Ontario Government.

Ontario’s goal is to encourage digital companies to operate and invest in infrastructure in Ontario, creating a larger tax base and more revenue to help offset the increasing costs of government projects (healthcare, infrastructure, etc.). The problem is that banks, insurers and print publishers have been taking advantage of this credit as well. Of note, none of these companies have been filing illegal or fictitious claims; these companies qualify for the OIDMTC based on the current legislation.

The questions become:

  1. How/when will Ontario adjust the current offering of credits to companies?
  2. Will Ontario only adjust the OIDMTC?
  3. Will Ontario adjust the provincial SR&ED tax credits as well?

You will note that the first question is how/when, not if. Based on the current fiscal situation of Ontario and Canada as a whole, I think the adjustment is inevitable. The bigger concern is exactly how the credits will be adjusted.

In my opinion, Ontario should review their mandate and decide exactly what type of business they want to attract to the province. Some of the keys determinants should include the size and industry of the companies. I think, however, that the key component is simple; which companies/industries will attract the best and brightest young talents to Ontario. It is these young talents that will help grow the economy and the population, both of which are needed to offset our aging workforce and increased government spending requirements.

Joshua Smith, CA, CPA
Manager, Tax, Welch LLP

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