Ontario trims R&D tax credits but leaves film/TV unchanged

However, Interactive Ontario has issued a statement noting the reduction in two innovation-related tax credits is "cause for concern."
: Queen's Park Legislature, Toronto, Still The Oldie

Those in Ontario’s film and television industry likely breathed a sigh of relief Thursday, as the provincial government left its film and television tax credits untouched in the 2016 budget.

The province, did, however, make proposed cuts to both the Ontario Research and Development Tax Credit (ORDTC) and the Ontario Innovation Tax Credit (OITC). The OTIC is a refundable tax credit eligible companies can claim for qualified expenditures on scientific research and experimental development performed in Ontario. The ORDTC, meanwhile, is a non-refundable tax credit for eligible scientific research and experimental development performed in Ontario that corporations can use to reduce their income tax payable.

In Thursday’s budget, the OTIC tax credit rate was reduced from 10% to 8%, with the ORDTC reduced from 4.5% to 3.5%. The changes in the tax credit rates would be prorated for taxation years straddling June 1, 2016. In the budget, the Ontario government said the savings from the proposed tax credits would be reinvested into three new technology-focused investments. These initiatives include a $35 million investment over five years to establish an Advanced Manufacturing Consortium, which would be an industry-academic partnership including McMaster, Waterloo and Western focused on industrial innovation projects, a $50 million investment in theoretical physics research centre The Perimeter Institute and a $20 million commitment over three years to help colleges and Ontario companies better collaborate on applied research projects.

Interactive Ontario largely applauded the provincial budget and its emphasis on supporting increased exports, investing in skilled talent and innovative small business. It did note, however, that the cuts to the OITC and the ORDTC is a “cause for concern,” adding that “Ontario IDM companies will not benefit from the redirection of the proposed tax credit savings into other key Ontario sectors.”

“The proposed change in the OITC and ORDTC rates effectively amount to a reduction of more than 20% in tax credits aimed at supporting research and innovation in Ontario. This makes Ontario less competitive when it comes to attracting R&D investments and will particularly hurt Ontario small businesses and startups which rely on these tax credits to employ highly skilled Ontario talent,” said Alexei Gavriline, president, Mobile Capital Network, in a release issued by Interactive Ontario Thursday.

Last year’s Ontario budget included renewed support of the Interactive Digital Media Fund program, with the province investing $6 million in 2015/16 and $10 million after that to “to help support some coproduction opportunities and activities that would not be eligible for the Ontario Interactive Digital Media Tax Credit (OIDMTC).” That budget also included a narrowing of what projects qualified for the Ontario Interactive Digital Media Tax Credit.

Two production-related tax credits were also cut in the last edition of the budget. The Ontario Production Services Tax Credit, which provides key subsidies to foreign producers, was cut from a 25% refundable all-spend to 21.5% for qualifying production expenditures. The Ontario Computer Animation and Special Effects Tax Credit was also cut from 20% to 18%.

Photo credit: Queen’s Park Legislature, Toronto, Still The Oldie, Flickr Creative Commons