Analyzing Canada’s 2024 Budget: Implications for Ontario’s Business Community
On April 16, 2024, the Government of Canada unveiled its 2024 Budget, aptly named "Fairness for Every Generation." This budget presents a significant roadmap for various sectors, particularly for Ontario’s vibrant business community. Here’s a look at the highlights, focusing on housing, innovation, economic reconciliation, taxation, health care, workforce development, and the creative industries.
Housing
Housing affordability continues to be a pressing issue across Canada, prompting the government to allocate a cumulative $8.5 billion in new funding aimed at constructing 3.87 million new homes by 2031-32. The package includes vital support measures such as grants, tax incentives, and substantial investments into apartment construction loans and infrastructure funding, including $15 billion for rental apartments and $6 billion for water and wastewater systems. The Housing Accelerator Fund is set to expedite the building efforts, projected to create 750,000 new homes with a total spend of $4.4 billion.
Moreover, the budget seeks to preserve affordable housing through a $1.3 billion investment in Canada’s Homeless Strategy and initiatives to assist non-profits in acquiring rental properties. For builders, the capital cost allowance for purpose-built rentals will increase from 4% to 10%, incentivizing the construction of new properties.
OCC Analysis
The Ontario Chamber of Commerce (OCC) commends the government’s dedication to addressing the housing crisis. Emphasizing that persistent supply-side measures are essential to alleviating the affordability crisis, the OCC welcomes initiatives promoting collaboration with non-profits and targeting the missing middle housing gap.
Research, Innovation, and Productivity
The 2024 budget introduces several key initiatives to boost economic innovation. A whopping $2.4 billion will fund various measures surrounding artificial intelligence (AI), including a new AI Compute Access Fund and support for businesses to adopt AI solutions in different sectors.
Furthermore, the budget allocates $725 million to incentivize innovation investments and $600 million for enhancements to the Scientific Research and Experimental Development (SR&ED) tax incentive program.
OCC Analysis
Recognizing the significance of AI in shaping future business landscapes, the OCC encourages the government to expedite the review of the SR&ED tax credit. The need for a comprehensive innovation strategy, particularly for commercialization and scaling tech solutions, is also emphasized.
Economic Reconciliation
In efforts to further economic reconciliation, the budget outlines a $5 billion national Indigenous Loan Guarantee Program aimed at enhancing access to capital for Indigenous communities. This includes additional funding to address housing and infrastructure gaps in First Nations, Inuit, and Métis communities.
OCC Analysis
The OCC voices strong support for the National Indigenous Loan Guarantee Program, seeing it as a meaningful step towards dismantling barriers historically faced by Indigenous communities. However, further collaborative efforts with provinces and private sectors to meet infrastructure needs are highlighted as essential.
Taxation
The budget proposes increasing the capital gains tax rate, which could have significant implications for private sector investment by potentially discouraging entrepreneurs and investors. However, to support small business growth, a Canadian Entrepreneurs’ Incentive is set to reduce the capital gains inclusion rate to one-third on a lifetime maximum of $2 million.
OCC Analysis
The OCC expresses concern over the proposed capital gains tax hike, warning that it may hinder private investments crucial for economic growth. It advocates for comprehensive tax system reforms aimed at increasing competitiveness while stressing the importance of returning fuel charge proceeds to support small businesses facing liquidity challenges.
Health Care
Continuing the rollout of pre-existing measures, the budget includes $1.5 billion for the National Pharmacare Plan and allocates $500 million for a Youth Mental Health Fund. Additionally, funding for the integration of internationally-educated healthcare professionals is earmarked to address skill shortages in the sector.
OCC Analysis
While the OCC expresses support for mental health initiatives, it critiques the limited scope of the National Pharmacare Plan, calling for a broader approach to fill existing gaps in healthcare coverage.
Workforce Development
A range of initiatives aims to improve labor force participation and skill development. Key projects include funding for the Foreign Credential Recognition Program, work-integrated learning opportunities, and supporting youth employment through 90,000 new job placements.
OCC Analysis
The OCC welcomes investments in workforce enhancement but urges targeted actions to ensure that the labor supply meets evolving market needs, suggesting improvements to Employment Insurance policies and international student permit reforms.
Creative Industries
The budget includes financial support for the creative sectors, allocating $31 million for the Canada Arts Presentation Fund, as well as significant funding for events like the Toronto International Film Festival.
OCC Analysis
Acknowledging the challenges faced by creative industries post-pandemic, the OCC sees federal investments as critical for the sector’s revival and sustainable growth.
Fiscal Outlook
With $53 billion in new spending announced over five years, the budget reflects a commitment to fiscal responsibility while projecting a deficit of $40 billion for 2023-24. As economic growth appears resilient—alongside continued investments—long-term fiscal strategies are crucial.
OCC Analysis
Despite optimistic forecasts, the OCC cautions against relying solely on tax hikes to fund spending, advocating for prioritization of measures that drive productivity instead.
Final Remarks
While the 2024 Budget presents various initiatives aimed at crucial areas such as housing, innovation, and workforce development, the OCC advocates for a balanced approach that considers the long-term implications on investment and economic growth. The sectors highlighted not only resonate with Ontario’s business community but also indicate a broader vision for a sustainable and equitable economic future across Canada.
