Finance Minister Charles Sousa today introduced the Province of Ontario’s 2016-17 Budget.

The budget’s main focus being on climate change, infrastructure and post-secondary tuition assistance.

Economic Outlook

Courtesy of lower oil prices and with Ontario’s export-driven manufacturers benefitting from a weak Canadian dollar, the economy is performing well, with real growth of 2.5% last year and a forecast of 2.2% real growth for 2016 and 2.4% in 2017. Most of Ontario’s economic indicators are trending in the right direction, including those with relevance to retail, such as job-creation, household spending and new housing starts.

With increased tax revenues (and reduced social spending) arising from this growth, the Ontario government is standing by its forecast for a balanced budget next fiscal year (i.e., in 2017-18). If this forecast is borne out, it will mark the first time in ten years that Ontario’s books will be in balance.


The major taxation measure is the introduction of a cap and trade program for carbon emissions, which is expected to yield $1.9 billion at auction in 2017. This will be felt by retailers in two ways. First, increased costs for large final emitters (“LFEs”) will inevitably be felt in higher prices for natural gas and also in the cost of products from heavy industry (metals, concrete, automobiles and so on).

The second impact will be at the pumps, with an anticipated 4.3 cents/litre added cost on unleaded gasoline and 7 cents/litre added cost on diesel, the latter also having an impact on the cost of transportation of goods. Note that these are not direct tax increases but rather the estimated cost that is expected to be passed down to consumers at the pumps.

Otherwise, the budget is pretty quiet on taxation measures, with some increases to tobacco and alcohol products, including wine. There is also a tightening of the tax credits on R&D expenditures.

Measures of Particular Interest

The government is eliminating the electricity Debt Retirement Surcharge (“DRC) on Ontario businesses on April 1, 2018 (rather than on January 1, 2019 as had originally been scheduled). This charge was already eliminated for residential electricity customers at the beginning of 2016.

For retailers offering automotive services, the $30 Drive Clean emissions test fee is being eliminated in 2017.

Retailers who supply materials for home renovation will note the $100 million investment in home retrofits, such as replacing furnaces and water heaters and upgrading insulation. However, the Healthy Homes Renovation Tax Credit (HHRTC) for seniors will be eliminated at the end of 2016, after disappointing take-up.

If you have any questions or concerns, please don’t hesitate to contact: Dave Wilkes, Senior Vice President Government Relations and Grocery Division at: [email protected] or 416-467-3767 or Alison Baxter, Director, Health & Wellness and Industry Relations at: [email protected] or 416-467-3765