The province is lowering tax and hydro costs for businesses and extending the legality of alcohol delivery from restaurants
On November 5, 2020, Ontario finally released its 2020 provincial budget and it brings good news for the province’s food and beverage and hospitality industries.
In particular, the steps taken to support those industries were applauded by the Ontario Restaurant, Hotel, and Motel Association (ORHMA), which has advocated over the past months for more help to be offered. 2020 has been a tough year with a long and painful road ahead for recovery for the industry. ORHMA says the budget tabled today sets the tone for success for those in the hospitality industry who face high expenditures and includes initiatives that are much needed.
2020 Ontario budget highlights for the foodservice industry
Business Education Tax (BET)
The government will lower high Business Education Tax (BET) rates from 1.25% to 0.88% for a vast majority of businesses while offering a $5,000 reduction in small business tax relief. 94% of businesses in Ontario will see a reduction in their property taxes, by standardizing the Business Education Tax. What businesses currently pay depends on their location and will average a rate of 0.98%. This tax reduction was directed specifically for businesses in the hospitality sector and was a top priority in ORHMA’s Relief Plan submitted to the government. These reductions will result in $450K in annual savings to the business community starting in January of 2021.
There will also be options for allowing municipalities to match deductions. Further property tax reductions for small businesses are announced and this is also good news. It will be up to each municipality to define the size of small business.
Beginning January 1, 2021, the renewable energy contracts that significantly make up the Global Adjustment Cost of a hydro invoice will be paid by the provincial government, not the business.
Hotels and restaurants will see healthy monthly savings, expected at approximately 14-16% for an average business. All hospitality operations have been hit hard with the Global Adjustment costs over the years and paying such expenses during these critical times has been tough.
Employer Health Tax (EHT)
Prior to the COVID-19 crisis, eligible employers in Ontario were paying a health tax over the first $490,000 of payroll. During the COVID-19 pandemic, the provincial government made a temporary EHT threshold exemption, increasing it to $1 million for the year 2020 during this crisis.
Today’s budget has announced that the $1 million threshold exemption will be made permanent. ORHMA’s advocacy drove the message that many small business employers have been under the set exemption due to ongoing minimum wage increases therefore were not eligible to pay the EHT. Since 2004, the minimum wage has increased by 96% yet the EHT exemption amount has not changed, forcing small businesses to incur significant payments to the EHT. The government estimates that 90% of businesses will not pay any EHT with this threshold.
Tourism expense rebate
Committing to provide Ontario residents with support of up to 20% of eligible Ontario tourism expenses encouraging Ontarians to safely discover Ontario in 2021, which has been designated as year of the Ontario staycation.
Beverage alcohol with delivery and takeout
As expected, the government has announced that the sale of beverage alcohol with delivery and takeout orders will be made permanent.
- Connecting workers in the tourism and hospitality sector and others most affected by the pandemic to training and jobs with an investment of $180.5 million over three years, including a skilled trades strategy, an additional $100 million of dedicated investments through Employment Ontario for skills training, a redesigned Second Career program, and $59.5 million to acquire in-demand skills.
- Freezing beer tax and mark-up rates until March 1, 2022 and proposing to retroactively cancel the increase in wine basic tax rates legislated to occur on June 1, 2020. The government issued an order under the Financial Administration Act during the state of emergency that prevents that increase from being applied between June 1, 2020 and December 31, 2020. The government is also directing the LCBO to not proceed with the scheduled wine mark-up.
- Providing a six-month interest- and penalty-free period to make payments for most provincially administered taxes, providing $7.5 billion in relief to help 100,000 Ontario businesses.
- The Workplace Safety and Insurance Board is allowing a six-month deferral of premium payments, providing up to $1.9 billion in financial relief to employers.
- Investing $100 million over two years for the Community Building Fund to support community tourism, cultural, and sports organizations that are experiencing significant financial pressures due to the pandemic.