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Rural Ontario’s Investment Challenges

Much has been written about the plight of rural America and the under investment and decay in this part of the country. Globalization has caused a hollowing out of much of the industrial base, bringing with it an urban/rural divide that has created tremendous social and economic problems. This is a global phenomenon and rural Ontario is not immune. The province has seen its rural communities devastated by plant closures and job losses over the past twenty years. As cities like Toronto attract global investments like magnets, much of rural Ontario struggles to bring in the necessary capital to support small and medium sized businesses (SMEs). Both the Ontario Chamber of Commerce and the Canadian Manufacturers & Exporters have highlighted these challenges recently in an attempt to shine a light on growing economic disparities.

The good news is that rural Ontario has incredible potential. Direct access to the booming GTA and the short distance to the U.S. export market should be a winning combination, but attracting capital remains a challenge for rural SMEs. There are policy measures the Ford government can pursue to change that, facilitating the creation of capital pools dedicated to rural Ontario. Several U.S. States have been experimenting with rural investment tax credits to do that, with very positive results. If structured properly, an investment tax credit can encourage institutional investors to pool their resources in order to better support rural investments. That is precisely what Ohio is doing with tremendous success. The state’s economy shares many similarities with Ontario and adopting similar tax measures could provide a significant boost to rural communities across the province.

Tax measures by their very nature do not pick winners and losers, unlike legacy programs that provide cash grants to proponents that meet program parameters regardless of their economic or commercial merit. A tax credit can only be monetized if the proponent deploys capital and creates jobs. In this scenario there is little or no risk to the provincial treasury if a proponent fails to be successful. These types of tax credit programs have now been adopted in several U.S.
States as policies designed to redirect investment capital to rural communities and bolster local
economies.

We believe that the Ford government should take a serious look at these important tax policy instruments that could give rural Ontario exactly what is needed – access to capital which grows local businesses.

Rural Opportunity and Investment Coalition

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