Despite the delivery of a balanced spending blueprint, the last federal budget before the fall election tabled by the Harper government this week still managed to include some key measures aimed at manufacturing and small businesses. The government states that actions already taken, including those proposed in its Economic Action Plan 2015, will reduce taxes for job-creating businesses by $14.7 billion in 2015–16.
Small businesses will see their tax rate fall from 11% to 9% by 2019, and manufacturers will benefit from an accelerated Capital Cost Allowance (CCA) that will allow businesses to write off new equipment faster. The Canadian Federation of Independent Business, which had lobbied hard for the tax cut, as well as several other measures included in the 2015 budget, gave the pre-election budget an ‘A’ grade.
The tax support for investment in machinery and equipment proposed in the budget will provide manufacturers with accelerated CCA at a rate of 50% on a declining-balance basis for eligible assets acquired after 2015 and before 2026. By allowing a substantially faster write-off of eligible investments than the usual 30% rate, this enables businesses to defer taxes and recover the cost of capital assets sooner (e.g., more than 90% of the asset’s cost will have been deducted in just four years). The government expects the deferral of tax associated with the accelerated CCA to save manufacturers $1.1 billion over the period from 2016–17 to 2019–20.
Starting in 2017 and running for seven years thereafter, the government also plans to implement a new “break-even” Employment Insurance premium rate-setting mechanism that aims to further reduce the EI rate by more than 20% from the current rate of $1.88 per $100 of insurable earnings to an estimated $1.49 in 2017.
To support the automotive industry, the budget will provide up to $100 million over five years, starting in 2015–16, to support product development and technology demonstration by Canadian automotive parts suppliers, both through the new Automotive Supplier Innovation Program and the existing Automotive Innovation Fund. Canada’s aerospace supply chain will benefit from creation of a new Technology Demonstration Program with funding of $110 million over four years beginning in 2014–15, and $55 million annually thereafter, drawn partly from the existing $1 billion dollar Strategic Aerospace and Defence Initiative.
The budget proposes to provide more than $1.5 billion over five years starting in 2017–18 to advance the government’s science, technology and innovation strategy’s objectives, including long-term sustained advanced research support through the Canada Foundation for Innovation and the federal granting councils.
Having unilaterally eliminated more than 1,800 tariffs since 2009, resulting in over $450 million in annual duty relief on inputs for manufacturers, no additional tariff provisions are contained in the latest budget, but the government states it “will continue to work with Canadians to identify further opportunities for tariff liberalization.”
The government also states that as part of its Economic Action Plan, it will further modernize Canada’s intellectual property framework by proposing amendments to the Patent Act, Trademarks Act and Industrial Design Act to provide intellectual property agents with a statutory privilege for confidential communications with clients. This measure it says will bring Canada’s framework in line with other common law countries such as Australia, New Zealand and the United Kingdom. Other unspecified amendments will also be proposed to “modernize administrative practices and increase clarity and legal certainty for businesses.”