Little cheer for manufacturing in budget

The industry is disappointed in federal Finance Minister Jim Flaherty's budget, released on Tuesday. While it does extend the Accelerated Capital Cost Allowance for an additional three years, for example, the two year depreciation will be available for only one additional year and then switches to 40 percent and 30 percent for the remainder of the program.

“In a budget loaded with a variety of carefully targeted tax cuts and spending initiatives, there is disappointingly little relief for plastics and other manufacturers,” observed CPIA president Serge Lavoie. “This is not a budget that goes out of its way to recognise the problems faced by the manufacturing sector and it probably signals this government's intention to let manufacturing activity decline as a result of our strong currency and increased global competition.”

The capital cost allowance falls short of industry's request for two year depreciation over the full five years of the program, which was a recommendation among the 22 contained in an all-party report on manufacturing released last year by the Standing Committee on Industry, Science and Technology.

The SR&ED tax credit system is being adjusted, with a 10 percent allowance for international collaborative research. The expenditure limit for R&D spending by Canadian owned privately held companies goes up from $2-million to $3-million, and the upper limit for taxable capital and income phase-out are up to $50-million and $700,000 respectively. The total benefit of these measures will be $70-million through 2009, which again is short of industry recommendations to make Scientific Research & Experimental tax credits refundable, to extend the credit to pre-commercialisation activity, and provide an allowance for collaborative research.

“The minister announced a new R&D innovation fund worth $250-million over the next five years,” Lavoie adds. “How this fund will be targeted isn't clear, although reference was made to green technologies which may or may not limit its application to the plastics value chain.”

Lastly, there were no initiatives to provide an employers' training tax credit creditable against Employment Insurance premiums. This, too, was an industry recommendation supported by the manufacturing study.

“To echo the sentiments of Jayson Meyers, president and CEO of the Canadian Manufacturers and Exporters,” Lavoie notes, “members of the Canadian Manufacturing Coalition, of which CPIA is a member, have a lot more work ahead convincing this government that our sector is innovative and adds considerable economic value to the country.”

www.cpia.ca