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Action to Support Businesses and Communities
Canada's Economic Action Plan protects jobs and supports structural adjustment during this extraordinary crisis with $7.5 billion in additional support for sectors, regions and communities.
Highlights
- Once the Budget Implementation Act, 2009 receives Royal Assent, $500 million of the $1-billion Community Adjustment Fund will be available to support economic adjustment and diversification initiatives in communities hardest hit across Canada.
- The Canada Revenue Agency is administering the increase in the amount of small business income eligible for the reduced federal tax rate to $500,000, which took effect on January 1, 2009.
- The Canada Revenue Agency is administering the temporary accelerated capital cost allowance rate for investment in computers, which took effect after January 27, 2009.
- Tariff eliminations came into force on a range of imported machinery and equipment on January 28, 2009.
- The Industrial Research Assistance Program will ramp up its support to small and medium-sized firms starting April 1, 2009, with a doubling of its contributions budget.
- The Canada Revenue Agency will administer the one-year extension of the temporary Mineral Exploration Tax Credit when it comes into effect April 1, 2009.
A Business Tax Advantage for Long Term Prosperity
A competitive business tax system that is responsive to changes in the economic environment is important to encourage new investment, growth and job creation in all regions of Canada.
The measures proposed in the Economic Action Plan build on the significant business tax reductions introduced by the Government since 2006, including reductions in the general corporate income tax rate to 15 per cent by 2012 from 22.12 per cent (including the corporate surtax) in 2007, with a scheduled reduction to 19 per cent in 2009. As a result of these tax reductions, Canada will have the lowest overall tax rate on new business investment in the G7 by next year and the lowest statutory tax rate in the G7 by 2012.
Canada's Economic Action Plan proposed to:
- Introduce a temporary two-year 100-per-cent capital cost allowance (CCA) rate for computers acquired after January 27, 2009 and before February 1, 2011.
- Extend the temporary 50-per-cent straight-line accelerated CCA rate to manufacturing or processing machinery and equipment acquired in 2010 and 2011.
- Undertake consultations with stakeholders and provinces on the desirability and feasibility of implementing an arrivals duty-free program at Canada's international airports.
The temporary accelerated CCA rate for investment in manufacturing or processing machinery and equipment, and the temporary 100-per-cent CCA rate for investment in computers, will contribute to boosting Canada's productivity through the faster adoption of newer technology and by encouraging the retooling needed by businesses to emerge even stronger and better equipped to compete globally as the economy recovers.
To date, significant progress has been made:
- The Canada Revenue Agency is administering the accelerated CCA for investment in computers based on the Economic Action Plan proposal. The amendments to the Income Tax Regulations that are required for this measure, and the extension of the temporary 50-per-cent straight-line accelerated CCA rate for manufacturing or processing machinery and equipment acquired in 2010 and 2011, are currently being processed for submission to Treasury Board and publication in the Canada Gazette.
- The consultations with stakeholders and provinces on the desirability and feasibility of implementing an arrivals duty-free program at Canada's international airports have been launched.
Other tax measures of a more technical or administrative nature are also being administered by the Canada Revenue Agency or steps are being taken to implement them, as noted at the end of this chapter.
Tariff Relief on Machinery and Equipment
Tariff Relief on Machinery and Equipment: In accordance with the Notice of Ways and Means Motion tabled with the Budget on January 27, 2009, tariffs on a range of machinery and equipment have been eliminated and related amendments to the Customs Tariff have been included in the Budget Implementation Act, 2009. This measure will represent savings for Canadian manufacturers worth more than $440 million over the next five years. The Canada Border Services Agency issued a notice to importers on January 27, 2009 to inform them of the coming into force of these changes on goods imported on or after January 28, 2009. The Government will undertake further consultations with industry to identify additional areas where tariff relief could be provided.
Customs Tariff Treatment of Temporarily Imported Containers: Proposed amendments to the Customs Tariff have been included in the Budget Implementation Act, 2009, to make two technical corrections related to the tax and tariff treatment of temporarily imported containers. Furthermore, a notice was issued in the February 7, 2009 Canada Gazette, Part I seeking the views of stakeholders on the further proposed modifications to the Customs Tariff treatment of temporarily imported containers to further liberalize the use of containers in Canada.
Sectoral Competitiveness
Forestry: Natural Resources Canada will begin making new additional commitments in support of market diversification and innovation initiatives for the forestry sector by summer 2009. A contribution agreement will be finalized with FPInnovations by spring 2009 to deliver one component of the forestry support with funding for its activities provided by summer 2009. A total of $170 million over two years was provided in the Economic Action Plan in support of the forestry sector through these initiatives.
Agriculture: The Economic Action Plan outlined four measures designed to provide support for Canada's agriculture sector, including funding of $500 million for an AgriFlexibility program to help the sector adapt to pressures and improve its competitiveness, and $50 million to support private investments that will contribute to reduced costs, increased revenues and improved operations of meat slaughter and processing plants in Canada. In addition, the Action Plan committed the Government to amend the Farm Improvement and Marketing Cooperatives Loans Act (FIMCLA) and to move toward devolution of the delivery of the AgriStability program to interested provinces. Authorities will be in place this spring for the AgriFlexibility and meat slaughter and processing investment programs with funds to flow later in the year. Amendments to the FIMCLA will be introduced this spring. Discussions with provinces are currently underway for the devolution of the AgriStability administration to interested provinces.
Shipbuilding: The Economic Action Plan allocated $175 million to the Department of Fisheries and Oceans (DFO) to support the shipbuilding sector through the procurement of 98 new Canadian Coast Guard vessels and vessel life extensions and refits for 40 aging vessels. DFO is finalizing the statement of requirements for the procurement of new vessels. For all vessels projects, Requests for Proposals will be issued in the spring.
The Automotive Industry: On December 19, the U.S. government introduced a US$17.4-billion loan package for General Motors (GM) and Chrysler. The Canadian and Ontario governments followed on December 20 to offer a C$4-billion liquidity loan package to the Canadian subsidiaries of GM and Chrysler.
Both GM and Chrysler drew down on immediate bridge financing from the U.S. government, which they indicated allowed them to sustain operations without using immediate Canadian support. Discussion with both companies continue.
The Government is currently reviewing the long-term restructuring plans submitted by General Motors and Chrysler to the U.S. government on February 17, 2009 and to the Canadian and Ontario governments on February 20, 2009. Decisions on federal support for the companies will continue to be guided by a commitment to work with the province of Ontario to secure a more competitive and sustainable industry in Canada. These actions are based on sound principles articulated in the Economic Action Plan, and include: focusing on long-term success, protecting taxpayers, making support available to a range of automotive firms, and ensuring the involvement of all stakeholders. As indicated in the Economic Action Plan, the Minister of Industry will develop, over the coming months, a principles-based strategy to position Canada's automotive sector for sustainable, long-term success.
Canada's Space Industry: In the summer of 2009, the Canadian Space Agency will issue a Request for Proposals for a number of industry-led projects to develop terrestrial prototypes of rovers and other robotic vehicles supported by the $110 million over three years provided in the Economic Action Plan. The agency will issue a contract in the summer of 2009 for the delivery, in early 2012, of a terrestrial prototype of a robotic on-orbit servicing system. Contracts for the rovers and robotic vehicles will be issued before fiscal year-end for delivery in early 2012.
Cultural Sector: Revised program guidelines to support infrastructure-related costs for local and community cultural and heritage institutions such as local theatres, libraries and small museums will be posted by April 2009 and contributions of $15 million are expected to be announced by October 2009. $20 million for the National Arts Training Contribution Program will support the highest calibre artistic institutions in Canada to train artists for professional careers. Confirmation of funding to organizations for 2009–10 will be provided in July 2009, once Parliamentary approval of the Supplementary Estimates (A) is in place.
Tourism: New support for the tourism sector will stimulate growth and help bring Canada to the forefront of the minds of travellers both here and abroad. This includes:
- By the summer of 2009, the Canadian Tourism Commission will receive the $20 million allocated for 2009-10 for domestic advertising and new activities in priority international markets.
- Also by the summer of 2009, initial funding will be provided by Industry Canada to marquee festivals and events that promote tourism from the $100 million over two years provided in the Economic Action Plan.
- Projects are set to begin in time for the 2009 construction season to upgrade visitor facilities and national historic sites in Canada's national parks including visitor centres, roads, waterways and sites with national historic significance.
Long-Term Competitiveness for Canadian Industry
Improving Canada's Competition and Investment Frameworks: Canada's Economic Action Plan commits the Government to implement improvements to Canada's competition and investment laws and policies based on the recommendations of the Competition Policy Review Panel. These changes will improve the competitiveness of Canadian businesses and better protect consumers. The Minister of Finance has brought forward these reforms through the Budget Implementation Act, 2009, currently before Parliament. Pre–publication of regulatory changes will commence as soon as possible after Royal Assent.
A More Sustainable Environment
Transforming to a Green Economy: Details will be announced in coming months on the five-year $1-billion Clean Energy Fund. This fund will support research and demonstration projects focused on clean energy technologies, including carbon capture and storage.
Capital Cost Allowance for Carbon Capture and Storage: The Government has committed to undertake consultations with stakeholders to identify specific assets used in carbon capture and storage with a view to providing accelerated capital cost allowance in respect of such investments. Details will be made available in the coming weeks.
Strengthening Canada's Nuclear Advantage: Atomic Energy of Canada Limited will start investing an additional $351 million over the coming fiscal year, beginning April 1, to develop the Advanced CANDU Reactor, and to maintain safe and reliable operations at the Chalk River Laboratories.
Supporting Small Businesses
Reducing Taxes for Small Businesses: The Economic Action Plan proposed to further support the growth of small businesses by increasing the amount of small business income eligible for the reduced federal income tax rate of 11 per cent to $500,000 from $400,000 as of January 1, 2009. A general Notice of Ways and Means Motion was tabled in Parliament with the Budget on January 27, 2009, followed by the tabling of a detailed Notice of Ways and Means Motion on February 4, 2009. In accordance with these motions, the Canada Revenue Agency is currently administering this measure. It will be implemented through the Budget Implementation Act, 2009.
Fostering Entrepreneurship and Small Business Growth: Funding of $10 million will be provided to the Canadian Youth Business Foundation by the summer of 2009 to support and mentor young Canadians who are creating new businesses.
Helping Small and Medium-Sized Companies Innovate: Starting April 1, 2009, the Industrial Research Assistance Program will ramp up its support for small and medium-sized enterprises with an additional $200 million over two years provided in the Economic Action Plan.
Helping All Regions Prosper
Community Adjustment Fund: Contributions of $500 million in 2009-10 will start flowing to communities to help mitigate the short-term impacts of restructuring once the Budget Implementation Act, 2009 receives Royal Assent. This is part of the $1 billion provided over two years in the Economic Action Plan to support activities such as community transition plans and economic diversification initiatives.
Southern Ontario Development Agency: The Economic Action Plan provides more than $1 billion over five years for the Southern Ontario development agency, which will support economic and community development, innovation and economic diversification in Southern Ontario communities. The Government is developing options to ensure a successful and timely launch of the new agency and determine the nature of programming that will address Southern Ontario's specific needs, and build on Ontario's tremendous strengths.
Eastern Ontario Development Program: Contributions in support of business and community development in rural areas of Eastern Ontario will continue, starting April 1, 2009, with the $10 million per annum provided in the Economic Action Plan. Industry Canada via FedNor will continue to deliver this funding until such time as the Southern Ontario development agency is operational.
Strengthening Economic Development in the North: Contributions under the Strategic Initiative for Northern Economic Development will continue, starting on April 1, 2009, from $10 million available in 2009–10 out of a total of $90 million over five years provided for the program in the Economic Action Plan. A new regional economic development agency will be established for the North in 2009–10 with a further $10 million provided in the Economic Action Plan.
Extending the Mineral Exploration Tax Credit: The Economic Action Plan proposes to extend for an additional year the temporary 15-per-cent Mineral Exploration Tax Credit to flow-through share agreements entered during the period from April 1, 2009 to March 31, 2010. The credit supports mineral exploration activity across Canada and helps businesses raise capital by providing an incentive for individuals who invest in flow-through shares issued to finance mineral exploration. A general Notice of Ways and Means Motion was tabled in Parliament with the Budget on January 27, 2009, followed by the tabling of a detailed Notice of Ways and Means Motion on February 4, 2009. In accordance with these motions, the Canada Revenue Agency will administer the extension of the credit, which will be effective April 1, 2009. This measure is included in the Budget Implementation Act, 2009.
