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Tax and Tariff Relief to Stimulate Business Investment
Budget 2009 includes significant measures to position Canada's economy for long-term recovery by:
- Introducing a temporary 100-per-cent capital cost allowance (CCA) rate for computers acquired after January 27, 2009 and before February 1, 2011.
- Extending the temporary 50-per-cent straight-line accelerated CCA rate to investment in manufacturing or processing machinery and equipment undertaken in 2010 and 2011.
- In the context of the current global financial environment, repealing the interest deductibility constraints in section 18.2 of the Income Tax Act.
- Providing over $440 million in savings for Canadian industry over the next five years by permanently eliminating tariffs on a range of machinery and equipment.
Sectoral Competitiveness
Budget 2009 provides significant short-term support for key sectors by:
- Providing $170 million over two years to secure a more sustainable and competitive forest sector.
- Supporting farmers with a $500 million agricultural flexibility program that will help the sector adapt to pressures and improve its competitiveness.
- Investing $50 million over the next three years to strengthen slaughterhouse capacity across Canada.
- Amending the Farm Improvement and Marketing Cooperatives Loans Act to help make credit available to new farmers, support inter-generational farm transfers, and modify eligibility criteria for agricultural co-operatives.
- Supporting shipyards with $175 million for the procurement of 98 new Coast Guard vessels and to undertake refits and vessel life extensions for 40 aging vessels.
- Offering short-term repayable loans to the automotive sector, in collaboration with the Ontario and U.S. governments.
- Providing $110 million over three years to the Canadian Space Agency to support the development of advanced robotics and other space technologies.
- Providing targeted two-year funding of $60 million to support infrastructure-related costs for local and community cultural and heritage institutions such as local theatres, libraries and small museums.
- Increasing funding by $20 million over the next two years and $13 million per year thereafter to the National Arts Training Contribution Program.
- Providing $30 million over the next two years to support continued access to Canadian magazines and community newspapers.
- Providing $28.6 million over the next two years to the Canada New Media Fund, and $14.3 million annually thereafter.
- Providing the Canadian Television Fund with $200 million in funding over the next two years.
- Providing $40 million to the Canadian Tourism Commission over two years to support marketing activities, such as the Vancouver 2010 Winter Olympic and Paralympic Games.
- Providing $12 million per year in 2011–12 and 2012–13 for infrastructure to promote international cruise ship tourism along the Saint Lawrence and Saguenay Rivers.
- Providing $100 million over two years for marquee festivals and events that promote tourism.
- Supporting Canada's parks with $75 million over two years for improvements and enhancements to Parks Canada's visitor facilities, such as campgrounds and visitor centres.
- Providing an additional $75 million to Parks Canada for upgrades to National Historic Sites, including a number of sites connected with the 200th anniversary of the War of 1812.
A More Sustainable Environment
Budget 2009 will take actions to ensure a healthy environment, including:
- A new Clean Energy Fund that supports clean energy research development and demonstration projects, including carbon capture and storage.
- Improving the Government's annual reporting on key environmental indicators such as clean air, clean water and greenhouse gas emissions with $10 million in 2009–10.
- Strengthening Canada's nuclear advantage with $351 million to Atomic Energy of Canada Limited for its operations, including the development of the Advanced CANDU Reactor, and to maintain safe and reliable operations at the Chalk River Laboratories.
Supporting Small Businesses
Small businesses are dynamic and drive economic growth and job creation. Budget 2009 supports their growth by:
- Increasing the amount of small business income eligible for the reduced federal tax rate of 11 per cent to $500,000 from the current limit of $400,000 as of January 1, 2009.
- Increasing access to credit for small businesses through proposed amendments to the Canada Small Business Financing Program and the Business Development Bank of Canada.
- Providing $30 million over two years for the Canada Business Network and $10 million to the Canadian Youth Business Foundation.
- Allocating $200 million over two years to the National Research Council's Industrial Research Assistance Program to enable it to temporarily expand its initiatives for small and medium-sized businesses.
Helping All Regions Prosper
Budget 2009 provides new resources to support economic diversification across Canada by:
- Providing more than $1 billion over five years for a Southern Ontario development agency to help workers, communities and businesses in this region.
- Providing $1 billion over two years for a Community Adjustment Fund that will help mitigate the short-term impacts of restructuring in communities. This support for communities in all regions will be provided through regional development agencies.
- Strengthening support for economic activity in the North with $50 million over five years to establish a new regional economic development agency for the North and $90 million over five years to renew the Strategic Investments in Northern Economic Development program.
- Providing $37.6 million in support of environmental assessments, regulatory coordination, science, and Aboriginal consultations related to the Mackenzie Gas Project.
- Extending for one year the temporary 15-per-cent mineral exploration tax credit to help companies raise capital for mining exploration.
Introduction
The global economic crisis has created particular challenges for several important sectors and the communities that rely on them.
The Government will work to support the most affected sectors, regions and communities in Canada as they make difficult adjustments in a changing global economy. Budget 2009 will position Canada's economy for long-term recovery by promoting investment and competition, investing in more sustainable development, supporting small businesses and promoting economic opportunities in all regions of Canada.
A Business Tax Advantage for Long-Term Prosperity
A competitive business tax system is essential for encouraging new investment, growth and job creation in Canada. Since 2006, the Government has legislated significant reductions in corporate taxes, including the reduction of the general corporate income tax rate from 22.12 per cent (including the corporate surtax) in 2007 to 15 per cent by 2012. The Government is committed to moving ahead with these tax reductions, which include a reduction in the general corporate income tax rate to 19 per cent as of January 1, 2009. As a result, Canada will have the lowest overall tax rate on new business investment in the Group of Seven (G7) countries by 2010.
Provinces and territories also have a crucial role to play in improving the competitiveness of Canada's business tax system. If all provinces and territories were to reduce their corporate income tax rates to 10 per cent, Canada could reach the goal of a 25-per-cent combined federal-provincial-territorial statutory tax rate by 2012. In addition, if the five provinces (British Columbia, Saskatchewan, Manitoba, Ontario, and Prince Edward Island) that still have retail sales taxes (RSTs) were to modernize their systems by implementing a value-added tax structure harmonized with the Goods and Services Tax (GST), businesses operating in those provinces would become much more competitive.
The Government remains committed to working with provinces and territories to further these goals, including working cooperatively with the RST provinces to identify potential areas where changes to the current framework for federal-provincial harmonization could facilitate provincial movement toward a fully modernized and efficient consumption tax system in Canada.
An overview of the Government's strong record of tax relief, as well as additional detail on areas for enhanced potential for federal-provincial-territorial collaboration in strengthening Canada's business tax advantage, is provided in Annex 2.
Budget 2009 proposes new tax measures to help Canadian businesses in the current economic circumstances to emerge even stronger and better equipped to compete across the world as the economy recovers.
Capital Cost Allowance
The capital cost allowance (CCA) system determines how much of the cost of a capital asset a business may deduct each year for tax purposes. The Government's approach has generally been to set CCA rates so that the deduction for capital costs is spread over the useful life of the asset. This ensures neutral tax treatment for different types of assets so that investment is allocated to its most productive use. Budget 2009 proposes temporary increases in CCA rates for computers, and machinery and equipment used in manufacturing or processing, to provide economic stimulus and assist Canadian businesses during this challenging economic period.
Providing Assistance to Businesses in All Sectors to Invest in Computers
Budget 2009 proposes a temporary 100-per-cent CCA rate for computer hardware and systems software acquired after January 27, 2009 and before February 1, 2011. In addition, the rule that restricts CCA deductions to one-half of the CCA write-off otherwise available in the first year will not apply to these computers.
This temporary measure will allow taxpayers to fully expense their investment in computers in one year. The measure will provide stimulus by assisting businesses to increase or accelerate investment in computers. It will also contribute to boosting Canada's productivity through the faster adoption of newer technology. Businesses in all sectors of the economy, including the service sector, will benefit from this incentive.
It is estimated that this measure will cost $340 million in 2009–10 and $355 million in 2010–11.
Extending Assistance for Canada's Manufacturing and Processing Sector
In recognition of the exceptional circumstances facing the Canadian manufacturing and processing sector, Budget 2007 announced a temporary two-year 50-per-cent straight-line accelerated CCA rate for investment in eligible manufacturing or processing machinery and equipment undertaken before 2009. This measure provided a more favourable climate for manufacturing and processing businesses to accelerate or increase their investment in machinery and equipment.
Budget 2008 proposed to extend accelerated CCA treatment for investment in machinery and equipment in the manufacturing and processing sector for three additional years in order to provide businesses with more time to accelerate or increase investments. This included a one-year extension of the 50-per-cent straight-line accelerated CCA rate for eligible assets acquired in 2009, followed by accelerated CCA treatment on a declining basis for eligible assets acquired in 2010 and 2011.
Given current economic conditions, Budget 2009 proposes to extend the temporary 50-per-cent straight-line accelerated CCA rate to investment in eligible manufacturing or processing machinery and equipment undertaken in 2010 and 2011. This will further assist businesses in the manufacturing and processing sector in restructuring and retooling to meet the current economic challenges, boost productivity, and position themselves for long-term success.
The two-year extension of the 50-per-cent straight-line accelerated CCA rate is estimated to cost $320 million in 2011–12, and $990 million in total over the period 2011–12 to 2013–14.
The tax measures proposed in Budget 2009 along with other measures announced since Budget 2006, including the reduction of the general corporate income tax rate to 15 per cent by 2012, will provide almost $12 billion in tax relief to manufacturers and processors in 2008–09 and the next five fiscal years.
Tariff Relief on Machinery and Equipment
With almost 90 per cent of all imports entering the country duty free, Canada is one of the world's most open economies. Still, tariffs continue to apply on several goods imported from outside North America, including certain machinery and equipment used by Canadian industry.
Budget 2009 proposes to permanently eliminate tariffs on a range of machinery and equipment. This measure will lower costs for Canadian producers in a variety of sectors, such as forestry, energy and food processing, which must purchase specialized equipment from overseas to modernize their operations and enhance competitiveness. This measure will affect close to $2 billion in annual imports of machinery and equipment and provide over $440 million in savings for Canadian industry over the next five years. The Government will undertake further consultations with Canadian businesses to identify additional areas where tariff relief could be provided.
Budget 2009 will also take steps to facilitate the movement of goods by improving the Customs Tariff rules respecting the treatment of temporarily imported cargo containers, and undertake consultations with respect to further liberalizing the use of these containers in Canada.
Sectoral Competitiveness
Short-Term Support for Key Sectors
The Government recognizes that a number of important economic sectors are facing unprecedented challenges due to declining global demand, and the tightening of credit markets in Canada and around the world. These sectors employ thousands of Canadians across the country, whose livelihoods and communities are threatened. While the primary responsibility for managing the current cyclical economic downturn lies with sectors themselves, the Government can help by working with these sectors to ensure that they weather the economic storm in the near-term, and take the necessary steps to return to profitability as the economy recovers. Budget 2009 takes significant action to assist key sectors in responding to the current economic circumstances.
Forestry
Canada's forestry sector is facing significant challenges from declining demand in the residential construction markets in the United States and increasing competition from companies in emerging economies. Budget 2009 provides a total of $170 million over two years for the following measures that will secure a more sustainable industry by helping companies develop new products and processes, and take action on new opportunities in the international market place.
Budget 2009 provides $80 million over two years to Natural Resources Canada for the Transformative Technologies program administered by FPInnovations. FPInnovations is a not-for-profit forest research institute that focuses on the development of emerging and breakthrough technologies related to forest biomass utilization, nanotechnology and next generation forest products. An additional $40 million will be provided to Natural Resources Canada in 2010–11 to develop pilot-scale demonstration projects of new products that can be used in commercial applications.
Budget 2009 also provides Natural Resources Canada with $40 million over two years for the Canada Wood, Value to Wood, and North America Wood First programs to help forestry companies market innovative products internationally. An additional $10 million will be provided to Natural Resources Canada in 2009–10 to support large-scale demonstrations of Canadian-style use of wood for construction in targeted off-shore markets, and non-traditional uses of wood in domestic markets.
Agriculture
Canada's farmers continue to strive to develop innovative, high-quality food products for Canada's families and markets abroad. In doing so, they provide a strong economic foundation for the many rural communities in which they live and work. Despite strong income gains in some sectors over the past two years, Canada's farm sector is not isolated from the current economic downturn. Some farmers, such as livestock producers, are facing higher input prices, and many are affected by low or volatile commodity prices.
Since 2006, the Government has introduced major enhancements to agricultural programming that help the sector manage business risks. The new suite of business risk management programs launched in April 2008 provides comprehensive protection against income variability, natural hazards and disasters as well as easier access to credit through cash advances. In addition, in July 2008, the federal, provincial and territorial governments announced $1.3 billion in funding over five years under Growing Forward, the new agricultural policy framework, to support non-business risk management cost-shared programs. Growing Forward puts more emphasis on building a profitable sector through more investment in innovation; action on key regulatory priorities; environment and food safety programs; programs that better meet local needs; and measures that enable farmers to be proactive in managing risks.
Budget 2009 announces new measures to build on this strong foundation. The Government will implement a five-year, $500 million agricultural flexibility program that will facilitate the implementation of new initiatives, both federally and in partnership with provinces, territories and industry. This program will help the sector adapt to pressures and improve its competitiveness by funding non-business risk-management measures such as those that will reduce costs of production, improve environmental sustainability, promote innovation and respond to market challenges. Budget 2009 allocates $190 million over two years to support the agricultural flexibility program. The balance will be funded from existing unallocated Agriculture and Agri-Food Canada resources.
The Government will also work with interested provinces toward devolution of delivery of the AgriStability program to support improved client service through wider integration and alignment with other business risk-management programs already delivered provincially. Integrated provincial program delivery would help ensure that the suite of programs meets producers' needs.
In addition, the Government will invest $50 million over the next three years to strengthen slaughterhouse capacity in various regions of the country, to support the livestock sector. The program will make federal contributions available to match private sector investments in sound business plans aimed at reducing costs, increasing revenues and improving operations of meat slaughter and processing operations in Canada, with a view to ensuring that Canadian livestock producers have viable and sustainable slaughter options available to them.
Budget 2009 also announces proposed amendments to the Farm Improvement and Marketing Cooperatives Loans Act to help make credit available to new farmers, support inter-generational farm transfers, and modify eligibility criteria for agricultural cooperatives. Currently, credit availability under the Act is limited to existing farmers and product marketing cooperatives fully owned by farmers. The proposed amendments will support the renewal of the sector workforce and enable cooperatives to better seize market opportunities.
Shipbuilding
Canada's shipbuilding industry includes over 150 establishments, with about 30 shipyards that are located in each Atlantic province, Quebec, Ontario and British Columbia. In recent years, the industry has experienced declining demand that has been exacerbated by the economic downturn.
Budget 2009 provides a catalyst to increase activity in the sector by allocating funds to speed-up needed procurement. The Canadian Coast Guard requires investments in vessels to carry out its responsibility to ensure safe and accessible waterways for Canadians. The Government is investing $175 million on a cash basis for the procurement of new Coast Guard vessels and to undertake vessel life extensions and refits for aging vessels.
While contracts have not yet been awarded, work will be conducted in Canada, and where possible, by shipyards located within the regions of the vessels' home-ports. New vessel procurements planned are:
- 60 new small craft and 30 new environmental response barges that will support Canadian Coast Guard operational requirements across the country.
- 5 new lifeboats home-ported in Prince Rupert (British Columbia), Campbell River (British Columbia), Dartmouth (Nova Scotia), Qu�bec City (Quebec), and Burlington (Ontario).
- 2 new inshore science vessels home-ported in Mont-Joli (Quebec) and Shippagan (New Brunswick), and one inshore fisheries vessel home-ported in St. Andrews (New Brunswick).
Vessel life extensions involve major repairs such as replacement of hulls, outdated equipment, propulsion systems and generators. The five vessels that will undergo vessel life extensions are the CCGS Bartlett and the CCGS Tanu both home-ported in Victoria (B.C.), the CCGS Tracy home-ported in Qu�bec City (Quebec), the CCGS Limnos home-ported in Burlington (Ontario), and the CCGS Cape Roger home-ported in St. John's (Newfoundland and Labrador).
Vessel refits are smaller repairs, aimed primarily at updating obsolete operational systems to improve the availability and reliability for delivery of all Coast Guard programs. Of the 35 vessels scheduled for refit, seven are stationed in the Pacific region, five in the Central and Arctic region, seven in the Quebec region, seven in the Maritimes region, and nine in Newfoundland and Labrador.
The Automotive Industry
The automotive industry, a key driver of Canada's economy, is facing significant challenges as a result of the economic downturn in the U.S., changing consumer preferences, and increased global competition. The Government is taking action to address the short-term financing challenges of automotive assemblers, parts manufacturers and consumers.
On December 20, 2008, Prime Minister Harper and Premier McGuinty announced that Canada and Ontario would provide GM and Chrysler with up to $4 billion in short-term repayable loans managed by Export Development Canada, $2.7 billion of which is from the Government of Canada.
The Government is also targeting support to automotive parts manufacturers by improving their access to credit through accounts receivable insurance offered by Export Development Canada.
In addition, the Government will create the $12-billion Canadian Secured Credit Facility, announced earlier in this chapter. This facility will improve credit availability for consumers to purchase and lease new vehicles.
The Government's actions in support of Canada's automotive sector are based on sound principles. These principles include:
- Looking beyond immediate challenges to factors for long-term success. This means helping firms strategically invest in areas in which Canada will have a competitive advantage in the years ahead, which may not be areas of traditional strength.
- Protecting taxpayers. This includes providing adequate security for government lending.
- Ensuring support is based on strong business cases. To encourage a market focus, private sector lenders should also be involved where appropriate in order to position the automotive industry for sustainability and independence.
- Making support available to the range of automotive firms. This includes Canadian-based assemblers, parts manufacturers and suppliers, and firms not yet located in Canada that are looking to invest here.
- Recognizing that Canada is part of a highly integrated and increasingly global market. Canada's role as an automotive-producing nation must be understood in this context and levered to generate the greatest benefits for Canadians.
- Ensuring that all stakeholders are involved. The Government cannot and should not help the automotive industry restructure on its own. The Province of Ontario has signalled its support. All stakeholders will need to play a significant role in creating solutions.
Based on these principles, the Minister of Industry will develop a strategy over the coming months to position Canada's automotive sector for sustainable, long-term success.
Canada's Space Industry
Canada is a leader in the design and construction of robotics for the space industry, and is well known for the Canadarm. The Canadian Space Agency plays an important role by working with the private sector to support advanced research, development and prototyping for new space-based technologies. Budget 2009 provides the Canadian Space Agency with $110 million over three years so that it can contribute to the development of terrestrial prototypes for space robotic vehicles, such as the Mars Lander and Lunar Rover, and for the further development of other technologies and space robotics.
Culture and Sport
Culture reflects who we are as a nation, how we see ourselves within our country, and how we appear to the world. Day-to-day, Canadians experience the essence of this rich and diverse country through the imagery and words of its artists, through works which demonstrate the best of talent. While resilient in many ways, the cultural sector is plainly also vulnerable to economic shocks. The Government wants to help ensure as much stability as possible for the sector at a time when the sector is facing difficult challenges.
Budget 2009 provides over $335 million in support for culture and the arts—recognizing the importance of our artistic institutions and the role they play in Canadians' lives.
Cultural Infrastructure
The Government recognizes the importance of economic stimulus through infrastructure investments in a number of targeted sectors, and the cultural sector is no exception.
As part of the overall stimulus package, Budget 2009 will provide a targeted, two-year fund of $60 million to support infrastructure-related costs for local and community cultural and heritage institutions such as local theatres, small museums, and libraries. Examples include the Toronto Public Library revitalization project, Toronto's Famous PEOPLE Players, la Maison du Festival de Jazz in Montr�al and the Confederation Centre of the Arts in Charlottetown. This support will be provided through Canadian Heritage programming.
Canada Prizes for the Arts and Creativity
The Canada Prizes for the Arts and Creativity will bring the world's best new artists from a vast array of art forms to Canada to compete for the title of most promising new artist and for significant cash awards. These artists will be publicly adjudicated by a distinguished panel of established artists in each discipline. To add a dynamic social value to the project, Canada Prizes will also develop media-based curriculum guides for schools across Canada to enhance knowledge about the arts.
Budget 2009 will provide $25 million for an endowment to support the creation of international awards to recognize excellence in dance, music, art and dramatic arts.
National Arts Training Contribution Program
Budget 2009 will provide an additional $20 million over the next two years and $13 million per year thereafter to the National Arts Training Contribution Program, which supports the highest calibre artistic institutions in Canada in training artists for professional careers. This funding will help ensure that training opportunities for Canada's next generation of artists will continue through many of Canada's top institutions such as the National Ballet School, the Royal Conservatory of Music, the Banff Centre and the �cole nationale du cirque.
Community Newspapers and Magazines
Canadians continue to look to local magazines and publications to see reflections of themselves and their communities. Budget 2009 will continue this tradition by providing $30 million over the next two years to support continued access to Canadian magazines and community newspapers.
Specifically, funding will contribute to a revitalized, streamlined program that provides aid to publishers. It will also contribute to diverse Canadian content by supporting business innovation for print and online magazines, in an ever-changing industry. This support will help ensure that Canadians in all parts of the country have affordable and reliable access to Canadian culture.
Canada New Media Fund
The Canada New Media Fund, administered by Canadian Heritage, encourages the production of Canadian interactive digital cultural content, and fosters the development, production, and marketing/distribution of original, interactive or online Canadian cultural new media works.
In recognition of the contribution of new media to Canadian culture, Budget 2009 confirms funding of $28.6 million over the next two years to the Canada New Media Fund, and $14.3 million annually thereafter.
Canadian Television Fund
Recognizing the importance of the production and broadcasting of high-quality, distinctively Canadian television programs, Budget 2009 provides the Canadian Television Fund with $200 million in funding over the next two years.
Sport
All Canadians are proud that the 2010 Winter Olympic Games will be hosted in Vancouver and Whistler. To date, the Government of Canada has provided significant financial support to the 2010 Olympic and Paralympic Games by investing over $650 million toward the event. The Government has also made significant investments in support of excellence, enhancing summer and winter Olympic and Paralympic athletes.
The Government also recognizes the importance of sports participation by Canadians with an intellectual disability. In recognition of their work, funding for Special Olympics Canada will be increased to $1.5 million for 2009–10.
Tourism
The tourism industry encompasses many service sectors and is an important source of employment in many regions of Canada. While the Canadian tourism industry remains strong, it is facing key challenges due to the international economic downturn and competition from other destinations. To stimulate the growth of tourism and help bring Canada to the forefront of the minds of travellers, both here and abroad, Budget 2009 provides:
- $40 million to the Canadian Tourism Commission over two years, including $20 million for domestic advertising and $20 million for new activities in priority international markets. This funding will support additional promotional activities, such as for the Vancouver 2010 Winter Olympic and Paralympic Games.
- $100 million over two years for marquee festivals and events such as jazz and other music festivals that draw a significant number of tourists.
An additional $12 million per year in 2011–12 and 2012–13 is being provided to support the development of infrastructure that will promote cruise ship tourism along the Saint Lawrence and Saguenay Rivers for attractions such as the Centre d'exp�rience glaciaire in Baie-Comeau.
National parks and historic sites contribute to tourism in 465 communities in every province and territory through direct spending, visitor spending and spin-off economic activity. Budget 2009 provides $75 million on a cash basis over two years for improvements and enhancements to Parks Canada's visitor facilities, such as campgrounds and visitor centres.
Budget 2009 also provides an additional $75 million on a cash basis to Parks Canada for upgrades to national historic sites, including a number of sites connected with the 200th anniversary of the War of 1812, as well as for national historic places owned by not-for-profit groups that receive support through Parks Canada's National Historic Sites Cost-Sharing Program.
The Government currently supports the tourism sector through a number of programs and services. There is a need and opportunity to bring greater coherence to these activities. To improve the effectiveness of the Government's support in this area, the Minister of State for Small Business and Tourism, will lead the development of a National Tourism Strategy that will guide future investments.
Long-Term Competitiveness for Canadian Industry
In addition to helping sectors weather short-term economic challenges, it is important to ensure that businesses in all sectors position themselves for long-term competitiveness. Building on our Advantage Canada commitments, the Government is taking steps to strengthen Canada's business and investment frameworks in order to increase competition, improve choices for consumers, and enable businesses to make the investments they require for future success.
Improving Canada's Competition and Investment Frameworks
Competitive markets offer consumers improved choices, higher quality goods and services, and lower prices. They stimulate innovation and investment. They help firms compete globally and adjust to economic shocks and technological change. They also increase productivity, boost wages and raise living standards.
In 2007, the Government convened a panel of experts to review Canada's laws and policies governing competition and investment matters. The Competition Policy Review Panel's objective was to ensure that current laws and policies are working effectively to improve Canada's competitive environment and stimulate foreign investment. The panel's June 2008 report proposed a number of changes to modernize Canada's competition and investment regimes.
Based on the panel's recommendations, the Government will implement improvements to Canada's competition and investment laws and policies. The Government will encourage new foreign investment but will also add protections to make sure that these new investments cannot jeopardize Canada's national security. In addition, new provisions will be added to the Competition Act to protect consumers from anti-competitive behaviour as well as unscrupulous business practices. These reforms will improve the competitiveness of Canadian businesses, better protect consumers and serve to make Canada a more innovative, productive and prosperous country.
A More Sustainable Environment
To maintain a strong economy Canada requires a healthy environment that provides sustainable resources and supports a high and enduring quality of life. The Government is committed to ensuring that Canada's enviable and pristine environment is protected and strengthened for current and future generations.
Transformation to a Green Energy Economy
Canada has committed to a 20 per cent reduction of greenhouse gases by 2020. Clean-energy technologies have the potential to make a significant contribution by reducing emissions from the production and use of energy, and creating new opportunities as Canada transitions toward a greener global economy. This is particularly the case for technologies that capture carbon dioxide, one of the most important greenhouse gases, at the point of production in industrial facilities and safely store it underground.
Since 2006, the Government has provided $375 million to support the development of carbon capture and storage technologies, including $250 million in Budget 2008 for a full-scale commercial demonstration of carbon capture and storage in the coal-fired electricity sector in Saskatchewan, research on the potential for carbon storage in Nova Scotia, and economic and technological issues. An additional $125 million is available for carbon capture and storage projects under the ecoENERGY Technology Initiative of Natural Resources Canada.
To further support Canada's leadership in clean energy, Budget 2009 provides $1 billion over five years to support clean energy technologies. This includes $150 million over five years for research, and $850 million over five years for the development and demonstration of promising technologies, including large-scale carbon capture and storage projects. This support is expected to generate a total investment in clean technologies of at least $2.5 billion over the next five years.
Capital Cost Allowance for Carbon Capture and Storage
In light of the potential importance of carbon capture and storage as a means of reducing greenhouse gas emissions from large industrial facilities, the Government will also consult with stakeholders to identify specific assets used in carbon capture and storage with a view to providing accelerated capital cost allowance (CCA) in respect of such investments. Accelerated CCA is used to actively promote investment in certain clean-energy generation technologies. Advancing the timing of capital cost deductions for tax purposes defers taxation and improves the financial return from investment in particular assets.
Informing Canadians About the Environment
The Canadian Environmental Sustainability Indicators initiative produces a coherent set of indicators on water quality, air quality, and greenhouse gas emissions over time. Budget 2009 will provide $10 million in 2009–10 to sustain the Government's annual reporting on the environmental indicators.
Strengthening Canada's Nuclear Advantage
Nuclear technology is a proven and reliable source of clean energy. In Canada and around the world, energy authorities are investing in nuclear power to meet energy security and climate change goals.
Atomic Energy of Canada Limited (AECL) is a federal Crown corporation that specializes in a range of advanced nuclear-energy products and services, and works with Canada's diverse nuclear industry. Budget 2009 provides $351 million on a cash basis to AECL in 2009–10 for its operations, including the development of the Advanced CANDU Reactor, and to maintain safe and reliable operations at the Chalk River Laboratories.
The Minister of Natural Resources is reviewing AECL's structure to ensure that it is appropriate in a changing marketplace. The review will include consideration of options, including private sector participation in the commercial operations of the corporation, in order to position Canada's nuclear industry to take maximum advantage of future opportunities at home and abroad.
Supporting Small Businesses
Entrepreneurs and small businesses contribute to Canada's economic success by creating jobs and generating economic activity in Canadian communities.
Reducing Taxes for Small Businesses
Canada's federal income tax system supports the growth of small businesses through a lower tax rate on the first $400,000 of qualifying income earned by a Canadian-controlled private corporation. The lower tax rate helps these small businesses to retain more of their earnings for reinvestment and expansion, thereby helping to create jobs and promote economic growth in Canada.
The Canadian Federation of Independent Business (CFIB) has emphasized to the Government the economic importance of helping small and medium-sized businesses to grow. To further support the growth of small businesses, Budget 2009 proposes to increase the amount of small business income eligible for the reduced federal tax rate of 11 per cent to $500,000 from the current limit of $400,000, as of January 1, 2009.
It is estimated that this measure will cost $45 million in 2009–10 and $80 million in 2010–11.
Fostering Entrepreneurship and Small Business Growth
To help create opportunities for young entrepreneurs, Budget 2009 provides $10 million to the Canadian Youth Business Foundation to support and mentor young Canadians who are creating new businesses.
To sustain existing small businesses and support their growth, Budget 2009 will increase access to credit through proposed amendments to the Canada Small Business Financing Program and the Business Development Bank of Canada that are referenced in Budget 2009's section on improving access to credit and Canada's financial system.
Budget 2009 also provides $30 million over two years for the Canada Business Network, which delivers single-window access to reliable, up-to-date, relevant information and tools to businesses.
Helping Small and Medium-Sized Companies Innovate
The National Research Council's Industrial Research Assistance Program helps small and medium-sized enterprises innovate by providing technical and business advice, networking services, as well as direct, non-repayable, financial assistance. This program also provides companies with support to hire recent graduates from colleges and universities for up to one year to work on innovative business strategies and technology-related projects.
Budget 2009 provides $200 million over two years, starting in 2009–10, to the National Research Council's Industrial Research Assistance Program to enable it to temporarily expand its initiatives for small and medium-sized enterprises. This includes $170 million to double the program's contributions to companies, and $30 million to help companies hire over 1,000 new post-secondary graduates, including graduates from business schools, to implement more effective business processes and strategies, and develop new innovative products and services that companies can bring to the marketplace.
Helping All Regions Prosper
Regional economic development agencies support economic diversification and help create opportunities in communities across Canada. Budget 2009 provides new resources to create new regional agencies in Ontario and for the North, and to strengthen the activities of existing agencies in other regions.
Southern Ontario Development Agency
Southern Ontario benefits from a number of economic advantages, including high education levels, large and prosperous urban centres, and a close proximity to the United States marketplace. However, the weakening U.S. and global economies have resulted in plant closures and slower economic growth that are creating hardships for workers and families in Southern Ontario.
In response to Ontario's economic challenges, Budget 2009 provides more than $1 billion over five years for a new Southern Ontario development agency. Its programs will support economic and community development, innovation, and economic diversification, with contributions to communities, businesses and non-profit organizations. It will help workers, communities and businesses in Southern Ontario position themselves to take advantage of opportunities, as economic growth recovers in Canada and around the world.
Budget 2009 also provides $20 million over two years for the Eastern Ontario Development program to support business and community development in rural areas of Eastern Ontario. This program will be administered by the Southern Ontario development agency.
Strengthening Economic Development in the North
The 2008 Speech from the Throne committed to the creation of a new regional economic development agency for the North. Budget 2009 provides $50 million over five years to establish the new agency.
The federal government currently supports economic development in the North through the Strategic Investments in Northern Economic Development (SINED) program, which aims to:
- Broaden the economic base of each Northern territory.
- Strengthen Northerners' ability to take advantage of economic opportunities.
- Increase coordination among partners and programs serving Northern economic development.
Budget 2009 provides $90 million over five years to Indian and Northern Affairs Canada to renew the Strategic Investments in Northern Economic Development program, which will form the core activity of the new regional economic development agency for the North.
Community Adjustment Fund
Restructuring of resource industries is leading to painful adjustments in communities across Canada. Resource-dependent communities are struggling in the face of reduced demand for natural resources and declining prices. These challenges are amplified in those parts of British Columbia and Alberta affected by the devastation caused by the mountain pine beetle. Declining global demand for fish is threatening the economies of many fishing communities, as evidenced by the difficulties faced by lobster fishers in Atlantic Canada. In Ontario, significant adjustment pressures are resulting from cyclical and structural pressures on the manufacturing industries.
Budget 2009 provides $1 billion over two years for a Community Adjustment Fund that will help mitigate the short-term impacts of restructuring in communities. A base amount of $10 million will be provided to each province, with the balance of the funding allocated on a per capita basis. The fund will support activities such as community transition plans that foster economic development, science and technology initiatives, and other measures to promote economic diversification. An example of the type of project that could be supported by the fund is the Two Feathers Forest Products initiative that promotes economic development in the communities of Red Lake, Eagle Lake First Nation, Pikangikum First Nation and Wabigoon Lake Ojibway Nation.
The fund will be delivered nationally through the regional development agencies with transitional measures for the newly created Southern Ontario development agency.
Promoting Energy Development in Canada's North
Private sector investment that develops natural gas resources in Canada's North will bring jobs and economic opportunities to Northern Canadians and new energy supplies to market. Investments in a Mackenzie gas pipeline are currently being considered that would unlock natural gas reserves in the Mackenzie region. Budget 2009 provides $37.6 million in 2009–10 to departments and agencies in support of environmental assessments, regulatory coordination, science, and Aboriginal consultations related to the Mackenzie Gas Project.
Extending the Mineral Exploration Tax Credit
The temporary 15-per-cent mineral exploration tax credit helps companies raise capital for mining exploration by providing an incentive to individuals who invest in flow-through shares issued to finance exploration. The credit is scheduled to expire on March 31, 2009. In light of global financial conditions and the important role of the mining sector in Canada, Budget 2009 proposes to extend the credit for an additional year, until March 31, 2010. Moreover, through the one-year "look-back" rule, funds raised with the benefit of the credit in 2010, for example, can be spent on eligible exploration activity until the end of 2011. By assisting companies' efforts to undertake important exploration programs, extending the credit will also facilitate adjustment to new commodity price conditions.
It is estimated that the net cost of this extension will be $55 million over the next two fiscal years.
