Canadian Manufacturing

Federal budget ‘sends important signal’ to manufacturers: CME

Features several key programs aimed at giving manufacturing firms booster shot

TORONTO—With the release of an cautious new federal budget, industry and small business look to be a priority once more as Canada fights the economic struggles continuing to plague many of its trading partners.

“Canada is in an enviable position among the world’s industrial economies,” Finance Minister Jim Flaherty said in his budget speech.

“The global economy is still fragile (and) some of our biggest trading partners are among the worst affected.”

Taking into account the delicate state of global finances, Flaherty’s 2013 budget has several key programs in place or extended in a bid to give manufacturing firms a booster shot.

From extending the capital cost allowance program through 2018 to unveiling research and commercialization and job creation grants, Canadian Manufacturers and Exporters president and CEO Jayson Myers heaped praise on the new budget, saying it “sends an important signal” for manufacturing firms across the country.

“It positions manufacturing and exporting at the heart of Canada’s Economic Action Plan by focusing on practical steps that will enhance competitiveness, productivity, innovation and business growth,” Myers said in statement following the budget’s release.

“It’s one of the most expensive items in the budget,” Dave Walsh, tax partner with Ernst & Young, said of the capital input program extension.

“That’s a big win for manufacturers (because) there’s a lot of significant dollars spent on very expensive equipment in the manufacturing sector, so to be able to depreciate it very quickly obviously results in tax savings.”

While not new, the capital inputs program affords Canadian manufacturers $1.4-billion in tax relief on upgrades and equipment over the extension period.

That program, coupled with $1.8-billion over six years for workforce training grants, $1-billion over five years for aerospace development, $200-million over five years for a new advanced manufacturing fund in Ontario and $92-million over two years for forestry innovation, could provide an estimated $4.5-billion in benefits for manufacturing and exporting firms in the coming years, according to CME.

“The budget recognizes the importance of manufacturing and exporting for each and every Canadian, as an anchor of high-value, high-paying jobs in all parts of the country and across all sectors of the economy,” Myers said.

With almost two-million Canadians working in the sector, it seems Flaherty and the governing Conservatives, too, recognize the important role the industry plays if the country is to continue to stave off economic hardship.

“The way to help manufacturers is to lighten their burdens, not weigh them down with more,” Flaherty said.

Another program manufacturers will be able to take advantage of is the Canada Job Grant, a program aimed at skills training in the workforce.

According to Flaherty, the new grant could provide upwards of $15,000 per person to train workers, whether new or existing hires.

Employers would be required to provide funding under the program, as well as the province or territory.

The federal government would chip in up to $5,000.

According to Walsh, while ambitious, the success of the grant program hinges on whether business owners are willing to chip in in order to get the federal and provincial funding.

“The taxpayer is going to be the trickier one,” he said. “The provinces certainly have the ability to say no to these kinds of things, but it’s a bit of a political land mine when you start telling the federal government that you’re not going to cooperate with them, just because there’s so many transfer payments going from the federal government to the provincial government.

“All I can say is it will be very interesting to see what support they get for that from taxpayers in terms of working in conjunction with the government to provide that grant.”

Also in the budget was the expected goal of eliminating the federal deficit by 2015.

“In uncertain global economic times, the most important contribution a government can make to bolster confidence and growth in a country is to maintain a sound fiscal position,” Flaherty said.

“We will not raise taxes (but) new measures to close tax loopholes will help ensure everyone pays their fair share.”

With Flaherty committing to avoiding tax hikes, Walsh said the government is saying goodbye to about $12-billion in revenues.

“(That’s) a big number, and the deficit would certainly be eliminated much quicker if they were earning an extra $12-billion a year,” he said of the GST that was reduced by two percentage points.

The budget is expected to be passed in the coming months.

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