Canadian Manufacturing

How will Canada’s new government impact your business?

Conservative majority gives businesses policy predictability

TORONTO—The Conservative Party has snagged a majority government, bringing the defeated 2011 budget back on the table and at least four years of greater certainty when it comes to economic policy.

Prime Minister Stephen Harper has said he won’t waste any time implementing the party’s budget and platform.

And members from Canada’s business community say they’re just as eager to see those changes.

“The election results spell good news for manufacturers in Canada,” says Steve Rodgers, president of the Automotive Parts Manufacturers’ Association.

Rodgers says companies will benefit from the government’s plan to lower corporate tax rates from 16.5 per cent to 15 per cent next year.

“We know capital has the tendency to flow to regions where it’s treated best. This will encourage investment and growth here in Canada,” Rodgers said.

Producers will also get another two years of machinery and equipment write-offs.

Accelerated Capital Cost Allowance

The Conservatives plan to extend the capital cost allowance, a two-year write-off to help companies invest in new production technologies.

Canadian Manufacturers and Exporters has estimated the extension could save manufacturers more than $600 million over the next two years.

Temporary hiring credit

Harper is also promising a temporary hiring credit for small businesses. It offers companies a rebate on the first $1,000 of EI premiums for new hires.

“We were really sorry to see the EI measure defeated when the government fell,” says Dan Kelly, senior-vice president of legislative affairs with the Canadian Federation of Independent Business.

Kelly says the credit will help companies manage costs while focusing on growth.

The Conservatives had also set aside $3-million a year to reduce red tape for business.

“The government was just starting to work with the Canada Revenue Agency on positive initiatives like responding to small businesses tax questions,” Kelly said.

“Ideally, they’ll quickly recapture the lost momentum,” he added.

And it’ll be a very different momentum now that the NDP has moved to official opposition status.

The orange factor: tax cuts for small biz

Kelly says now that the NDP has more influence, it could push parts of its platform, including its proposal to reduce taxes for small business, from 11 to nine per cent.

“On the other hand, the NDP is also pushing for a doubling of the Canada Pension Plan, which is something the Tories haven’t been clear on. We’ll be watching that file very closely in the weeks ahead,” said Kelly.

A majority makes it harder for the NDP and other parties to defeat the government’s plans. That should give businesses more economic certainty over the next four years, according to Derek Burleton, vice-president and deputy chief economist at TD Bank Financial Group.

Environmental regulations

“Other parties have taken a more aggressive approach with carbon trading schemes, but a Conservative majority suggests a slower approach. This may reduce concerns in the oil and gas sector.” Burleton says.

But the government’s slower pace means some companies are still waiting to see how policies could affect their business.

And they could be waiting a while, according to Glen Hodgson, senior-vice president and chief economist at the Conference Board of Canada.

“On almost all things environmental, we’ve been proceeding with U.S.—even with a Conservative majority, I don’t expect that will change,” Hodgson says.

“If we want as few trade barriers as possible, I suspect we will continue to proceed that way.”

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