Archive for the ‘Economy’ Category

USMCA Trade Deal Reached After Year of Intense Negotiations

Details about the newly renegotiated United States-Mexico-Canada Agreement (USMCA) have been released.  This proposal, if ratified, will address disputes in the Canadian automotive and agricultural sectors, the cost of generic drugs in Canada, and online eCommerce.  It does not currently address national security tariffs, but preserves the dispute resolution process from the North American Free Trade Agreement (NAFTA).

News of the USMCA deal sent the Canadian dollar soaring on Monday.  The announcement of the USMCA deal may remove the uncertainty that was  preventing the Bank of Canada from hiking interest rates.  It is anticipated that the Bank of Canada will increase interest rates during the next policy announcement on October the 24th.  Details of the USMCA proposal will be summarized below.

Automotive sector- Trump has agreed that no hard limit will be placed on Canadian automotive exports to the United States.

Agricultural sector- American farmers will gain greater access (3.6 percent) of Canada’s current dairy market, and Canada will dismantle the “Class 7″ dairy ingredient (lower) pricing strategy for protein concentrates, skim milk, and whole milk powder, that  discourages foreign competition in the Canadian market.  The Americans will gain more than twice the market access to the Canadian chicken industry than what was previously negotiated in the Trans-Pacific Partnership, as well as increased access into the Canadian egg and poultry markets.  However, no major concessions will be made on the import and export of beef, pork, and grain.

eCommerce- The threshold of American goods Canadians can purchase online or via mail order without paying duties increases from $20 to $150.  American online and mail-order businesses expect to gain increased market share in Canada.

Prescription drugs- Canada has agreed to extend patent protection for biological pharmaceutical drugs from 8 to 10 years, which means that it will take longer for generic versions of new biological drugs to become available to the Canadian public.  Canada’s diminished control over the price of biologics may potentially pose a fresh challenge for the creation of a national pharmacare plan.

National security tariffs- During the summer, Trump announced that Canada would be subject to tariffs on steel and aluminum.  No agreement has been reached on the removal of these tariffs yet.

Dispute resolution- Trudeau was unequivocal about its inclusion of Chapter 19  in any new pact, which was ultimately agreed upon by the Americans despite protest from US negotiator Robert Lighthizer.  Chapter 19 from the NAFTA agreement spells out the process for companies to request arbitration if they feel that their products have been unfairly impacted by anti-dumping or countervailing duties.  

Ontario Budget 2018 Highlights

The Ontario 2018 Budget, tabled on March 28, 2018, projects a growing deficit over the next three years and is predicted to resume a downward trend in 2022 with accumulated deficit expected to decline from 23.2% of gross domestic product (GDP) in 2017-18 to 22.1% by 2022.

The Ontario Budget proposes several measures and investments that impact businesses, including:

Innovation

  • An increase to the Ontario Research and Development Tax Credit (ORDTC) from 3.5% to 5.5% for eligible R&D expenditures over $1M (per taxation year) incurred on or after March 28, 2018.
  • Enhancements to the Ontario Innovation Tax Credit (OITC) for eligible R&D expenditures incurred on or after March 28, 2018 based on the ratio of R&D expenditures to gross revenues. Companies with a ratio of R&D expenditures to gross revenue of:
    • 10% or less will continue to claim the OITC at a rate of 8%;
    • 10-20% will be eligible for an enhanced OITC rate that will increase from 8% to 12% on a straight-line basis; and
    • 20% or more will be eligible to claim the OITC at a rate of 12%.
  • Expansions to the Ontario Interactive Digital Media Tax Credit (OIDMTC) eligibility criteria to include broadcaster purchased or licensed film/television websites that host film, television, or Internet production content not previously assessed (before Nov 1, 2017).
  • A review of various tax incentives implemented in other jurisdictions such as preferential corporate income tax rates (i.e., patent boxes), tax refunds, tax deductions, and exemptions with the intention of developing a provincial incentive to encourage Intellectual Property (IP).
  • An additional $50M over 10 years for the New Transformative Technology Partnerships Fund for businesses, SMEs, and scale‐ups as well as post-secondary and research institutions to collaborate on new dynamic products and services in artificial intelligence (AI), 5G wireless communications, autonomous vehicles, advanced computing, and quantum technologies.

Business Growth

  • In parallel with the 2018 Federal Budget proposal to phase-out or grind the $500,000 small-business limit, the Ontario Budget proposes to phase out the small-business limit on a straight-line basis for CCPCs (and associated corporations) earning between $50,000 and $150,000 of passive investment income in taxation years beginning after 2018.
  • Ending the electricity debt retirement charge (DRC) for mid-sized commercial and industrial non-ICI or non-RRP, Class B consumers as of April 1, 2018.
  • An additional $100M over 10 years for the Eastern Ontario Development Fund (EODF) and the Southwestern Ontario Development Fund (SWODF) to support regional economic development by creating jobs, attracting private sector investment and promoting innovation, and encouraging collaboration and cluster development.
  • An additional $500M over 10 years for the New Economy Fund for investing in priority sectors such as advanced manufacturing, information and communication technology (ICT), life sciences, and clean-tech.
  • An additional $85M over 3 years for the Northern Ontario Heritage Fund to stimulate economic development and diversification across the region.
  • An additional $100M over 10 years for a new Greater Toronto & Hamilton Area Fund to support SMEs in the GTA and Hamilton area.

Export Market

  • Work to implement a Global Trade Strategy to diversify and promote trade in Ontario. This will include the Accelerate to International Markets program, the Global Growth Fund, and the Magnet Export Business Portal.

Startup Support

  • An additional $85M over 10 years for a new Venture Technology Fund to support a select number of very high‐potential, fast‐growing firms in expanding to become globally competitive.
  • An additional $15M over the next 3 years to NextAI, a Toronto based accelerator for early stage startups that leverage AI technologies.

Workforce Development

  • An additional $170M over 3 years for the new Ontario Apprenticeship Strategy to support transition into apprenticeship from high school, make the system easier to navigate, and to improve access for apprentices to high‐quality jobs upon completion.
  • Transforming the Apprenticeship Training Tax Credit (ATTC) into the new Graduated Apprenticeship Grant for Employers (GAGE) to encourage employers to ensure that apprentices complete their training.

Spring 2017 Newsletter- Canadian Business Growth and Innovation Funding

In our most recent Newsletter, we examine the performance of the Canadian economy, while comparing economic performance between provinces and the investments that each government has set aside to encourage business growth and innovation.  Provinces have proposed a variety of solutions to stimulate economic growth, including but not limited to tax rate reductions for small businesses, funding opportunities for early-stage start ups, tax credits to stimulate innovation, and funding for the development of technology clusters.

 

 

Federal Budget 2017 Highlights

Federal Finance Minister Bill Morneau’s second budget, tabled on March 22, 2017, forecasted an increase in the 2017-2018 deficit from $25.4B (projected in the fall) to $28.5B. Deficits are expected to decline gradually to $18.8 billion by 2021-2022.

There were no proposed changes to the corporate income tax rates or to the $500,000 Small-Business Deduction Limit for Canadian-controlled private corporations (CCPCs).

Budget 2017 provides a platform for the anticipated Innovation Agenda by proposing several new initiatives including:

Skills Development

  • $2.7B over 6 years for skills training programs through labour market transfer agreements with the provinces and to expand eligibility relating to Employment Insurance (EI) skills training/employment support;
    • Programming, and/or metrics to measure performance, will depend upon negotiations with provinces;
  • $225M over 4 years, starting with $75M in 2018 and an additional $75M per year thereafter, to establish a new agency to research and measure skills development;
  • $7.8M over two years, starting in 2017, to implement the new Global Talent Stream under the temporary Foreign Worker Program, and to introduce a new work permit exemption for short-duration work terms under the Global Skills Strategy;
  • $287.2M for a pilot project taking place over three years, starting in 2018-2019, to increase mature student access to government student grants and loans;
  • $395.5M, over three years for a youth employment strategy; and
  • $50M over two years to support initiatives aiming at teaching students to code.

Innovation

  • $950M, provided on a competitive basis over 5 years starting in 2017, to support business-led “superclusters” in clean technology, advanced manufacturing, digital technology, health/bio sciences, clean resources, and agri-food;
  • $125M to launch a pan-Canadian Artificial Intelligence Strategy to be administered by the Canadian Institute for Advanced Research (CIFAR); and
  • $2.2B to accelerate growth in Clean Technology, of which $1.4B will be provided through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC).

Startups and Small Businesses

  • $400M to BDC over 3 years, starting in 2017, for a new Venture Capital Catalyst Initiative to increase availability of late-stage venture capital;
  • Additional private funding available through the recently announced Canadian Business Growth Fund, which was created by Canada’s leading banks and other key financial institutions to provide long-term capital through minority interests in small- and medium-sized Canadian enterprises; and
  • A commitment to review the use of tax planning strategies involving private corporations, which can result in  tax advantages.

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Federal Budget 2016

The federal budget released on March 22, 2016 has made several changes that affect Canadian businesses, including announcements related to government funding programs and adjustments to the Small Business Deduction for Canadian-Controlled Private Corporations (CCPCs). Pertinent announcements are summarized below:

Reduced Small Business Tax Rate

  • Reduced small business income tax rate from 11 to 10.5% on first $500,000 of active business income. This reduction is in line with the reduction proposed in the 2015 Federal budget; however, reductions for future years have been deferred.

Trade Tariffs

  • Eliminated tariffs on several manufacturing inputs.  This is estimated to provide Canadian manufacturers in the consumer goods and transportation sectors approximately $9 million in tariff savings over the next five years.
  • Budget 2016 intends to launch public consultations on eliminating tariffs on food manufacturing ingredients other than supply-managed products.

Innovation (Investment of $137 million from 2016-2017)

  • $800 million over 4 years ($150 million in 2016-2017) to innovation clusters and networks as part of the government’s ‘Innovation Agenda.’  Further details will be provided in the coming months.
  • An additional $50 million to the Industrial Research Assistance Program (IRAP) to help small and medium sized companies to innovate and grow.
  • The Automotive Innovation Fund was extended to 2020-2021. Previously scheduled to close at the end of 2017-2018, the Automotive Innovation Fund was established in 2008 to support research and development projects to build more fuel-efficient vehicles.

Science and Research (Investment of $853 million in 2016-2017)

  • $4 million in 2016-2017 to the Growing Forward 2 (GF2) initiative. Budget 2016 provides continued support to Agri and food processing companies through the GF2 initiative in line with the current five year (2013-2018) $3 billion investment.
  • $30 million over four years, starting in 2016–17 to maintain Canada’s participation in the European Space Agency’s Advanced Research in Telecommunications Systems program.
  • Additional investments to strengthen science and research including $95 million on an ongoing basis to granting councils (including Canadian Institutes of Health Research, Natural Sciences and Engineering Research Council Social Sciences and Humanities Research Council and Research Support Fund); $237.2 million until 2020 for advancing Canadian leadership in Genomics; $32 million over two years for commercializing Canadian Health discoveries; $12 million over two years to strengthen stem cell research through the Stem Cell Network; $50 million over five years to the Perimeter Institute for theoretical physics; $20 million over three years to support brain research; and $14 million over two years to promote Canada as a premier destination to study and conduct research.

Workforce Development

  • $165.4 million for Youth Employment Strategy (YES). The federal Youth Employment Strategy contributes over $330 million annually to help youth gain the skills and experience necessary to thrive in Canada’s highly competitive labor market.
  • The YES investment is in addition to the $339 million announced in February 2016 for the Canada Summer Jobs program, which provides funding to help employers create summer job opportunities for students.

Clean Tech

  • $1B over four years, starting in 2017–18, to support development of clean technologies in the forestry, fisheries, mining, energy and agriculture sectors.
  • Further details about funding allocation will be provided in the coming months as part of the Innovation Agenda implementation.

Stay tuned as we continue to bring you the most recent developments in government funding and details on the new Canadian Innovation Agenda proposed in the 2016 federal budget.   

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  • NorthBridge Consultants' Government Funding Blog is dedicated to bringing businesses news and information to help them identify and access the most appropriate government funding programs.

    We offer opinions and insider information that can provide a pulse on government initiatives, the health of the Canadian economy, and firsthand thoughts from Canadian business owners.

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