Yesterday saw one of the more important annual events in relating to the Canadian economy – the announcement of the budget for the upcoming year. While (at the time of writing this) it is still left to be seen whether the budget will be accepted, if done so, there are many items covered in it that would be of benefit to Canadian businesses – especially those in the manufacturing industry, or those who work in innovative fields.
- An extension of two years will be put in place for the temporary accelerated capital cost allowance treatment when purchasing manufacturing and processing machinery and equipment.
- $3 million will be provided per year to the Natural Sciences and Engineering Research Council of Canada (NSERC) for 30 new Industrial Research Chairs at colleges, allowing colleges to work more with applied research in a variety of fields.
- IRAP will be receiving an additional $80 million over three years.
- Approximately $100 million over two years for the R&D of clean energy and energy efficiency.
- $50 million towards a two-year Agricultural Innovation Initiative that will support the creation of knowledge and increased commercialization for agricultural innovations.
- $60 million towards the forestry industry to assist innovation and finding opportunities in the global market.
Of course, that is just a very brief overview of some of the items that would benefit Canadian businesses. We will see whether the budget gets accepted, and will keep you up-to-date with news that will have an impact on your businesses.
In March both Quebec and Manitoba announced their 2010 provincial budgets – and both provincial governments have made changes to their provincial SR&ED programs.
Manitoba’s budget, announced on March 23rd, made changes to how the provincial refund would be given to companies. Starting in 2011, all SR&ED performed in Manitoba will be eligible for a partially refundable tax credit – previously, only companies working with institutions in Manitoba were eligible, all other companies received a non-refundable tax credit. (A non-refundable tax credit is applied directly to your taxes, so if a company did not have a profitable year and did not owe any taxes, then they would not have access to the tax credit.) In 2011, companies can receive a quarter of their tax credit; in 2012, companies can receive half of their tax credit.
Quebec’s budget, announced on March 30, made changes to what was eligible for their provincial refund. Additional costs that are now applicable for this provincial credit are costs to use pharmaceutical companies or clinical research organizations. As well, the wage credit has been modified slightly so that owner-managers of eligible companies can be treated as an eligible employee.
These changes reflect that the Manitoba and Quebec governments are improving their provincial budgets in order to help companies in those provinces who are involved with doing innovative work in their field.
The 2010 Federal Budget was announced last Thursday, March 4th, and it looks like the government is on track with the Economic Action Plan. Although it will still be some time before Canada sees a full recovery, we are headed in that direction. There are quite a few positives that are worth mentioning to provide a clearer picture of the recovery that Canada has made to date.
- This year, Canada will have the lowest overall tax rate on new business investment in the G7.
- By 2012, Canada will have the lowest statutory corporate income tax rate in the G7.
- Canada’s federal tax-to-GDP (gross domestic product) ratio is at its lowest level since 1961.
- As a result of the expiration of the Economic Action Plan and the measures in this budget, the deficit is projected to decline by almost half over the next two years to $27.6 billion in 2011–12, and by two-thirds to $17.5 billion in 2012–13. In 2014–15, the deficit is projected to be $1.8 billion.
- Finance minister predicts real growth in economy of 2.6% in 2010 and 3.29% in 2011.
- One objective was to maintain or create 220,000 jobs – Action Plan has contributed to the creation of over 135,000 jobs recorded since July, 2009.
Budget Highlights
- Under Year 2 of Canada’s Economic Action Plan, $19 billion has been allotted in new federal stimulus to create and maintain jobs, complemented by $6 billion from provinces, territories, municipalities and other partners;
- Over $4 billion in actions to create and protect jobs. This includes additional Employment Insurance (EI) benefits and more training opportunities to help unemployed Canadians through this difficult period, and help ensure they are equipped to re-enter the workforce and prosper in the future.
- $7.7 billion in infrastructure stimulus to create jobs. This will modernize infrastructure, support home ownership and improve social housing across Canada. This builds on the $8.3 billion investment in infrastructure and housing delivered in 2009–10.
- $2.2 billion to support industries and communities. This will support adjustment and provide job opportunities in all parts of Canada that have been hit hard by the economic downturn. It provides support for affected sectors, including forestry, agriculture, small business, tourism, shipbuilding and culture.
- Providing $3.2 billion in personal income tax relief to support growth and job creation.
- Delivering $1.6 billion to strengthen benefits for the unemployed.
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