Archive for the ‘recession’ Category

The proposed 2009 Ontario provincial budget, released March 26th, 2009, puts forward new tax measures intended to build on the government’s “5 point” economic plan. Understandably there is much controversy about the spending plans, and many Ontarians are expressing concern over the Sales Tax Harmonization, and how it will affect the individual.

On a positive note, there are a few bright spots for Ontario’s diverse technology sector. Most importantly, to our readers, are the changes to the Ontario Innovation Tax Credit (OITC), a tax relief measure for businesses to encourage technological development and new innovations.

Dalton McGuinty and Ontario Finance Minister Dwight Duncan (right), in Toronto on Thursday.

Ontario Innovation Tax Credit

The OITC is a 10% return for small to medium sized enterprises who perform qualifying SR&ED activities (Scientific Research & Experimental Development) in Ontario. The new budget proposes to extend the taxable income phase-out range from the current $400,000 – $700,000 to $500,000 – $800,000.  This measure will parallel the changes and enhancements to the Federal Investment Tax Credit for SR&ED claims, proposed in the 2009 Federal budget.

Sustaining and Promoting Research and New Technology

Ontario’s technological advancements require continuous support.  The new provincial budget is proposing more than $110 million in additional tax relief for 2009 and 2010, and $715 million in investments supporting partnerships in innovation, encouraging businesses to develop their new products, services, and processes.

These new investments are in addition to the $3 billion already to be provided by the Ministry of Research and Innovation.  They will include:

• $300 million in capital funds over six years for research infrastructure, to leverage funding from the Canada Foundation for Innovation

• $100 million in extra operating funds over four years for research in the biomedical field. This funding, as well as aforementioned funds for the research infrastructure, will be delivered via the Ontario Research Fund.

• $250 million over five years for a new Emerging Technologies Fund that will put focus on clean technologies and clean energy, health and life sciences, and information and communication technologies (including digital media).

• $10 million over three years to the Colleges Ontario Network for Industry Innovation, to assist small to medium sized enterprises with applied research, technology and commercialization.

Quote for March 27th, 2009:

“The most terrifying words in the English langauge are: I’m from the government and I’m here to help.”
- Ronald Reagan

The number of Canadians filing for bankruptcy and unemployment benefits rose significantly in January, according to new numbers released Tuesday by The Office of the Superintendent of Bankruptcy Canada.

More than 117,000 Canadians filed for bankruptcy over the period of twelve months ending January 2009. This denotes an increase of 15.8 % from the previous year. Nationally, the number of Canadians who filed for EI increased to more than 500,000 for January, according to Statistics Canada. Our unemployed Canadians filing for financial help is now 23% higher than it was in February of 2008.

Both the rapidly increasing bankruptcies and EI claims are signs of escalating troubles faced by Canadian citizens as the recession here deepens. And it’s not just individuals facing worry, but businesses as well.

In January of this year, 567 firms pulled the plug on their operations and filed for bankruptcy. Ontario manufacturing bankruptcies also rose 24%. Business insolvencies rose severely in Quebec, where the recession is strongly hitting the province’s industrial sector. 250 companies closed their doors in January, up from 202 closures in December of 2008.

How can individuals cope with job loss? Apply for EI as quickly as possible. The process takes time to be finalized, so the sooner you do, the less you’ll have to dip into savings. If faced with having to pay high prices for prescription medication after losing benefits, programs such as Ontario’s Trillium Drug Program can help cover these expenses.

Businesses can look at cost cutting where feasible, look for opportunities to expand their services to stable or growing sectors, and seek financing from federal and provincial funding programs (such as SR&ED or SMART). Companies on the brink of bankruptcy can look at Turnarounds and seek assistance from an experienced professional.

Source: Statistics Canada

Last week’s threat by Chrysler to close Canadian plants if it doesn’t win big concessions from the CAW is possibly one the most troubling announcements since the beginning of the auto industry meltdown.

Tom LaSorda, Chrysler president, said the company needs to lower its labour costs by about 25%, reducing wages from the current estimated to $75/hour to $55/ hour. LaSorda also said the company would require $2.3 billion USD in government bailout funds for Chrysler to continue manufacturing in Canada.

Currently, Chrysler directly employs an estimated 10,000 people in Canada. This number does not factor in the parts suppliers, dealerships and distribution centres who deal with the auto giant. The withdrawal of Chrysler would possibly force some parts companies and distributors to close entirely. And since suppliers usually sell parts to more than one auto maker, it would send other car makers clambering to find parts, eventually slowing production lines to a halt.

Some argue that over the long term, the loss of Chrysler might not be the worst thing to happen and prove advantageous for Ford and GM. The two remaining companies could theoretically pick up the slack for Chrysler in their absence.

Many are shaking their heads, calling it an idle threat. Shutting down operations in Canada would cost millions of dollars, not to mention a lot of time. While the auto industry as a whole would likely endure such a move, the move could potentially have severe impacts and pose countless problems across the board. Chrysler would have to shift production lines from Windsor and re-open their US minivan plant, should the current Windsor plant (where approximately 4,000 Canadians are employed) face closure. This would be an extremely costly endeavour.

And what of the effect this would have on the CAW, the very people Chrysler is demanding the concessions from?

Pundits and industry analysts say the threat is very real and not to be taken lightly, as Chrysler could very well transfer Canadian production to plants in the U.S. in a matter of months.

But historically, Chrysler has also made similar threats before (to varying degrees), and yet, are still here. CAW president Ken Lewenza has also recently asserted that Chrysler will not pull out just yet, anyway, as they have a three-year collective agreement with terms that prevent them from selling or closing plants for the duration of the agreement.

Readers: what are your thoughts?