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.