Change will ‘hinder innovation’ | Reduction in the manufacturing tax benefit will affect Canadian research
A federal government budget proposal to change the rules for a manufacturers’ tax credit will cost manufacturers of agricultural equipment millions of dollars and hurt competitiveness, says an industry representative.
In a budget bill now before Parliament, finance minister Jim Flaherty proposes to reduce the Scientific Research and Experimental Development tax credit for companies to 15 percent from 20 percent.
The budget would also exclude from the tax credit program capital expenditures such as buying equipment needed to make equipment.
A coalition of Canadian manufacturing interests including agricultural equipment companies and the Canadian Fertilizer Institute have protested the proposal in a letter to Flaherty, arguing that it would remove more than $800 million of tax benefit to the manufacturing industry.
Read Also
Vancouver port says it has improved efficiency
Grain movement has been strong at the Port of Vancouver due in part to a new centralized scheduling system.
In a May 8 appearance at the Senate agriculture committee, Association of Equipment Manufacturers public policy adviser Howard Mains argued it would hurt companies like Winnipeg agricultural machinery manufacturer MacDon Industries Ltd.
The change in the capital cost allowance would “severely hinder innovation and development in the Canadian manufacturing sector,” Mains told senators.
In a later interview, he said the changes would favour labour-intensive product development such as computer software and penalize equipment manufacturers that must buy equipment to develop new models.
“The proposals in the budget really don’t take account of how research and development is done on the manufacturing floor,” he said. “We hope the government reconsiders.”
He said the harvesting equipment that MacDon markets around the world takes years to develop and millions of dollars of investment.
In his May 7 letter to Flaherty, which was signed by other manufacturing sector leaders, Canadian Manufacturers and Exporters president Jason Myers said other countries still offer more tax breaks for their manufacturers than Canada does, despite Conservative government tax reductions during the past six years.
And since many manufacturers are divisions of foreign companies, Canada’s tax regime does not en-courage their head offices to assign research and development work to the Canadian branches.
“Even with recent reductions in corporate tax rates, Canadian manufacturers are at a disadvantage when they compete for new or increased R and D mandates,” he wrote.
