Feature Spotlight

Feature SpotlightFeature

2015 Federal budget: An overview by the Calgary Chamber

Wednesday, April 29, 2015
Federal Budget 2015: An Overview The Calgary Chamber is pleased to see that several of our priorities were addressed in the 2015 federal budget, including small business tax competitiveness, infrastructure investment, venture capital incentives, and skilled labour. Nonetheless, there are a few areas in which we would have liked to have seen greater commitment, and greater detail. As our nation continues to grapple with economic volatility, now more than ever the federal priority must be to support Canada's long-term competitiveness. We’ve outlined some highlights, as well as our impressions of how well-positioned the budget is to tackle the Calgary business community’s greatest priorities. Supporting the Manufacturing Sector Highlights of the budget: • Maintaining a low tax burden on businesses to encourage investment in Canada and a 10-year tax incentive to boost productivity-enhancing investment • Providing up to $100 million over five years, starting in 2015-2016, to support product development and technology demonstration by Canadian automotive parts suppliers through the new Automotive Supplier Innovation Program • Providing $2.5 million per year, starting in 2016-2017, to increase the analytical capacity needed to support the Defense Procurement Strategy The Chamber’s thoughts: • The negative economic impact of low oil prices heightens the need to invest in Canada’s manufacturing sector, and maintaining a low tax burden will help to accelerate new investment. • The low tax burden also frees manufacturers to investment more in capital equipment, including new machinery and infrastructure upgrades. • Funding for the Automotive Supplier Innovation Program is aimed specifically at technologies to improve fuel efficiency, onboard communication, and automation. With oil prices low, increasing international exports through enhanced product development, especially to the United States, therefore capitalizing on greater foreign activity and a weak Canadian dollar, will help offset the economic losses of the energy industry. We are supportive of the budget’s aims to take advantage of our weakened dollar as an additional boost to exports. • Something to note, however, is that half of the money being funneled into this new program is being re-directed from an existing auto sector fund, so it only amounts to $50 million in new contributions • Overall, this budget was favourable for Canada’s manufacturing industry, which is beneficial for the Canadian economy as a whole in this economic downturn. However, Canada’s oil and gas industry, another important economic driver, received little mention save for minor tax breaks in LNG. Investing in Advanced Research Highlights of the budget: • Providing an additional $1.33 billion over six years, starting in 2017-2018, to the Canada Foundation for Innovation to support advanced research at universities, colleges, and research hospitals • Dedicating an additional $46 million per year to granting councils, starting in 2016-2017, focused in areas that will fuel economic growth and respond to important challenges and opportunities. The Chamber’s thoughts: • This budget’s investment in the Canada Foundation for Innovation is substantially lower than the 1997-2012 average of $370 million annually, which makes it difficult for Canada to maintain leadership and spur innovation in science, engineering, and medicine, and other fields. Small Businesses and Entrepreneurs Highlights of the budget: • Reducing the small business income tax rate from 11 per cent to 9 per cent by 2019 • Increasing the Lifetime Capital Gains Exemption to $1 million for owners of farm and fishing businesses • Reducing tax compliance burden o Reduce the frequency of required remittance payments by two-thirds, for new small businesses o Review of riles used to define active versus passive income o Federal adoption of Businesses Numbers as a Common Business Identifier o Exempt qualifying non-resident employers from Regulation 102 • Increasing access to venture capital by continuing the 2013 Venture Capital Action Plan’s fund of funds model, and increased loan programs • Expanding services and roles of Business Development Bank of Canada and Export Development Canada to help small businesses secure loans and reach international markets • Providing $14million over two years to “Futurpreneur Canada” in support of young entrepreneurs and supporting the Action Plan for Women Entrepreneurs to help women business owners succeed The Chamber’s thoughts: • Support for small business appears to be the economic cornerstone for this budget, and is welcome news for the Calgary business community. The budget provides a host of credits and tax reductions for a segment of the economy that is incredibly vulnerable to economic volatility. • Changes to the small business income tax rate, Lifetime Capital Gains Exemption, and the expanded roles of Export Development Canada help ensure that Canadian small businesses stay completive in the global marketplace • The concerted effort to reduce red tape and tax burden for small businesses is a very positive step, as it ensures that business owners can spend greater time doing what matters—running their business • It is great to see the federal government continuing its active role in conquering the challenge of improving access to capital for small businesses. However, we believe that one very effective method is not being used, investor tax credits. Programs which provide a non-refundable income tax credit on investments made in an eligible small business have seen a great deal of success on the provincial levels. Rather than putting forward seed money, or directly providing loans, the government should instead use free market forces to make the investment decisions, and incentivize the flow of capital to small high-growth businesses • Greater diversity and youth in entrepreneurship a very important to the Calgary Chamber, and this budget provides a significant amount of capacity funding to ensure women and young people can advance as entrepreneurs Skills and Workforce Development Highlights of the budget: • Support provinces and territories in harmonizing apprenticeship training and Red Seal certification requirements, with $1 million over five years to Blue Seal Certification programs • One-time $65 million investment to business and industry associations to help better align curricula and employer needs, and $2 million over two years to expand Computers for Schools program • $248.5 million over five years in Aboriginal market programming • Reallocation of funding toward labour market information, with launch of a new one-stop national labor market information portal The Calgary Chamber’s thoughts: • Even with the current downturn, it is important that Alberta continue to ensure that the pipeline for skilled labour continues to flow. If not, the labour shortage will be exacerbated once the price of oil recovers. Support for training harmonization, the skilled trades, aboriginal workforce development, and better alignment of post-secondary institutions and business needs ensures that the Canadian workforce remains productive, mobile, and qualified for the jobs our economy needs. Apprenticeship grants, training programs, and incentive schemes are major boons to industry which relies on these programs to offset training barriers both for workers and businesses. • A greater alignment of post-secondary curricula with the demands of the business community is something the Calgary Chamber has been interested for many years, and it is great to see greater capacity funding in the area • Aboriginal labour market participation is a major issue across Alberta, so the training of an aboriginal work force to meet demands in the labour market is an important policy. However, there also needs to be a greater effort to gather aboriginal specific labour market data. Currently, Statistics Canada’s monthly labour force survey excludes First Nations reserves due to the cost prohibitive nature of collecting information in these areas. This has resulted in roughly half of Canada’s First Nations being omitted from the data. A monthly survey may not be infeasible, but a greater effort must be made • Greater labour market information has been an important advocacy issue for the Calgary Chamber. Greater information, particularly in regard to First Nations workforce participation, regional statistics, and post-secondary education is required so that businesses are able to make sense of long-term market fluctuations, and governments can track demographic challenges and the effectiveness of policy decisions. Especially in a time of market volatility it is important to understand current labour trends, and the policies needed to address them. We commend the government’s efforts to make this data more accessible, but would like to also see a reinstatement of the long-form census Investing in Infrastructure Highlights of the budget: • Continuing to provide $5.35 billion per year on average for provincial, territorial and municipal infrastructure under the New Building Canada Plan. • Providing an additional $750 million over two years, starting in 2017–18, and $1 billion per year ongoing thereafter for a new and innovative Public Transit Fund—the Government’s largest targeted infrastructure program—to promote public transit infrastructure investment in a manner that is affordable for taxpayers and efficient for commuters. • Creating a new dedicated infrastructure fund to support the renovation, expansion and improvement of existing community infrastructure in all regions of the country as part of the Canada 150 celebrations. • Continuing to build and renew federal infrastructure and on-reserve schools, including through $5.8 billion in investments over six years. • Reviewing the usefulness of the rule that restricts federal pension funds from holding more than 30 percent of the voting shares of a company. The Chamber’s thoughts: • Increased investments in infrastructure through balanced base funding of $250 million per province is a step in the right direction, and continued investment in the Federal Gas Tax Fund is the most significant feature of this, which offers some assurance that large metropolitan areas are subject to some degree of permanent, predictable, and legislated infrastructure funding. • The federal government’s promise of investment into the new Public Transit Fund is by far and away the most promising development in infrastructure. Under the Public Transit Fund, cities will be able to apply for transit infrastructure funding, which will provide $750 million until 2019, then $1 billion annually on a permanent basis. This is an incredibly encouraging development that addresses a large facet of Canada’s infrastructure deficit – the issue of congestion. The largest concern about this new fund is that it will not come into operation until long after the upcoming election, only coming into effect in 2017-2018. • The budget also emphasizes the use of P3s and the role of the private sector for leveraging expertise as a way to fund transit infrastructure in a more innovative and efficient way. • The creation of a new fund dedicated to community infrastructure as part of Canada 150 will improve the attractiveness and liveability of a community, which in turn helps attract human capital, and in addition to the improved marketing of Canada as a tourist destination to the United States. • The Chamber welcomes the creation of a new dedicated infrastructure fund, but the types of infrastructure projects that the fund will be dedicated to details on the new fund are vague and broad. It highlighted that the costs associated with these renovations and expansions would be shared with community organizations and municipalities, but articulated no detail on costs or funding structure, promising further details to be announced over coming months. • The commitment to invest in much needed infrastructure repair for on-reserve schools is encouraging, however this should be coupled with renewed talks on the First Nations Control of First Nations Education Act which collapsed last year • Canadian pension funds are among the most experienced private sector infrastructure investors globally, yet their activities are limited. Examining the effects of removing the 30 percent restriction is promising. Growing Trade and Expanding Markets Highlights of the budget: • $50 million in financial support for SMEs who wish to establish a foothold in targeted export markets • A focus on the agriculture and agri-food sectors when it comes to the development of trade opportunities • Continued implementation of the Beyond the Border and Regulatory Cooperation Council Action Plans with the United States to strengthen our long-term security and trade relationship. The Chamber’s thoughts: • As an export-oriented country, Canada’s economic competitiveness depends on investments that help foster international trade and broaden the reach of our goods and services to new markets around the world. From infrastructure investments at our ports that facilitate international trade, to securing preferential terms of trade with strategic partner-nations, federal policy in this space has a material impact on the success of Canadian business. • The funding decisions made in Budget 2015 will help support Canadian business and their efforts to diversify their export base, and complement notable progress Canada has made striking free trade agreement with both the EU and South Korea. • However, there is a glaring lack of innovation or renewed focus on the issue of market access for Canada’s energy production. Diversifying our energy export markets is of paramount economic importance, particularly for Alberta-based businesses. Investing in Aboriginal Communities Highlights of the budget: • Investing $30.3 million over five years for the expansion of the First Nations Land Management Regime to create further opportunities for economic development on reserve. • Providing $200 million over five years, starting in 2015–16, to improve First Nations education • Providing $12 million over three years to Indspire to provide post-secondary scholarships and bursaries for First Nations and Inuit students and investing $2 million per year ongoing for mental wellness teams in First Nations Communities The Chamber’s thoughts: • Increased investment into the First Nations Land Management regime will allow 25 more nations to opt out of the 34 land-related sections of the Indian Act, which allows communities to manage their land, resources and environment under their own land codes, resulting in less red tape and quicker economic development on First Nations’ terms. • Studies have indicated that First Nations who are part of this regime have experienced higher job creation, greater opportunities, and increased community investment. There has, however, been a large backlog of applicants awaiting entry to the regime, so in addition to investing $30.3 million over five years to allow for 25 more nations to join, the government should consider additional funding mechanisms, such as self-funding or resource-pooling, to further expedite the process. • $200 million over five years to improve First Nations education falls short of the $1.9 billion promised in February 2014 under the First Nations Control of First Nations Education Act. This money was tied to the act, which did not pass. As a result, there should be a renewal of talks to craft another option to the bill. • The budget’s promise of $12 million in funding for Indspire and $2 million for community mental wellness teams signals a commitment to supporting labour support and skills development among First Nations. While the funding does support First Nations and Inuit students, the program should be expanded to provide funding for Metis students as well. Responsible Resource Development Highlights of the budget: • Providing accelerated capital cost allowance treatment for LNG assets • Extension of the Mineral Exploration Tax Credit • An additional $34 million over five years for consultations related to projects assessed under the Canada Environmental Assessment Act • $80 million over 5 years for the National Energy Board (NEB) to support safety and environmental protection, and greater engagement with Canadians • Dedicating more than $23 million to encourage technological innovation in the mining sector The Chamber’s thoughts: • The sustainable development of Canada’s natural resources is critical to the success of Calgary’s business community. For this reason, the Chamber is pleased to see progress on incentivizing environmental stewardship. The Chamber has clearly articulated the priorities of the Calgary business community to the federal government, identifying infrastructure investment, incentivization of a venture tax capital, solving the skilled labour shortage as our national economy’s chief method of ensuring long-term competitiveness. As Canada begins to enter a season of federal campaigning, we hope to see an ongoing effort by all of Canada’s federal parties to consider our positions when framing their respective fiscal policies and platforms.