With that, we appear today to seek the committee's support on five issues of importance to Canadian equipment dealers.
First of all, we have requested that the Department of Finance increase the capital cost allowance--the CCA--schedule on new farm equipment purchases to 40% in the first year from the current 30%. That is for investments in new agricultural equipment.
Our organization made this request to the Standing Committee on Finance in 2006, and reference was made to our request in the pre-budget report presented to the House of Commons. In the committee report, recommendation number 24 addressed this issue, and I quote:
If the review concludes that accelerated rates would enhance productivity, changes to capital cost allowance rates should be made.
We believe that the current marketplace sees quicker turnover of equipment, and the current rate of 30% is not reflective of today's environment. Currently the 40% CCA is provided to heavy trucks, and the same ratio should be put in place for agricultural equipment.
Furthermore, recent initiatives in the United States have seen rapid acceleration of their depreciation schedule. There is a new initiative led by the North American Equipment Dealers Association to have agricultural equipment fully depreciated over a five-year period, as opposed to the current seven years, and there has been a receptive ear to this message in Washington. Such a change in Canada would see all sectors of the agricultural equipment market benefit--the manufacturer, the dealer, and the consumer--but the major benefactor of this change would be our farmer customers. Today's farmer and the innovative farmer of the future are both trading in their equipment at a faster rate than in the past, and an increase in the depreciation rate is warranted to reflect the current purchasing pattern and the use of the equipment.
One other benefit of this change would be to the environment. As more and more of the efficient and sophisticated farm equipment enters the market, it replaces older and inefficient technology; an adjustment in the CCA rates for farm equipment in Canada is needed for us to remain competitive in the world.
We seek the support of this committee as the issue is reviewed by the Department of Finance.
Our second and third recommendations address environmental aspects. We are requesting that the committee propose and support the introduction of a program that would see financial incentives for farmers to replace, repower, and retrofit older diesel engines.
We base this initiative on a program currently in place in the United States that is successfully reducing emissions from diesel engines. We feel that manufacturers, dealers, and our farmer customers are ready for such an initiative; however, what is needed is an incentive to make it happen. We seek the support of the committee in this effort, which would place Canada as a leader in reducing pollution emitted from farm equipment.
Keeping with the theme of the environment, the third issue we would like to bring before the committee is that the Canadian affiliates of the North American Equipment Dealers Association strongly support the development and expansion of a viable biofuels industry in Canada, and we ask that incentives offered in the U.S.A. be matched in Canada to encourage the growth of our industry here.
In addition to the positive impact on the environment, the advent of the biodiesel and ethanol industries has placed another demand for our customers' products. We have seen commodity prices increase over the past year, partly because of the biofuels initiatives that have been launched in both Canada and the United States. This certainly is part of the reason for the optimism in the industry coming from our dealer members. We hope this is not a short-term phenomenon, but we believe incentives in Canada should match those offered in the U.S. in order to ensure that our biofuels industry is sustainable over the long term.
Our fourth recommendation to the committee is also a finance issue and concerns the capital gains tax exemption limit. We seek the support of the committee for our recommendation to increase the exemption limit to $750,000 due to the consolidation of our businesses. This is becoming a bigger issue within our industry.
We feel the $500,000 limit is dated and that the limit needs to be more reflective of today's economy and business sizes, as each year more and more of our businesses that have been sold are exceeding the limit. We will be forwarding this recommendation to the Department of Finance. We seek the support of the committee in this request.
Our fifth and final recommendation addresses our shortage of technicians. We ask for the committee's support in exploring programs and assistance to recruit and maintain technicians so that our dealer members can competently service the equipment we sell to our farmer customers. We recommend that programs assisting in foreign recruitment, education and training, and rural living be considered, as well as tax credits for tool purchases by all technicians.
In closing, we are looking forward to a strong 2007 for the farm equipment industry, one that will be positive for Canadian farmers, dealers, and Canadian-based manufacturers.
On behalf of our dealer members across the country, we would like to thank the committee for the opportunity to make this presentation on their behalf, and we look forward to your questions and comments.
Thank you.