Good afternoon.
I would like to thank the committee for the opportunity to make a presentation on behalf of the North American Equipment Dealers Association. Our trade association represents over 800 equipment dealers in Canada. Our dealer members retail equipment that is primarily used in agricultural or farming practices. Our members are sensitive to the changing needs and demographics of farmers and have seen many advances in the equipment offered for sale.
Farming today is vastly different from 30, 20, and even 10 years ago. Increases in farm size and demand for greater production with the same farmable acres have seen significant increases in technology. Tractors, combines, high-clearance sprayers, air seeders, corn planters, and GPS systems today are very sophisticated pieces of equipment that require highly skilled technicians to service. Added to this is that the changes in technology are coming in at an extremely fast rate, making relatively new equipment obsolete. However, it is our perspective that government policy affecting our industry has not moved as fast.
To accurately represent these increases in technology and to fully account for the effective life of today’s farm equipment, we recommend that consideration be given to changes on the capital cost allowance schedule on farm equipment and implements. We believe that the existing CCA rates on farm equipment are not reflective of the current life of the machine, nor respect the substantial increases in technology that have taken place in recent years, nor match the buying and purchasing practices common today in the industry. Our dealer members are seeking quicker turnover of equipment by our customers, which speaks to the demand for the new technologies and the increased usage of the current equipment.
The current CCA rate of 30% is not reflective of today’s environment; therefore, we are requesting that the CCA rate on class 10 equipment be increased to 40% in the first year from the current 30% and the CCA rate on class 8 equipment move to 30% from the current 20%. At the same time, we are requesting that the Department of Finance undertake a comprehensive review of the current determination of what qualifies for class 8 or class 10 types of equipment. Current classifications identify high-clearance sprayers, air seeders, air drills, and corn planters as class 8, but due to the sophistication and useful life of these machines, we suggest they be reclassified to class 10.
It is our understanding that Minister Flaherty commissioned his officials in the Department of Finance to undertake a review of current CCA rates to ensure that Canada’s businesses are competitive in the world economy. Our industry has yet to see any adjustments in CCA rates from this review.
Increasing the CCA rates has been addressed through resolutions that passed unanimously at our annual general meetings. This has become formal North American Equipment Dealers Association policy in both Canada and the United States. There have been recent initiatives in the United States that have seen rapid acceleration of their depreciation schedule. Our organization was successful in leading an initiative in Washington, D.C., to have agricultural equipment fully depreciated over a five-year period as opposed to the previous seven-year period. The American Recovery and Reinvestment Act of 2009 also makes an additional $250,000 of equipment depreciation available, in addition to another measure of a 50% bonus depreciation provision for farm equipment purchases.
Our agricultural equipment industry conducts business in a North America-wide market. It is vital to our Canadian dealers that Canadian taxation policy be as competitive as possible.
Such a change in Canada would see all sectors on the agricultural equipment market benefit, the Canadian manufacturer, dealer, and consumer, and result in a positive effect for the Canadian economy. Farmers will be encouraged to reinvest in their equipment even quicker and faster. This benefits the manufacturer, which will allow for further sophistication and advances in technology.
In our materials that I have provided, we have a current outline of the CCA rates. According to the CCA guidelines, harnesses and sleighs have the same depreciation rate as a $300,000 combine. We hope this illustration alone points to our desire to have the CCA rates updated.
I'd also like to point out that in 2007 the Standing Committee on Agriculture and Agri-Food passed a motion supporting our request to increase the CCA rates on class 10 and class 8 agricultural equipment. Our organization is also one of 14 groups and sectors in Canada that is calling for long overdue changes to the CCA rates. We seek support from the Standing Committee on Finance to finally address this long overdue change.
Our third issue addresses environmental concerns. We are requesting that the committee propose and support the introduction of a program that would see financial incentives to see farmers replace, repower, and retrofit older diesel engines. We base this initiative on a program currently in the U.S. that is successfully reducing emissions from diesel engines.
Recently the Obama administration announced a new directive to reduce carbon dioxide emissions. Soon the State of California will be requiring all tractors to have a tier 4 engine. We don't envision that tractor manufacturers will have tractors with two different engines for the North American market, so Canadian dealers and farmers will be impacted by these changes. We feel that manufacturers, dealers and farming customers are ready for environmentally responsible changes; however, our concern is who pays, and what value will the farmers' old equipment have once new environmental standards are imposed?
In closing, Canadian farm equipment dealers remain committed to selling and servicing quality products for Canadian farmers. We are hopeful that all sectors of the industry will be profitable in 2009, 2010, and beyond.
On behalf of our 800 dealer members across the country, I'd like to thank the committee for the opportunity to make this presentation on their behalf, and I look forward to your questions and comments.