Good morning.
Just for background, I am a CA who has practised in taxation for medium and large businesses for about twenty years.
When we were looking at the two questions, we wanted to look at recommendations--we've come up with three, dealing with two specific areas--that were practical and effective.
The first area is with respect to credit cost and availability. There are still significant problems in Canada in terms of the availability of credit and the cost of credit to businesses. What has happened by the Bank of Canada's easing of credit is that basically the banks have sucked up the difference. They have taken all of the difference in rates--if anything, rates are higher--and they've jacked up fees. Some of our members are facing fees that are three and four times what they were just a year ago.
Our first recommendation deals with how to deal with these issues. We need to have someone else with available capital to come to the market. We're suggesting that we need to entice more leasing companies back. Within the last year, most of them have actually left the market. Only one has come back, and they've come back with high rates. They're extremely selective about who they will lease to.
So that's the first area. You'll see in our paper that we're suggesting that there are tax-motivated ways to entice leasing companies to come back through accelerated capital cost loans. We just need to get them back into the market in the short term. We know there's lots of capital out there. There's lots of cash. They're just not bringing it back to the people who need to borrow it.
In the same vein of credit cost and availability, our next recommendation is with respect to the amount of tax credits that manufacturers specifically have. We have a huge amount of investment tax credits that we've earned; we just can't use them. No one will lend you money if you have tax credits. You can't cash them out. As one of the CME members pointed out, tax credits are largely useless during a recession.
We're suggesting a short-term measure that would allow members, under strict criteria, to cash those out and return the credits back to the federal government in exchange for receiving funds. The conditions perhaps would be something like this: if I agree to invest $10 million into my plant, I could take $5 million, for example, of my tax credits and turn them back to the government; after I've demonstrated that I've invested the $10 million, I could get $5 million back through my tax return.
Again, this is not going to cost the government any money at all in the long term. These are credits that have already been granted and are sitting there just unutilized. That would allow us to take that $5 million and go to lenders. We would have our portion and we could borrow the balance. Having no funds today, or very little ability, we can't borrow. So that's the second specific recommendation.
The second area where we have some suggestions is to improve a current program, the scientific research and experimental development program. It's a great program. It's one of the best in the world--on paper. The problem is that it doesn't work very well. It's very bureaucratic. It takes an extremely long period of time to get any dollars. We have members who wait up to four and five years from filing their tax returns before they hear back. The process is extremely bureaucratic. It's inconsistent across Canada. Specifically in Atlantic Canada, where we operate, we have a lot of problems of consistency with the rest of the country. We've run into staff who are not very well trained.
We just believe this program has such great potential; it truly should be the incentive that it was designed to be to reward innovation and reinvestment.
Thank you.