Thank you very much, Mr. Chair and members of the committee.
I am Richard Paton, the president of the Chemistry Industry Association of Canada. With me is David Podruzny, the vice-president of business and economics.
Our association used to be called the Canadian Chemical Producers Association, so it's nice to know that Mr. Rajotte has made the transition to our new name. We made that change to represent the broader chemistry industry in Canada, which is a $24 billion industry, with 50 major companies across the country.
I've made pretty well the same presentation for four years now on accelerated capital cost allowance. We're very focused here. It's the same presentation that Roger Larson made.
I have to admit that over the last 10 years we have made a lot of progress on corporate tax change. I came to this committee eight or ten years ago to talk about the surtax and the capital tax and the need for corporate tax reduction. We have made a lot of progress, over two governments, in this area.
However, I have to point out that over four years we have not made any significant progress on the accelerated capital cost allowance.
I remember Mr. Rajotte chaired a great committee, the industry committee, which made a unanimous recommendation. I think the first recommendation in that report was for an accelerated capital cost allowance change. We did see some changes in subsequent budgets, but they were always for a period of time that was not useful to our industry.
You will see a chart in our submission that we started using several years ago to explain our case, which is that unless the capital cost allowance operates for a five-year period, it has no value to us. It takes five years to go from the planning stages to the implementation stage of a major investment.
That's one of the questions we have heard over the years: why does it have to be five years? This chart was designed specifically for this committee a couple of years ago to explain that.
The other question--and you've seen the handout we provided that explains it--is how does this work? Something as technical as a capital cost allowance is not easy to explain, but you can go to that presentation. I'll start with the opportunities.
We are at a stage in the recovery period where we need to get private sector investment back into the economy. We are a capital-intensive industry, along with fertilizer and many other resource-based sectors. I think Canadian corporate tax cuts that have been done over the years have enabled us to stay in business and to compete in this very difficult global climate we work in. However, we need major investment in capital facilities.
This chart we've provided is an example of how $100 million would be taxed differently under the current 30% declining balance approach, versus the 50% straight line depreciation, which is essentially the accelerated capital cost. You can see if you go through these numbers that in one case, with the normal 30% declining balance--a tax approach that takes literally forever to write off your investment--in a three-year period you're able to write off $58.3 million and the other $42 million is taxed. In the accelerated capital cost approach, over that three years you basically write off $100 million, and that leaves $10 million of cashflow for companies.