Great. Thank you very much.
You know, these jerseys are on every wall in Calgary. I'm not sure if you have the same policy at the city, but we can't remove it. It's part of our heritage, if you will.
Thanks very much for the opportunity to present to the committee today. The Calgary Chamber of Commerce represents over 3,200 members in the Calgary business community.
My remarks today are informed by our 2012 pre-budget submission to the committee in August of this year and are structured around the consultation framework. The three key questions are how to balance the budget, how to achieve sustained economic recovery, and how to attain high levels of job growth and business investment to ensure shared prosperity.
First, on balancing the budget, the chamber urges the federal government to apply prudent fiscal management policies relating to program expenditures and debt levels to balance the budget and position the Canadian economy for stable growth. The chamber was pleased with the strategic operational review announced in 2011 as well as the reduction of corporate tax revenues to 15% from 16.5%, which, as we have seen, has led to increased corporate tax revenues in general.
To undertake further efforts in this regard, the chamber is suggesting that government adopt what we call a “bandwidth” approach to spending by targeting expenditure increases within a range delimited between population and inflation and real GDP and inflation. Using a five-year average, this range is between 0.03% and 3%.
This approach is beneficial in that it establishes future spending parameters in the context of the current fiscal climate and spending constraints, and sends a credible signal to the business community that Canadians and the federal government are committed to returning Canada to balanced budgets.
The 2011-12 federal budget proposes a spending increase well within this range, at approximately 0.2%. For 2012-13 the chamber suggests targeting increases at the lower end of this bandwidth, estimated at 0.03%, while earmarking the remaining capacity of the bandwidth for deficit reduction on an annual basis, estimated at approximately $6.6 billion.
Second, in regard to achieving sustained economic recovery, we're proposing some R and D changes. With Canada seeking to grow its economy and create new jobs, we believe research and development is the key to enhancing productivity, particularly in this economic climate, beginning with ensuring and strengthening the equity of the scientific research and experimental development tax credit, or the SR and ED credit.
The SR and ED program itself is a federal policy lever for incentivizing R and D. However, it creates an unlevel playing field for business through differential tax treatment based on ownership. The credit favours Canadian-controlled private corporations by giving them a 35% investment credit for expenditures up to $3 million, with 25% on amounts above that. Public companies and non-Canadian-controlled private companies get only 20%.
In addition, companies lose the cash refundable portion of the SR and ED claim when they go public, which lowers the amount of money they can use for R and D.
Effectively, the tax creates inequities across companies of different ownership structures and discourages private companies from becoming publicly owned. This ultimately hinders R and D investment and prevents the Canada Revenue Agency from benefiting from the improved disclosure records and audit trails offered by public companies. The chamber recommends that the government extend the 35% credit to all companies in Canada, provided the R and D activities are undertaken here.
Second, on the SR and ED, government has been challenged to apply and enforce the SR and ED tax framework on a consistent basis. The chamber suggests structuring the tax credit to more closely represent a fee-for-service model, similar to the patent office approach, as it would then be possible to write a more principled and consistent framework for administering and enforcing the SR and ED credit. That would further strengthen the effectiveness and integrity of the system and improve its use.
Finally, on the SR and ED, and more particularly on research partnerships, the federal government provides funding for research partnerships that represents up to 37% of total federal support for science and technology. All but two provinces provide additional subsidies--