Thank you, Mr. Chair.
First, I'd like to recognize your leadership on this issue as well. It was six years ago that we started talking about this and started asking what the most important measure to boost investment would be.
As you say, if you visit companies across Canada, they can show you the benefit there. It's not just the piece of equipment; it's what that has enabled their employees to do. It's the fact that their employees are still employed and the fact that their employees are in better jobs as a result of the greater profitability of the company. And that's important.
Frankly, I'd suggest that there might be too many tax economists in the Department of Finance and that maybe we should take all of them out to visit a few plants as well and show them what really goes on in business and what happens on a shop floor, because I think that's the type of technical experience and background that a lot of our policy-makers, especially in the Department of Finance, need.
Under the old system of depreciation, there is a 30% declining balance based on the economic life of an asset, and as long as the asset is generating money for you, it should be depreciated over that period of time. That's why we have 40-year-old boilers in place, and that's why we aren't moving to more energy-efficient systems. That's why the whole name of the game today is to compete on a very timely basis as new technologies emerge and you want to accelerate that capital turnover.
If we didn't have corporate taxes, in the best of all possible worlds, the manufacturing sector would be making a return on their investment in a period of three years. So when we implement a corporate tax system, wouldn't you want the rate of depreciation to sort of match the natural rate of return on the asset? That's what this effectively does. To me, this matches the rate of return for investors to exactly the rate of return they'd be expecting in the marketplace. They need certainty over a period of time, because it may take three or four years before the initial plan is put in place and the capital is installed.
That's why the two-year extension is important. It gave us three years here, and as I say, we'd like to make it a permanent part of the tax system, because it's a tremendous advantage. But, again, you need certainty, and I think right now, as you say, many companies have been factoring in tax reductions as part of their investment plans.
But I can also tell you that the combination--and it's a pretty powerful one--of a low corporate tax rate, a two-year write-off on manufacturing equipment, the introduction of the HST in most provinces, and the elimination of tariffs on imported equipment is a very powerful message to send to a lot of international companies in Europe and especially the United States.