Evidence of meeting #47 for Finance in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was companies.
A video is available from Parliament.
NDP
President and Chief Executive Officer, Canadian Manufacturers and Exporters - Ontario Division
The way this is run right now is that this is a long-term repayable loan, so it's hardly a grant.
President and Chief Executive Officer, Canadian Manufacturers and Exporters - Ontario Division
Yes, because it's a long-term loan.
NDP
Murray Rankin NDP Victoria, BC
This may not be possible, but Mr. Murphy, how did you come up with the number of $50 million that you're asking for?
Manager, Government Relations, Co-operatives and Mutuals Canada
We're hoping to have $25 million for the fund from within the sector, so it's a 2:1.
Conservative
The Chair Conservative James Rajotte
Okay, thank you.
Thank you, Mr. Rankin.
We'll go to Mr. Allen, please, for five minutes.
Conservative
Mike Allen Conservative Tobique—Mactaquac, NB
Thank you, Mr. Chair, I appreciate that.
Mr. Myers, I want a little follow-up on the accelerated capital cost allowance, and specifically the numbers that Lorraine took us through, indicating that when you compared us to the U.S. there was a significant difference between the countries. Is that based on the calculation or the rates because, as you said, 40% on a declining balance would put us more in the game?
I know that various business units within your large multinational companies are competing for projects too. So you can decide to locate a project here in Canada, the U.S., Europe, wherever it happens to be, based on potential tax policy. From what I understand, the lowering of corporate taxes in Canada has been beneficial in getting the companies to locate here. The question now becomes, how does that business unit compete on a global scale? How do we compare? You said we don't really compare in the U.S. How do we compare to other countries?
Manager, Stakeholder and Corporate Relations, Williams Energy, Canadian Manufacturers and Exporters
Yes, and I think the word I used was “significant”, not “huge”. So I want to make sure that's clear.
Manager, Stakeholder and Corporate Relations, Williams Energy, Canadian Manufacturers and Exporters
“Significant” means it's meaningful, but not huge. We have plus and minus columns for investing in Canada versus other jurisdictions and we have regulatory certainty. Sometimes it takes a while, but it's certainly clear. In Alberta in particular, we have incredible long-term feedstocks, lots of natural resources. We have favourable corporate tax rates. No one argues about that in our company. The biggest barrier right now is capital expenditures, the capital cost of building the project. We've done some work on that, and indeed had to because our company had these choices of locating on the Gulf Coast or Alberta, especially in this particular instance. We've done a lot of examination on the difference in capital expenditures, and we're finding a 20% to 40% factor difference to build in Alberta or to build on the Gulf Coast. That's largely labour, and when I say that it's also because you can't bring in a large module on the water and put it on the coast, but have to build it in Alberta. There are winterization issues. There are other sorts of things like that. Because of that high capital expenditure or cost, that's why the capital cost allowance or depreciation rate matters.
Conservative
Mike Allen Conservative Tobique—Mactaquac, NB
Thank you.
Ms. Atkinson—and probably Jason—when you had the discussion on the SR and ED program, I guess I have to be a little tough on that, because maybe some larger organizations have found it pretty helpful, but some smaller ones haven't. When you look at the SR and ED program the way it was, you see that its application was inconsistent by the CRA and that there were unpredictable results with it.
The poor little guy who has to fight the CRA through appeals, appeals, and appeals can't do it. So I would suggest that maybe it wasn't very effective for everybody; hence, some of the changes, including the CRA being able to have the expertise to do that. I just question whether the glowing comment with respect to SR and ED should have been that glowing.
Tax Partner, Ernst & Young, Chair, Tax and Finance Committee, Information Technology Association of Canada)
I'll provide anecdotal comments from SR and ED performers. There clearly are a variety of responses and comments like those you have suggested. The system is complicated and does take up time, but for a lot of the SMEs, the R and D performers, I guess they were so desperate for that initial source of funding in their initial phase of bringing their product to market that they tolerated those kinds of barriers. They have clearly benefited from the government's generous continued investment for SMEs in the SR and ED program and are very grateful for that. They're also grateful for the venture capital action plan and the funding that's taking place there. That has made a tremendous difference.
I think what they recognize, though, is that it's an ecosystem. We have a lot of SMEs and we have large players. We don't have a lot of what I'll call companies that are five to ten years old, have not been bought out, and are going to be the next global performers, and that's where we need to focus.
Conservative
The Chair Conservative James Rajotte
Thank you.
Thank you, Mr. Allen.
We'll go to Mr. Cullen, please.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
The question I wanted to use is about the SR and ED comments by the manufacturers. Forgive my lack of familiarity with the program as it's described in your comments here. Do you see this as, in a sense, an outstanding liability? You've made some recommendations that they should be, in part, transferred over. Am I mis-characterizing them?
President and Chief Executive Officer, Canadian Manufacturers and Exporters - Ontario Division
Well, I think it is an outstanding liability for the government. These are tax credits that at some point, once a company becomes profitable, can be exercised and credited against revenue. We're trying to find a solution that can transfer those credits into some form of direct expenditure program that would support the type of R and D that companies have been doing. Again, in part, we're trying to look for solutions to overcome some of the problems, especially for the smaller companies in manufacturing, where they are coming up against difficulties.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
The present lack of profitability for some of those companies to be able to achieve those SR and ED credits...? Is that what.... I look at this recommendation and try to assess its viability and what the cost is to the treasury to do what you're suggesting here, which would be—
President and Chief Executive Officer, Canadian Manufacturers and Exporters - Ontario Division
These are already liabilities—
President and Chief Executive Officer, Canadian Manufacturers and Exporters - Ontario Division
—from the federal government point of view. Particularly in a high tech business or in a manufacturing business where capital spending and investment in R and D, in product development, is running ahead of profit, as it would be in a growth business, then it becomes very important to be able to exercise those credits where you may not be earning as much revenue as you're spending in R and D.
NDP
Nathan Cullen NDP Skeena—Bulkley Valley, BC
My colleague Mr. Caron and I are just pulling up here the state of manufacturing in Canada over the last little while. Statistics Canada says that between 2002 and 2011 we lost about half a million manufacturing jobs in this country. Does that cess up with what your association finds? Also, how far are we along the road to replacing those half-million jobs?
President and Chief Executive Officer, Canadian Manufacturers and Exporters - Ontario Division
It does. We've lost actually about 700,000 manufacturing jobs—