Thank you, Mr. Chair.
Members of the committee, I am pleased to be here with you today to discuss part 1 of the budget implementation bill.
Our organization, Canadian Manufacturers and Exporters, represents more than 10,000 companies in Canada. The companies we represent account for about two-thirds of Canada's annual exports and for more than one half of all private research and development expenditure. Our sector employs about 1.7 million people.
First of all, we want to express our appreciation to you for the support that has been shown to our sector by the government and the opposition parties over the years. The manufacturing sector is crucial for the development of our economy. Your support is important. We have covered a lot of ground since the dark years when some thought that the Canadian manufacturing sector was on its death bed. Not only is it not dead, it is back with a much more technological approach. I would be remiss not to express our appreciation for your support.
The most important measure of part 1 of the budget bill is the renewal of the accelerated capital cost allowance for the acquisition of machinery and equipment. Between 2007 and 2014, the federal government offered manufacturers a measure to depreciate their machinery and equipment over a two-year period using a straight line method of depreciation. This measure has been highly successful. By 2013, spending on machinery and equipment had reached pre-recession levels, at $14.3 billion, and has been growing since.
There are some indicators that lead us to believe the timing is right for a new wave of investments in our sector. The industrial capacity rate is now over 80%, which means many companies will start looking at investments in industrial capacity, including plant expansions, adoption of automated production systems, and so on. The question is whether these investments will take place in Canada or not. That's why it's important to keep the marginal effective tax rate on new manufacturing investments very low.
The new measures in the last budget, the ACCA, had a 50% rate on a declining balance. It might not be as generous as the previous two years' straight line rate, but at least it provided a level playing field with other countries, such as the United States, for new manufacturing investments. The new 50% rate will allow companies to depreciate more than 95% of their investments within five years, which is much better than the 30% declining balance that was previously effective before 2007. Even more important, this 50% rate will be effective for 10 years, allowing companies to plan ahead for large investments that are planned over a period of between three and five years on average.
As Corinne mentioned, the budget bill also reduces the small business tax rate from 12% to 9% over four years' time. This is good news. Approximately 85% of our members are SMEs and will benefit from this tax cut. By 2019, the small business tax rate will have decreased by 46% compared to the 2006 level, a significant reduction that will help provide a more competitive tax environment for SMEs in Canada, which make up more than 98% of all businesses in the country.
Finally, I'd like to remind committee members there are still very important challenges ahead of us if we want our manufacturing sector to grow and better compete globally. One of them is access to capital, especially for the acquisition of machinery and equipment used mostly for research and development or for prototyping purposes. For example, one of the fastest growing sectors in our sector is what we call additive manufacturing, or 3-D printing, where 80% of the activities with those machines right now are taking place in prototyping. Very few of these machines are used for end product fabrication right now, which means they don't necessarily qualify for ACCA. These machines used to be eligible under the scientific research and experimental development tax credit as a capital expenditure for the tax credit, but it's no longer the case since the government's decision to eliminate capital expenditure under the SR and ED tax credit. This is becoming a major issue, and we hear that both from companies buying these machines and also companies selling those machines, because we know that early adoption of these advanced manufacturing technologies is crucial for the future competitiveness of our sector.
Thank you very much again for inviting me, and I look forward to your questions.