Good morning, Mr. Chair and hon. members. Thank you for inviting my organization and I to discuss our priorities for the next federal budget. I will start my presentation in French and switch to English afterwards.
I represent Canadian Manufacturers & Exporters, Canada's largest business association. We represent almost 10,000 companies across the country. Our sector accounts for more than 88% of all Canadian exports and 75% of all research and development spending in the private sector in Canada.
Today, I will make six recommendations that can be grouped in four major categories.
The first category is support for research and development activities. Our first recommendation has to do with research and development tax credits that are not used by medium and large businesses in Canada. The scientific research and experimental development program provides large industrial companies with non-refundable tax credits that can be carried over to subsequent years while waiting for a more profitable outcome.
The 2,600 medium and large businesses that are using the tax credit have carried over almost $7 billion in unused tax credits since 2001. In keeping with the current government's intentions to make more direct investments in research and development for businesses, we recommend that a program be set up to exchange unused tax credits for government contributions and to support capital investment that is used for research and development purposes. Those contributions would therefore be an alternative to the complete elimination of capital expenditures for the scientific research and experimental development tax credits that were announced in budget 2012 and that will be in effect starting next year.
The second recommendation has to do with the direct funding for research and development. We strongly support the creation of the support fund for the advanced manufacturing sector in southern Ontario. We firmly believe that all the other regional economic development organizations in the country should adopt similar programs for the advanced manufacturing sector.
Our next recommendation is about large-scale capital investment attraction. CME suggests the creation of a national fund to boost new investments in capital for the manufacturing sector. This new capital investment fund would target projects that would demonstrate an ability to increase manufacturing and processing output in Canada.
The sorts of projects that could be eligible for such direct funding would include the building of new production facilities, the expansion of current facilities, revamping existing operations, or the upgrading of machinery and equipment,
Our fourth recommendation is related to machines and equipment. It's something that my colleagues have talked about.
The accelerated capital cost allowance for machinery and equipment has been in place since 2007, and is set to expire in 2015. We strongly recommend that the ACCA become a permanent feature of the Canadian tax system, recognizing the importance of capital expenditures for the future of our sector and for increased productivity in the Canadian economy.
We also strongly encourage the federal government to review all the classes of assets and to align them with the U.S. depreciation rules in order to provide a level playing field in the fiscal treatment of business investments.
Our next recommendation is with respect to commercialization of new products in Canada. We recommend the adoption of a patent box model. A patent box is a tax incentive that provides relief from corporate tax on income generated from certain types of qualifying intellectual property, such as patents. Relief can be given as a reduced tax rate on revenues generated by the sales of products that were invented and commercialized in Canada. Countries such as the United Kingdom, Belgium, and the Netherlands have already implemented similar systems successfully.