Thank you. On behalf of 3M Canada, I'd like to thank the Standing Committee on Finance for the opportunity to appear before you as part of the consultations of the 2018 budget.
Ranked as the third most innovative company in the world, behind only Apple and Alphabet, 3M remains focused on utilizing technology to meet Canada's current and future needs in key areas such as energy, health care, safety, automotive, aerospace, and general industrial.
Research and development is at the very heart of 3M. That is why we reinvest 5.8% of sales annually into science. This investment helps 3M produce more than 3,000 patents each year. In collaboration with our customers, 3M is helping solve the world's toughest challenges by leveraging the power of 46 technology platforms to create better, safer, and more economical solutions for different market spaces. Headquartered in London, Ontario, since 1952, 3M Canada continues to invest in science, research, innovation, and talent.
There are several federal measures that would help Canadian businesses become more competitive.
One of the most powerful levers any government has at its disposal is taxation. Taxation can and should be used as a tool to incent investment in Canada and drive innovation. In an increasingly globally competitive environment, both manufacturing and research and development investments are subject to competition when it comes to choosing one jurisdiction over another. Half of 3M Canada's sales are generated by our nine Canadian manufacturing facilities, and the great majority of these sales—more than 85%—are exported to the United States.
3M Canada must compete with other countries around the globe for manufacturing capital investment. In 2012, the “Global Tax Competitiveness Report” ranked Canada the 19th-highest tax burden on new business investment among 34 OECD countries. By 2014, Canada had moved up to the 14th place. Consequently, the proposal that we will highlight today focuses on incentives to attract investment in Canada.
The most impactful proposal, in our opinion, is to implement an innovation box system, also called a patent box system. To help accelerate the commercialization of intellectual property developed in Canada, we echo the recommendations set out by the Advisory Council on Economic Growth in February 2017 to create a patent box. A patent box would incent R and D investment in Canada and encourage businesses to develop and commercialize patents in Canada. It provides a preferential tax rate to manufacturers on income derived from patents and other intellectual property.
More than 12 countries now have some form of patent box. A version of this plan has also been introduced in Quebec and in Saskatchewan in 2017. The Quebec program applies an effective tax rate of only 4%, and Saskatchewan 6%, on qualifying patent income. While action at the provincial level is needed and most welcome, action is also required at the federal level to develop a truly effective and compelling Canadian patent box system to help attract manufacturing and R and D investment.
In addition to a patent box, we also recommend a permanent accelerated capital cost allowance reduction for environmental and advanced manufacturing technologies to allow manufacturers to claim an immediate first-year writeoff of all qualifying capital expenditures, including software.
Another tax measure to spur investment would be to expand the Atlantic Canada investment tax credit program to the rest of Canada and increase the tax credit rate from 10% to 20%.
Finally, as NAFTA negotiations continue to be top of mind, we would like to take this opportunity to further emphasize the importance of negotiating a successful NAFTA trade agreement and avoiding trade retaliation measures that could impact integrated supply chains. 3M is committed to Canada and will be part of its growth in the long term. We have a long-standing history in both Canada and the U.S. and would like to see that strong trading relationship continue. We have a fully integrated North American operation. 3M Canada is a net exporter from Canada to the U.S., and more than 1,000 of our Canadian employees' jobs are dependent on our ability to sell globally.
In conclusion, thank you for the opportunity to present to you today. I look forward to your questions.