Thank you. Thanks for having me here tonight.
I am representing the Toronto Board of Trade, although I do work for Bell Canada. I'm the vice-president of enterprise for Bell Canada, and the manufacturing sector is one of the sectors I'm responsible for. I'll bring in and draw on as much experience as I can on the downturn that, in fact, even we feel through the manufacturing competitiveness. It reaches out and hits a lot of companies, including companies like Bell Canada and the whole ICT sector.
The Toronto Board of Trade is the largest local chamber of commerce in Canada. We represent a wide variety of businesses and sizes, including nearly 200 manufacturing companies. It is a key sector for the Toronto economy, and it remains a key sector. According to the Greater Toronto Marketing Alliance, manufacturing still employs roughy 470,000 people in this area. That's 19% of the total employment in the GTA. It's a major contributor.
Federal government action in support of this sector is really critical to maintaining the overall economic health of the whole GTA. It is the economic engine of the nation. Most of you would agree with that. In the city of Toronto, taxpayers alone contribute $20 million to the tax coffers in Canada. Our manufacturers' ability to meet the competitive challenges to survive, succeed, and grow is significantly affected by the policies, and all levels of government contribute to this.
I'll focus on three areas. I'll focus on an area that we certainly talk about at Bell Canada and at the economic development committee at the Toronto Board of Trade, and that's productivity growth. I want to talk about the factors around investment, innovation, and regulation that impact on productivity growth.
Productivity growth in Canada, as you probably know, has been either low or stagnant over the last several years. It's a key area that we need to focus on. There's a well-established positive relationship--and you heard it here--between investment in equipment and technology and our capacity to become more innovative and address the productivity gap that we've been suffering from here in Canada. We need to find ways to encourage investment by the manufacturers, not only in key capital but in areas as far-reaching as ICT, in the information, communication, and technology sectors--everything that we can do to address the competitiveness of the sector.
You've heard a lot of people talk today about the workforce taxes, transportation infrastructure, investment in innovation, and regulation. We'll agree with all of those, and I'll speak to some of those specifically. But it really comes down to our overall competitiveness, which comes down to productivity growth and the relationship between how we invest in and get some benefits on productivity growth. I'll talk to some of the specific things that we would want to look at from the Toronto Board of Trade.
First, we want to look at taxes. I'm sure you've heard it before, but we do need to look at reducing corporate tax rates. We've made a lot of progress toward reducing those rates since 2000. We now have the fourth highest marginal effective tax rate in the G8, instead of the highest. That's good. However, our rate of 36.6% is still well short of the G8 average of 33.3%, so we're still not there. In the 2006 budget the government promised to get to the general corporate income tax rate down from 21% to 19%; that's between 2008 and 2010. We think that implementation period is arguably too long. The problem is now, and we need to look at it and act now. The sector needs to get competitive now. We need to do what we can, and act quickly.
We also want to look at the general corporate income tax rate, moving it from 20% in 2007 and reducing it by a percentage point in each of the following three years.
Another critical area of support for manufacturers is encouraging provinces like Ontario to have a look at the retail sales tax and at whether or not a value-added tax makes sense. We look at that because if you look at some of the notions of a value-added tax and how that can contribute to the relative price of the inputs, at least the pricing of the inputs can become more competitive, which hopefully would make us more competitive at the output end.
If you look at things like the reduction in the GST from 6% to 5%, which the government is heading toward now, how would we use that to help provinces defray those transitional costs of moving from a retail sales tax to a value-added tax? How do we use that to address some of the perceived vertical fiscal imbalance and better match some of that revenue-raising capacity and public spending responsibility?
So encouraging the provinces to integrate some of those sales tax systems with the federal value-added tax could help create a simpler, hopefully more efficient and more competitive tax regime for manufacturing.
On tax policy, the board believes the federal government really has to take a serious look at investments in equipment and technology. How do you address the productivity gap that I spoke about? If we look at the CCA or capital cost allowance rates, let's make sure they're truly in line with the useful economic life of those assets. In 2004 the Department of Finance study found that every dollar in tax reductions on capital costs gave us $1.40 in long-run economic gains. Canada's economy and the federal government's finances have proven to benefit from a greater incentive to manufacturers in this key area.
Last, the best manufacturers can't succeed if they can't get their parts to market. For those of you who commented about the Highway 427 and 401, I will tell you that if I were coming up here today and were part of a just-in-time manufacturing line, I would have stopped the production line. We have to get our traffic, transit systems, and infrastructure in line, as you heard here. Getting goods to market is a critical component of any successful manufacturing capacity and any successful manufacturing business, so anything we can do to increase our transit support is good. For example, the things we've done around the sharing of the gas tax have been great; sharing the gas tax has been a good move, gratefully received, particularly here in Toronto. It's still falling short of even maintaining a good state of repair in Toronto, let alone looking at how to improve and invest in the infrastructure we need to grow.
Thank you.