That's what I was told. Thank you.
I'm live and I'm not a robot. Thanks for inviting me.
Mr. Chair and members of the committee, thanks for the opportunity to discuss the importance of the adoption of digital technologies among SMEs.
For many SMEs, the adoption of digital technologies in the business context is often referred to as electronic commerce. In manufacturing, however, electronic commerce goes beyond the traditional activities of buying goods or services through the Internet. We estimate that business-to-business transactions represent between 80% and 90% of all e-commerce activities. Those business-to-business transactions happen in two major fields of business activity in our membership: supply chain management, where suppliers are integrated in the manufacturing process and parts and components can be ordered and delivered just in time; and research and development, where digital solutions are used to share and analyze large data and to perform simulations jointly with research partners.
In addition to business-to-business platforms, digital technologies are also used in the manufacturing factories in areas such as R and D, rapid prototyping, and assembly lines. The adoption of digital technologies has already had a huge impact on the productivity of companies. Today, companies are able to develop, design, test, market, and sell complex consumer products using e-commerce tools and by tying various global suppliers together virtually. For example, cars and trucks in the automotive sector, which a decade ago took about five to seven years to get from concept to the local showroom, are now brought to market in two to three years, on average. Corporate research and development, while still centrally controlled, is now conducted throughout various portals globally.
In Canada, about 50% of all investments in machine equipment are in equipment related to information and communication technology. If you compare it to 20 years ago, almost 100% of machinery and equipment investments were in non-ICT equipment, so we've made a lot of progress. However, a lot of work still remains to be done. One of the challenges we have in Canada is to accelerate the adoption of digital technologies by companies so we can catch up with the rest of the world, particularly with the United States. According to the latest “State of the Nation” report published last week by the Science, Technology and Innovation Council, in 2009, Canada ranked 9th out of 20 countries with respect to business investment in ICT equipment. Although Canada ranks higher than some of the key advanced economies, such as France, Japan, Finland, and Germany, it still trails the top five performers: the U.S., Sweden, Denmark, the United Kingdom, and New Zealand. Compared to the U.S. alone, Canadian companies invest about 42% as much in ICT equipment as their U.S. counterparts.
Let me talk a little bit about what we think governments could do to accelerate the adoption of ICT equipment among SMEs.
The first way would be to look at the tax treatment of ICT equipment. This would be capital expenditure related to information communication technology. Although Canada has made some progress in recent years to allow companies to depreciate a larger share of their investment in ICT machinery and equipment, most other countries have taken a much more aggressive approach to accelerate the adoption of digital equipment. As an example, the elimination of capital expenditure under the scientific research and experimental development tax credit, to be implemented fully next year, is going to make Canada one of the few countries in the world that does not offer a significant tax credit or an accelerated depreciation rate for the adoption of ICT equipment for R and D purposes. I would strongly encourage the government to revisit its decision to completely eliminate capital expenditures under the SR and ED program.
In terms of machinery and equipment used for actual production, so no R and D purpose, again, there are no specific tax incentives in Canada to accelerate the adoption of ICT equipment. The accelerated capital cost allowance for machinery and equipment used for manufacturing and processing does not cover computers, data processing systems, and software, which are in a different class of assets under the CRA rules. However, the federal government did provide an accelerated capital cost allowance specifically for ICT equipment between 2009 and 2011, but that lasted only two years.
The second way to accelerate the adoption of ICT equipment would be to explore other forms of support, such as direct funding or innovation voucher programs. Because accelerated depreciation might not be enough, especially for SMEs that are not yet profitable, the accelerated depreciation is not fully useful for them. This is why other countries have used technology voucher programs to accelerate the acquisition of digital equipment. Countries such as Austria, Belgium, Denmark, Finland, the Netherlands, and the United Kingdom have all implemented voucher systems, with more countries attempting to follow this path. A program can be set that offers vouchers for the purchase of advisory services in e-commerce, systems integration software, or digital content. This is another area the government could look for in the Canadian context.
Although we do have in Canada a program called the digital technology adoption pilot program, referred to as DTAPP, I believe their funding is ending this year. It was a three-year pilot program. I'm not sure if it has been renewed or if it will be renewed.
The program was a good starting point, although the acquisition of computers, hardware, and off-the-shelf software is not eligible for funding under this program. A bit more than 600 companies will have received funding at the end of the three-year program. It's a good program, but you will agree with me that more could be done to reach out to more SMEs across the country.
The third point I would like to raise is about the open access policies, which are crucial to Canada's digital competitiveness. We often hear that Canada usually ranks poorly in terms of Internet prices and speed.
It's essential that the government implement open access rules that would force Internet network owners to share their infrastructure with smaller competitors. The choice is still very limited, and a lot of barriers are in place, so conversion to fibre networks in large commercial and institutional buildings is still very limited. I think you heard about this lack of choice from the CFIB when they appeared here. I won't spend too much time on it, except to say that we very much share the same concerns.
In conclusion, I remind you about the importance of the digital economy for productivity in manufacturing and in other sectors of the economy. I think looking at current programs and what is being done in other countries would be a good way to see how government can accelerate the adoption of ICT equipment.
Thank you very much.