Mr. Speaker, I also thank the hon. member for Montmagny—L'Islet—Kamouraska—Rivière-du-Loup for providing me with the opportunity to talk about what this government is doing to help the manufacturing sector. I also want to say that the finance committee is trying to work through these issues with all parties. I certainly appreciate the member's efforts in that regard.
I want to mention a few facts about our economy because, quite frankly, our economic fundamentals are exceptional. We are experiencing the second longest period of economic growth in the history of our country. Core inflation has remained within our set range of 1% to 3%. Our unemployment rate is the lowest in more than 30 years and there are more Canadians participating in the workforce than ever in the history of Canada.
We are reducing debt and we are on the best financial footing of any country in the G-7. We are the only country of the G-7 with ongoing budget surpluses, plus a falling debt burden.
Nevertheless, we must remain prepared for the challenges that confront us, including a significant rise in the Canadian dollar and its impact on the manufacturing sector, increased competition from emerging economic giants, such as China and India, and a shortage of skilled workers and an aging population.
As the world changes, Canadians need to work together to make Canada even more prosperous and strong, which is why our government developed Advantage Canada, a strategic, long term economic plan designed to improve our country's economic prosperity both today and in the future. This plan sets Canada on a path toward achieving five key advantages that will strengthen our nation and show a modern, ambitious and dynamic Canada to the rest of the world.
First, the plan will create a tax advantage for Canada by reducing taxes for all Canadians and establishing the lowest tax rate on new business investment in the G-7.
Second, a fiscal advantage will eliminate Canada's total government net debt in less than a generation and will create a strong foundation on which to build sustainable prosperity.
Canada's entrepreneurial edge will reduce unnecessary regulation and red tape and lower taxes to unblock business investment. By building a more competitive business environment, consumers will receive goods at lower prices and Canadian businesses will be better equipped for global success.
The Advantage Canada plan will also create a knowledge advantage by developing the best educated, most skilled and most flexible workforce in the world.
The fifth part of the plan focuses on an infrastructure advantage in order to create modern, world-class infrastructure to ensure the seamless flow of people, goods and services across our roads and bridges, through our ports, our gateways and via our very important public transit systems. Each component of the Advantage Canada plan will benefit the manufacturing sector.
Today's motion asks the government to introduce tax measures to support Canadian manufacturing. Recently, the Minister of Finance was in Quebec City as part of the government's prebudget consultations to hear about the challenges facing the manufacturing sector. The finance committee went to Montreal to listen to manufacturers about the types of steps that we need to take to enhance the manufacturing sector in our provinces, territories and throughout the country.
Although it has been a difficult period for many, manufacturers in Canada have been resilient. In the face of adversity, they have acquired more and better technology and equipment. They have improved productivity, have become more diversified and have broadened their reach in this highly competitive, global marketplace. Manufacturers are responding to this difficult situation and so are we.
The government is lifting the tax burden by lowering taxes of every description, including a historic reduction in business taxes.
Canada's strong economic and fiscal foundation has provided the government an opportunity that few other countries have: to put in place historic, broad based tax reductions that will strengthen our economy from one end of the country to the other.
I am talking about the comprehensive tax reduction action that this government has taken since coming into office. Many of the tax reduction initiatives brought forward by our government are broad based, while others will provide direct strategic tax relief to the manufacturing sector.
The capital cost allowance system determines how much of the capital cost of an asset a firm may deduct each and every year. The rates are generally set so that the deductions for capital costs are spread over the useful life of the asset. This ensures the accurate measurement of income for tax purposes and promotes neutrality with respect to investment decisions. Where a capital cost allowance rate is too low to reflect an asset's useful life, an increase to that rate can reduce the tax burden on investment and increase the efficiency of the tax system.
As part of the government's continuing review of capital cost allowance rates and to further the Canadian tax advantage, budget 2007 contained a number of changes to capital cost allowance rates to better reflect the useful life of assets. For example, budget 2007 increased the capital cost allowance rate for buildings used for manufacturing or processing to 10% from 4%. This change will better reflect the useful life of the buildings in the sector because, as we know, in the manufacturing business buildings tend to need repair and rework based on the fact that they are used sometimes on a 24-hour basis. Those repairs should be reflected, quite frankly, in the ability of the company to make and earn a profit.
This year's budget also increased the capital cost allowance rate for other non-residential buildings to 6% from 4%. Furthermore, the budget increased the capital cost allowance rate for computers, an important asset for the manufacturing sector to 55% from 45%.
In addition to those rate changes, to better reflect the useful life of assets in recognition of the economic challenges facing the manufacturing and processing sector, budget 2007 introduced a new temporary investment incentive for manufacturing and processing businesses.
For investment in eligible machinery and equipment, until the end of the 2008 year, businesses engaging in manufacturing or processing will be eligible to claim an accelerated capital cost allowance at a rate of 50% on a straight line basis. This rate will allow these investments to be written off in a two-year period on average after taking into account the half year rule which treats assets as if they had been purchased in the middle of the year.
Taken together, those measures will provide a much more favourable climate for manufacturing and processing businesses to accelerate or increase their investment in buildings, in machinery and in equipment. What is more, those measures will assist the manufacturing sector in restructuring to meet the challenges they are currently facing.
Ours is not a government that rests on its laurels. Even after the budget of 2007, we knew we had more work to do for individual Canadians, for families and, in particular, for businesses across the country, which is why in the economic and fiscal update we are reducing the general corporate income tax rate to 15% by 2012. This broad based tax reduction will improve the investment environment for every sector of the economy, including the manufacturing sector.
Tax reductions announced by this government, the majority of them broad based, will result in $8.2 billion in tax relief for manufacturers and processors. This includes tax reductions totalling $2.6 billion over this and the next five years in the recent economic statement of October 30, 2007, and $5.6 billion for measures announced in the last two federal budgets and the tax fairness package.
However, It is not only the federal government that can provide tax relief to Canadian businesses. Provinces also have an important role in improving Canada's business tax competitiveness.
To encourage further provincial action, budget 2007 put in place a financial incentive to facilitate the elimination of provincial capital taxes and indicated the government's willingness to work with the provinces to complete the sales tax harmonization initiative. Canadians are already reaping the rewards of the first of these measures.
Since the announcement of the measure to encourage provinces to eliminate their capital taxes as soon as possible, both Quebec and Ontario have acted to qualify for the incentive and Manitoba has also announced its intention to do so.
Canada now has a solid, statutory, corporate rate advantage over our partners in the United States and this advantage will continue to grow year after year through 2012.
In addition, as a result of this government's actions, Canada will meet the Advantage Canada goal of establishing the lowest overall tax rate on new business investment by 2011.
As I said at the outset, I am glad the hon. member's motion provided me with the opportunity to tell the House what action this government has taken to assist our manufacturing sector.