Canadian Plastics

EXCLUSIVE: Industry leaders highlight hopes for federal budget

The new federal budget -- set to be unveiled on Tuesday -- has captured the headlines recently, primarily because o...

February 25, 2008   Canadian Plastics

The new federal budget — set to be unveiled on Tuesday — has captured the headlines recently, primarily because of the nasty bickering between Ontario Premier Dalton McGuinty and federal finance minister Jim Flaherty.

“The vitriol that has been going on between [McGuinty and Flaherty] is not hopeful,” noted Serge Lavoie, president and CEO of the Canadian Plastics Industry Association. “It does not point towards a positive budget for manufacturing.”

Canadian Plastics polled industry association leaders to find out what they hope to see in the new federal budget. Although each association serves different market segments, they all identified the extension of the two-year accelerated capital cost allowance (ACCA) as a top priority issue.

Plastics industry leaders are calling on the federal government to extend the ACCA, which allows manufacturers to write off equipment investments at a faster pace, to allow a larger number of manufacturers to take advantage of the incentive.

“It improves your cash flow,” explained Dan Moynahan, president of the Canadian Association of Mold Makers (CAMM). “By amortizing [your investment] sooner…it helps you reduce taxes payable.”

Moynahan also said he is anxious to see if the federal government offers new incentives regarding employee training, as well as some tax relief for mid-sized business owners.

Automotive Parts Manufacturers’ Association (APMA) president Gerry Fedchun, meanwhile, said he likes what the government has done in terms of write-offs, but notes that parts suppliers are not profitable enough to take advantage of the benefit. Fedchun believes the government can help embattled manufacturers take advantage of the ACCA by extending the tax loss carry-back, which currently stands at three years.

He also believes that the budget should address employment insurance (EI) premiums, and make plant and equipment investments a credit instead of a write-off. The association recently asked for a $400 million emergency infusion to help mid-sized parts manufacturers stay afloat, but Fedchun says the investment can come through helpful budgetary measures.

“It doesn’t have to be an infusion of actual cash, it could be a loan or an extended tax loss carry back,” Fedchun said.

CPIA’s Lavoie is looking for three key things in Tuesday’s budget. The CPIA, which is part of the Canadian Manufacturing Coalition, wants to see the ACCA extended for five years.

Lavoie also wants to see improvements to the Scientific Research and Experimental Development (SR&ED) program in light of the change in the dollar. For one, he said he would like to see credits be made refundable or monetized.

“Margins are pretty thin and profits are pretty thin, so you can’t use those credits for some time,” Lavoie explained. “It would be helpful for the industry to be able to reach the changes it needs.”

Thirdly, instead of lowering premiums, Lavoie would like to see an employers’ training tax credit that is creditable against the EI program. He believes that the credit would pull from the existing EI surplus, and allow for deductions on companies’ payments.

“These three key tax measures all help accelerate cash flow by helping companies recover their investments more quickly,” said Lavoie. “If they’re not done immediately, it’s a huge lost opportunity and it will show us that the government is not listening.”

Canadian Plastics will highlight new manufacturing-related budgetary measures and provide industry reactions to the new federal budget as soon as they become available on Tuesday. Please check our website for updates.


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