Surrey BOT likes federal budget
“The budget brought down by the federal government this afternoon is both careful and strategic,” said Anita Huberman, CEO of the Surrey Board of Trade. “It is careful in that it recognizes that the economy, although improving, is still somewhat fragile and is signaling its intention to move ahead carefully.”
Members of the Surrey Board of Trade’s Finance and Taxation team indicated that it was a good budget for the times, signaling well in advance what it’s economic direction would be in the long term, while delivering an economic package much more benign than expected in many quarters, and appropriate for the continuing difficult times in the world.
“We particularly liked the decisions around venture capital in directed research and development funding,” said Huberman.
The push to simplify the government's $3.5-billion-a-year Scientific Research and Experimental Development (SRED) program to limit the scope of the credit to labour costs caused a funding cut from the SRED program to be redirected toward direct measures, namely, grants and contributions. Federal investment in the costs of commercial research and development is an effective tool for stimulating innovation. This was the more important part of the recommendation from an investor perspective. The Surrey Board of Trade is pleased to see that at least some of the funds saved through cuts to SRED will be redirected toward Gs&Cs (grants and contributions). Grants and contributions programs differ from tax policies by providing up-front funding for initiatives, unlike tax credits, which reimburse companies after the fact.
Prior to yesterday's Budget, Canadian-controlled private corporations could earn an investment tax credit of 35 per cent of up to the first $3 million of qualified SRED expenditures and 20 per cent on any additional expenditure, while larger firms could get a 20 per cent non-refundable tax credit.
As a result of today's Budget, the general tax credit rate for larger firms will be reduced from 20 to 15 per cent. Small and medium sized businesses will also be affected by measures announced in the Budget, as eligible expenses under the program will continue to include salary, wages, materials, overhead expenses and contract payments, but capital expenditures will no longer be eligible.
The government also announced changes to the way overhead expenditures and arms' length contract payments are calculated, and will invest $6 million over two years to implement changes to the administration of the program to improve its predictability. This last measure would be welcome by many businesses.
The Apprenticeship Job Creation Tax Credit, a non-refundable tax credit covering up to 10 per cent of eligible apprentice salaries and wages payable to eligible employers, is something that Canadian SMEs can continue to benefit from. The Surrey Board of Trade was pleased to see that no cuts here. Trades continue to play a vital role in the Canadian economy and in the labour force of large and small employers alike, in every region of the country and almost every sector of our economy. This tax credit program remains as vital as ever in assisting companies to attract young people, and to assist older workers to acquire the skills required to meet shifting labour force needs.
The government also extended the temporary Hiring Credit for Small Business for one year, and announced an additional $50M over two years to the Youth Employment Strategy to assist more youth in gaining job experience. These are positive steps to train today's labour market and encourage the growth of small businesses.
Another important concern for the Surrey Board of Trade is the signal to support further improvements to foreign credential recognition by working with the provinces and territories to identify the next set of target occupations to be included beyond 2012 under the Pan-Canadian Framework for the Assessment and Recognition of Foreign Qualifications.
Although the changes concerning pensions is getting much attention, it will not come into force for another 10 years and has little impact on those over 54 years of age. It signals that the government is aware and preparing to deal with the better alignment as well as funding of pensions in the future.
Increases in the long unchanged duty-free limits for cross border shoppers ($200 after 24 hours, and $800 after 48 hours) were welcome by many. The concern over any new impact on businesses close to the US border was felt not to be of particular concern as it is really a reflection of what the government is currently allowing anyway. Until now, the Canadian duty-free allowances are reported to have been well below other G20 countries. It will be popular with consumers, however for businesses close to the border, it will challenge them to find ways to hold local buyers and even attract those from the US to come north.
There is little doubt that this budget is a signal that the current government is planning for the longer term, and the Surrey Board of Trade is in agreement with this approach.
The Surrey Board of Trade represents 3,600 business contacts. It advocates at all levels of government, provides networking opportunities, international trade services, cost saving, marketing and business education. We work behind the scenes for business to improve our economic climate and to serve the needs of business.