Canada’s chemical industry “enthusiastically" welcomed new federal government measures to ensure that the country is a competitive environment for industry investments, trade group Chemistry Industry Association of Canada (CIAC) said on Thursday.
The group was commenting on the Fall Economic Statement 2018, a fiscal update released late on Wednesday in which Prime Minister Justin Trudeau's government put forward measures to counter the US corporate tax cuts by the administration of President Donald Trump.
The US tax cuts are seen as a threat to Canada’s industry, in particular petrochemicals.
BIG TAX WRITE-OFFS
As one key measure to stimulate investment in Canada, businesses will now be allowed to immediately write off the cost of machinery and equipment used for the manufacturing or processing of goods.
Immediate expensing will apply to qualifying assets acquired after 20 November 2018.
It will be gradually phased out starting in 2024, and will no longer be in effect for investments put in use after 2027.
Furthermore, businesses will be allowed to immediately write off the full cost of specified clean energy equipment to spur new investments and the adoption of advanced clean technologies in the Canadian economy.
Those measures are also be effective after 20 November and will be gradually phased out beginning 2024.
In addition, the government is introducing an accelerated capital cost allowance – that is, larger deduction for depreciation – for businesses of all sizes, across all sectors of the economy, that are making capital investments.
CIAC said that increasing the depreciation schedule for capital assets for manufacturers and processing equipment to 100%, and allowing that to be immediately deductible in the year it is put into use, was particularly important.
In fact, the group had suggested such measures in its submissions to legislators.
Furthermore, CIAC welcomed the government’s decision to allocate an additional Canadian dollar (C$) 800m ($600m) to a strategic investment fund which has been valuable in attracting chemistry investment to Canada.
Another positive in the government’s fiscal update are plans to establish an external advisory committee on regulatory competitiveness, as well as plans for an Annual Regulatory Modernization Bill, CIAC said.
The new federal measures, together with this week’s announcement of increased incentives for petrochemical investments in Alberta province and planned measures in Ontario, would “help make the case that Canada is, once again, providing a competitive business environment and is open to investments in the chemistry sector,” said Bob Masterson, CEO of CIAC.
Historically, Canada has attracted about 10% of the total chemistry investments made in North America, the trade group said.
However, that share has plummeted to 2% as petrochemical investments went to the US in the wake of that country’s shale gas boom.
Meanwhile, the US tax cuts threatened to make things worse for Canada.
“That’s why we’ve been steadfast in our message that urgent action was needed to ensure that Canada can compete with other jurisdictions for the next wave of industry investment”, Masterson said.
"[As for regulations] The government can and should do a better job of considering competitiveness when developing and implementing its regulatory agenda."