MNI: Ottawa Launches Biz Tax Write-Offs To Compete With US

By Courtney Tower

     OTTAWA (MNI) - Three new business tax write-off measures intended to

improve competition and trade with the United States were proposed to Parliament

by the Canadian government Wednesday.

     These measures allow businesses to deduct the depreciation of their new

investments sooner and will be in effect until 2023. They will then be phased

out from 2024 through 2027.

     Announced, as well, in the face of the Trump Administration's deregulation

efforts, is a new focus on reforming federal regulations on business.

     The U.S. fiscal package removed much of Canada's long-time tax advantage

over the United States and a government statement Wednesday says that without

the new measures "Canada is at risk of losing investment and jobs."

Manufacturers, especially, could pick up and move south of the border, it says.

     Finance Minister Bill Morneau told Parliament in presenting a Fall Economic

Statement that the government rejected calls to actually match the U.S.

measures. To fully do so, he said, "would add tens of billions in new debt."

Further "it would do more to worsen income inequality in Canada than improve

it," by making services less affordable.

     Economists consulted by the government have in recent days focused on

accelerated depreciations as the single best measure the federal government

could take.

     The first of the three immediate tax changes will allow businesses to

immediately write off the full cost of machinery and equipment used for the

manufacturing or processing of goods. It is aimed at keeping in Canada companies

that operate in "this highly mobile sector." It applies to assets acquired after

November 20, this year.

     The other 100% write-off in the first year is for investment in clean

energy equipment.

     The third measure - "accelerated investment incentive" - is for any and all

businesses that make capital investments. It varies according to sectors. For

instance, computer software investments benefit from a 100% first-year deduction

under the new regime, compared to 50% under the current regime, while it

increases from 15% to 45% for motor vehicles. Overall, businesses can now

write-off up to three times their normal rates in the first year.

     The Fall statement shows slight upward revisions to deficit projections,

although they remain on a declining path through 2024.

     The deficit increases from C$18.1 billion in 2018-2019 to C$19.6 billion

the next year, when it peaks. It goes back to C$18.1 billion in 2020-21, and

reaches C$11.4 billion in 2023-2024.

     The debt-to-GDP ratio drops by small percentage points from 30.9% in

2018-19 to 28.5% in 2024.

     On regulation of business, the federal government says it will in coming

months introduce in Parliament an Annual Modernization Bill "to remove outdated

or redundant regulatory requirements," to make them better reflect "public

policy and business realities." The government, in this, will be advised by

private experts, and it will fund a "Centre For Regulatory Innovation." A focus

will be on supporting "the development of innovative approaches and products."

--MNI Ottawa Bureau; +1 613 869-0916; email: yali.ndiaye@marketnews.com

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