Budget 2008 -- Disadvantage Canada for manufacturers and exporters

OTTAWA - The federal government may tout its budget as Advantage Canada, but for the nation's largest business sector, it's putting manufacturing at a competitive disadvantage.

"Disadvantage Canada, that's what this budget represents for Canada's manufacturing and exporting sectors," said CME President Jay Myers. "We were very specific in what the nation's most innovative industry needed and we received recycled ideas and pocket change at a critical time when we needed tangible solutions. It's disappointing."

The biggest disappointment in the budget is the new measure concerning accelerated depreciation. Manufacturers made it clear to the government that the two-year write-off for investments in manufacturing and processing equipment introduced in last year's budget had to be extended for five years, simply to give companies time to make investment decisions, customize equipment, and meet regulatory approvals. This budget extends the two-year write-off for one year then provides two additional years of declining depreciation rates. This erodes the most effective tax measure the government has to stimulate business investment in new productive technologies.

"This just doesn't cut it," added Myers. "Manufacturers are under the gun to innovate and this measure basically takes us back to where we started. With an one-year extension at current levels, it doesn't fit into the business planning cycle for Canadian companies, so many hard-pressed businesses won't be able to take advantage of this.

"Manufacturing is the grassroots leader of innovation in this country, but I am not sure politicians are hearing that message," Myers added. "This budget worries me because it sends the message that a reduction in corporate tax rates is the silver bullet for the economy. That gets you in the game. But, it doesn't give you many chips to play with as other nations are encouraging investments in technology, innovation, and skills.

"Manufacturing is at risk. We are seeing some of the most productive and competitive operations in the world close because of the dollar. There's nothing natural about that. But, clearly we can't rely on this budget to build a competitive advantage for Canada."