120K not an exec-level salary: ITAC

The Industry Technology Association of Canada (the ITAC) is calling for four “centres of excellence” in Ontario to help stimulate the microelectronics industry. In a report released Tuesday titled “Revitalizing Ontario’s Microelectronics Industry,” the association recommended an “automotive centre of excellence” in the province, not only due to the number of auto plants but also because microelectronic components are used in vehicles for systems like collision avoidance.

The report, based on interviews with nearly 40 executives, also called for a “healthcare technology centre of excellence,” designed to “speed the introduction” of applications that would cut costs and improve patient care.

Asked whether the health centre of excellence should be funded directly by the government or located in a medical facility, ITAC vice-president Lynda Leonard said “possibly.”

She added the people interviewed for the report are asking whether the province could “play a role” to “create opportunity for construction” of a centre of excellence. The report stated the Ontario government could “spearhead the development of centralized electronic health records” with access controlled by biometric authentication.

The other centres of excellence recommended are a “multimedia processing” centre in Waterloo Region, which would focus on video technologies, and one in Ottawa that would focus on broadband and include the Communications Research Centre’s Broad Applications Laboratory.

Although Ontario is home to several processor manufacturers, such as ATI Technologies Inc. in Markham (now part of Sunnyvale, Calif.-based Advanced Micro Devices Inc.), few firms actually make components in Canada, Leonard said.

“Most of them are in the business of chip design – higher up the knowledge value chain,” she said. “We’re at kind of a turning point right now in making determinations as an industry, as to what the next generation of companies and research and product is going to look like.”

ITAC said some executives interviewed for the report complain the income tax rates in Ontario are not competitive, because the highest marginal tax rate (the lowest income at which a person enters the highest income tax bracket) in Canada is $120,879.

“The argument that we make is that $120,000 in the knowledge-based economy is not an executive level salary,” Leonard said. “That’s basically a mid-tier salary for the PhDs and people with multiple degrees that are running our labs, that are producing the innovations necessary to keep a strong knowledge-based economy competitive.”

The report noted in California and Texas, workers don’t pay the highest marginal rate unless they earn more than $319,000 per year. Therefore, Leonard said, a company looking for a mid-career, mid-tier design engineer must “top up” the salary to compete with companies based in Texas.

“That skews my payroll cost, which has an impact on how competitive a Canadian enterprise can be against those other jurisdictions that understand the realities of a knowledge-based economy and have more favourable tax structures for knowledge-based workers,” Leonard said.

Though ITAC does not make specific recommendations on income tax in Tuesday’s report, it has called for tax reform in the past. “It can be a challenging argument to win because it looks like a tax break for rich people and I think the point that we’re trying to make is that if we care about building a strong cadre of knowledge resources in Canada, we have to start changing our definition of who those people actually are.”

Asked what recommendations ITAC is making specifically to the Ontario government, Leonard said: “We don’t get down into the weeds of what specific regime works,” but added, “something has to be done to make Ontario competitive with other jurisdictions.”

She said in the past, ITAC has asked the province to lobby for changes in the federal government’s Scientific Research and Experimental Development tax credit program, which gives an investment tax credit of 35 per cent to Canadian companies for “qualified expenditures,” such as applied research, experimental development of new materials or products, or support of engineering, design or programming.