Representatives from computer industry associations say the federal government has delivered a laudably IT-minded budget, although they add that the feds still have some work ahead to make Canada a truly high-tech friendly place.
After Finance Minister Ralph Goodale delivered his budget on March 23, high-tech industry associations chimed in with their opinions that the document was generally positive for their sector.
“Overall, the Goodale budget shows good stewardship of the taxpayer’s money,” said David Paterson, national director the Canadian Advanced Technology Alliance (CATA), in a statement. “There is a combination of focus, prudence and targeted incentives to advance Canada’s economic and social interests.”
The budget “demonstrates that the Martin government is serious about its commitment to build Canada’s 21st century economy,” said the Information Technology Association of Canada (ITAC) in a statement the day after Goodale delivered the budget.
The associations were pleased that the government increased the capital cost allowance rate from 30 per cent to 45 per cent for computers, and from 20 per cent to 30 per cent for network infrastructure. That means a company can write off 45 per cent of the cost of a new computer and 30 per cent of the cost of a new router, Paterson said during an interview.
ITAC said it had hoped to see the capital cost allowance rate increased to 50 per cent for computers and 40 per cent for network infrastructure. Still, “the adjustment is [ellipse] an indication that the government explicitly understands that ICT (information communication technology) investment drives productivity,” the group said.
The high-tech orgs noted that the government lowered subscription fees for its Government Electronic Tendering Service (GETS) by 30 per cent. GETS is an online resource where the feds display their electronic wants and needs, and where companies bid for the business.
The government also boosted its investment in programs designed to give the health care industry greater access to IT resources. That pleased CATA and ITAC as well.
The government changed the rules around the Scientific Research & Experimental Development (SR&ED) tax credit, too, making it easier to take advantage of this program that puts money back into the hands of companies involved in deep R&D.
“There are other changes which we want as well, but this one is a significant step forward,” Paterson said.
CATA and ITAC have said in the past that the SR&ED program requires an overhaul. Right now only companies that make money can take advantage of the credit.
“Do we want an instrument that only works in good times?” said ITAC spokesperson Lynda Leonard in an earlier interview. “Or do we want to design an instrument that ensures the engine of innovation continues to turn over, that we have the capacity to innovate our way out of a downturn?”
Still, the high-tech groups are for the most part happy with the budget. CATA pointed out that the government was smart to change the rules around small business income taxes.
It used to be that small businesses with a pre-tax income of more than $275,000 would face a 21 per cent tax rate, whereas companies making less than $275,000 would be taxed at 12 per cent, Paterson said. The government planned to raise that bar to $300,000 in 2006 so that more companies would get the 12 per cent tax rate. Goodale bumped up the schedule, saying the $300,000 threshold would take hold one year early, in 2005.
CATA was also impressed with the government for granting cities a goods and services tax (GST) rebate.
“Anything that helps cities meet their expenses and address their growth problems, we are strongly in favour of,” Paterson said. CATA runs “town hall” events across the country wherein the group tries to foster ties between high-tech companies and the municipalities in which they reside.
But Paterson said CATA is still waiting for the government to kybosh the corporate capital tax. “They are on a program to eliminate it gradually. [ellipse] We know it would be a good idea to abolish it entirely, but they didn’t have the financial room to do that.”
Greg Lane, president of the Canadian Information Processing Society (CIPS) in Ottawa, said he thinks the government’s budget is good, but it could go further. He noted that the document seemed rather quiet about the national broadband project. And he said the feds could do more to make life easier for high-tech workers.
Lane pointed to Ireland as an example. In that country, he said, IT workers, writers and other “creative” types pay no income tax, as their jobs add greatly to the country’s economy but have little negative environmental impact.
“I think we have narrow thinking still regarding the government’s ability to influence and get people to stay here,” Lane said. “We still have a challenge with people looking for work overseas, still have a problem finding good jobs for graduates, and keeping Canadians in Canada.”