Write-off extension a multimillion-dollar boost for manufacturers: CME

The extension of the two-year write-off for investments in manufacturing and processing technologies announced in the 2011 federal budget is critical to sustaining Canada’s economic recovery, according to Canadian Manufacturers and Exporters (CME).   

The two-year depreciation rate for investments in manufacturing and processing machinery and equipment has been in effect since 2007. It was set to expire at the end of this year. Budget 2011, announced on March 22 by Finance Minister Jim Flaherty, now allows businesses to take advantage of the accelerated write-off for their new investments in production technologies for an additional two years. This means that equipment acquired before 2014 is eligible for a temporary capital cost allowance (CCA) rate of 50 percent on a straight-line basis, subject to the half-year rule, under Class 29.

“In an era of economic uncertainty, this tax measure gives manufacturers the confidence to invest in their future by boosting purchases of productivity-enhancing technologies,” says CME president and CEO, Jayson Myers. “This translates into an ROI of 12 percent over three years for manufacturing and processing technologies. We need these investments to compete with the rest of the world, drive innovation, improve productivity, and offer the high-paying jobs that will in turn sustain the public services and living standards that Canadians enjoy.   

“Manufacturing companies employ 1.8 million Canadians and create high-paying jobs across all sectors of the economy. Canada’s manufacturing sector took the full brunt of the recession, but the industry is extremely resilient. Companies are recovering and investing in new markets, new products and new technologies,” adds Myers. “This is the time when manufacturers need cash to invest. We estimate extending the two-year write-off will save manufacturers more than $600 million in 2012-13.”   

The top priority for CME in this year’s federal budget was to secure the extension of the two-year write-off for manufacturing investments. It has been a priority for both the Canadian Labour Congress and the 40 industry associations that are members of the Canadian Manufacturing Coalition, who wrote to the finance minister earlier this year.

“Manufacturers and their employees across Canada recognize the importance of investment to compete in today’s global marketplace. The two-year write-off is a tremendous tax advantage for Canadian companies, especially when combined with lower business tax rates,” Myers concludes. “CME applauds the government for extending the write-off in this year’s budget.”   

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