Member Of Parliament for Sherwood Park—Fort Saskatchewan
February 25, 2016

The importance of capital investment

The federal government will be delivering a budget on March 22. The Liberals had promised during the election that the budget deficit would not exceed $10 billion. However, expectations are now that the deficit figure will be between $20 billion and $30 billion. I expect I will be writing another column, or even several columns, on the budget more generally — but one area I will be paying particular attention to is what the budget does with respect to Accelerated Capital Cost Allowance (ACCA).

 

What is ACCA? When industry makes an investment, they write off the cost of that capital investment against their profits over time. Because a company only pays corporate taxes on their profits, capital investment reduces the tax that they pay in the year that they write off the cost of the capital. ACCA is the idea that, as an economic stimulus, companies should be allowed to write off the cost of capital faster than it ordinarily depreciates. This allows companies who make major capital investments to defer taxes — although they still eventually pay the same taxes that they otherwise would. By allowing a substantially faster write-off of eligible investments than the usual 30 per cent declining-balance rate, this measure defers taxes and allows businesses to recover the cost of capital assets more quickly

ACCA is an economic stimulus because it encourages companies to make capital investments that otherwise might not take place. It is particularly desirable as a stimulus because it is, at least in the long run, cost-free. If you consider the revenue generated by new investment, ACCA stimulates both the economy and government revenue.

In 2007, in response to concerns about potential dark clouds on the economic horizon, then-prime minister Stephen Harper introduced ACCA. This sought to encourage investment in new manufacturing and processing technology. It was a popular and useful measure, and further steps were taken in subsequent years extend allowances.

Sherwood Park–Fort Saskatchewan has been a significant beneficiary of ACCA. With many energy-related manufacturing facilities and several more in the works, ACCA has helped to stimulate economic activity in this region.

The 2015 federal budget sought to make ACCA permanent for investments in the manufacturing sector, although there was always the possibility of a subsequent government reversing it.

After the 2015 budget, a press release from our Alberta Industrial Heartland Association said the following: “New investment in the manufacturing sector is expected as a result of a long-term tax credit announced in the Government of Canada’s 2015 budget. Alberta’s Industrial Heartland Association commends this initiative. The program provides long-term certainty to industry and helps boost Canada’s global competitiveness to attract new investment.”

ACCA has had a dramatically positive effect on our local economy. I have already spoken out in support of its continuation through the Parliamentary budget consultation process. As your Member of Parliament, I will continue to advocate for this sensible, cost-free economic incentive. And I hope the government will maintain ACCA in Budget 2016.

 

Garnett Genuis is the member of Parliament for Sherwood Park-Fort Saskatchewan. He can be contacted by e-mail at garnett.genuis@parl.gc.ca. Genuis was first elected in October 2015.

 

Published: Thursday, February 25, 2016

Source: http://www.sherwoodparknews.com/2016/02/25/the-importance-of-capital-investment


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