Budget 2016 Summary Infrastructure Budget 2016 will implement a plan to invest more than $120 billion in infrastructure over 10 years, including: - $3.4 billion over three years to upgrade and improve public transit systems across Canada; $5.0 billion over five years for investments in water, wastewater and green infrastructure projects across Canada; and, $3.4 billion over five years for social infrastructure, including affordable housing, early learning and child care, cultural and recreational infrastructure, and community health care facilities on reserve. Innovation: Through 2016, the Government will redesign and redefine how it supports innovation and growth, in partnership and coordination with the private sector, provinces, territories and municipalities, universities and colleges, and the not for- profit sector. Sectors identified in the budget include clean technology, health sciences, advanced manufacturing, digital technology, resource development and agri-food. Budget 2016 proposes to make available up to $800 million over four years, starting in 2017 18, to support innovation networks and clusters as part of the Government s upcoming Innovation Agenda. Budget 2016 proposes to launch a new initiative in 2016 17 to help highimpact firms scale up and further their global competitiveness. Under this client-centric approach, firms will be able to access coordinated services tailored to their needs at crucial transition points, from key organizations starting with Innovation, Science and Economic Development Canada, the Business Development Bank of Canada, Export Development Canada, the National Research Council s Industrial Research Assistance Program, Global Affairs Canada s Trade Commissioner Service and the Regional Development Agencies. The initiative aims to target 1,000 firms in the first few years, and expand to more firms thereafter. 1 Nicholas Street, Suite 1500/1 rue Nicholas, bureau 1500, Ottawa, ON K1N 7B7 T 613-238-8888 F 613-563-9218 www.cme-mec.ca
Budget 2016 proposes to provide up to $2 billion over three years, starting in 2016 17, for a new Post-Secondary Institutions Strategic Investment Fund, a time-limited initiative that will support up to 50 per cent of the eligible costs of infrastructure projects at post-secondary institutions and affiliated research and commercialization organizations, in collaboration with provinces and territories. Budget 2016 proposes to provide an additional $95 million per year, starting in 2016 17, on an ongoing basis to the granting councils These funds will be allocated as follows: $30 million for the Canadian Institutes of Health Research; $30 million for the Natural Sciences and Engineering Research Council; $16 million for the Social Sciences and Humanities Research Council; and, $19 million for the Research Support Fund to support the indirect costs incurred by post-secondary institutions in undertaking federally sponsored research. Automotive sector: Budget 2016 announces the extension of the Automotive Innovation Fund, which is currently scheduled to sunset at the end of 2017 18, through to the end of 2020 21. In the coming months, the Minister of Innovation, Science and Economic Development will work, in collaboration with the Government of Ontario and industry stakeholders, to raise the profile of Canada s strong capabilities and better influence investment location decisions necessary for the long-term competitiveness of the Canadian automotive sector. As part of this work, the Government will examine approaches that will allow it to maximize the impact of federal support offered to the automotive sector, including through assessing the terms of the Automotive Innovation Fund. Environment, energy and climate change To support future investments, Budget 2016 proposes to provide more than $1 billion over four years, starting in 2017 18, to support clean technology, including in the forestry, fisheries, mining, energy and agriculture sectors. Further details about the allocation of this funding will be provided in the coming months as part of the implementation of the Government s Innovation Agenda.
Budget 2016 proposes to provide more than $130 million over five years, starting in 2016 17, to support clean technology research, development and demonstration activities: - - $50 million over four years, starting in 2017 18, to Sustainable Development Technology Canada (SDTC) for the SD Tech Fund. These resources will enable SDTC to announce new clean technology projects in 2016 that support the development and demonstration of new technologies that address climate change, air quality, clean water, and clean soil. $82.5 million over two years, starting in 2016 17, to Natural Resources Canada to support research, development and demonstration of clean energy technologies. These resources will accelerate the innovation required to bring clean energy technologies closer to commercialization, reducing the environmental impacts of energy production and creating clean jobs. Canada s six Regional Development Agencies support economic and community development by leveraging local networks and capabilities. The Agencies combined support to clean technology activities amounted to $50 million in 2015 16. Budget 2016 announces that the Regional Development Agencies will double their annual aggregate support for clean technology to $100 million per year, from existing resources, starting in 2016 17. Canada is moving towards a pan-canadian Framework on Clean Growth and Climate Change that will meet or exceed Canada s international greenhouse gas emissions targets. Pricing carbon will be a key element to transition Canada to a low-carbon economy while also improving our quality of life. Tax measures: LABOUR-SPONSORED VENTURE CAPITAL CORPORATIONS TAX CREDIT: Budget 2016 proposes to restore the federal LSVCC tax credit to 15 per cent for share purchases of provincially registered LSVCCs prescribed under the Income Tax Act for the 2016 and subsequent taxation years. MINERAL EXPLORATION TAX CREDIT FOR FLOW-THROUGH SHARE INVESTORS: Budget 2016 proposes to extend eligibility for the mineral exploration tax credit for one year, to flow-through share agreements entered into on or before March 31, 2017.
EXPANDING TAX SUPPORT FOR CLEAN ENERGY: The range of stationary electrical energy storage equipment eligible under CCA Classes 43.1 and 43.2 will be clarified and expanded to explicitly allow a much broader range of equipment ancillary to eligible generation equipment. In addition, stand-alone electrical energy storage property will be included in Class 43.1 when the round trip efficiency of the energy storage is greater than 50 per cent. Electrical energy storage helps displace fossil-fuelled power generation and facilitate the integration of a higher proportion of intermittent renewable electricity generation into the electrical grid. Fixing the issue of Double taxation of GHG emission allowances Budget 2016 proposes to amend the Income Tax Act to introduce specific rules to clarify the tax treatment of emissions allowances and to eliminate the double taxation of certain free allowances. Specifically, these rules will provide that emissions allowances be treated as inventory for all taxpayers. However, the lower of cost and market method for the valuation of inventory will not be available in respect of emissions allowances because of the potential volatility in their value. If a regulated emitter receives a free allowance, there will be no income inclusion on receipt of the allowance. In addition, the deduction in respect of an accrued emissions obligation will be limited to the extent that the obligation exceeds the cost of any emissions allowances that the taxpayer has acquired and that can be used to settle the obligation. This measure will apply to emissions allowances acquired in taxation years beginning after 2016. It will also apply on an elective basis in respect of emissions allowances acquired in taxation years ending after 2012. Small business taxation: Budget 2016 proposes that the small business tax rate remain at 10.5 per cent after 2016 and that further reductions in the small business income tax rate be deferred. International Tax Measures: Base erosion and profit shifting (BEPS): Budget 2016 proposes: - New legislation to strengthen transfer pricing documentation by introducing country-by-country reporting for large MNEs;
- That the Canada Revenue Agency applies revised international guidance on transfer pricing by multinational enterprises, which provides an improved interpretation of the arm s length principle; and, - The Canada Revenue Agency will also undertake the spontaneous exchange with other tax administrations of tax rulings that could potentially give rise to BEPS concerns in the absence of such exchanges. Tax Treaty Shopping: Budget 2016 confirms the Government s commitment to address treaty abuse in accordance with the minimum standard. Going forward, Canada will consider either minimum standard approach, depending on the particular circumstances and discussions with Canada s tax treaty partners. Amendments to Canada s tax treaties to include a treaty anti-abuse rule could be achieved through bilateral negotiations, the multilateral instrument that will be developed in 2016, or a combination of the two. The multilateral instrument is a tax treaty that many countries could sign modifying certain provisions of existing bilateral treaties. Canada is actively participating in international work to develop the multilateral instrument, which would streamline the implementation of treaty-related BEPS recommendations, including treaty abuse. Regulation 102 of the Income Tax Act: Budget 2016 confirms the Government s intention to proceed with an exception to the withholding tax requirements for payments by qualifying non-resident employers to qualifying non-resident employees. Other measures Import Tariffs Budget 2016 announces that the Government will eliminate tariffs on about a dozen manufacturing inputs, providing an estimated $9 million in tariff savings over the next five years to Canadian manufacturers in the consumer goods and transportation sectors. Budget 2016 also announces the Government s intention to launch public consultations on eliminating tariffs on food manufacturing ingredients other than supply-managed products. These ingredients are primarily used in the agri-food processing industry, Canada s largest manufacturing employer and an important contributor to Canada s economy. Eliminating tariffs on imported ingredients will support investment and job creation in this important sector by
strengthening the competitiveness of Canadian agri-food processors in domestic and foreign markets. Unfair Trade: As part of Budget 2016, the Government is taking steps to improve its ability to effectively remedy dumped and subsidized imports, including through specific legislative amendments. Further, the Government will consult stakeholders to ensure that Canada s trade remedy system offers Canadian businesses the ability to respond to changing global trade conditions. Gordie Howe International Bridge Project The Government of Canada has been working with the State of Michigan and the U.S. Federal Government to construct a new international crossing between Windsor and Detroit since the early 2000s. A significant milestone towards the construction of the Gordie Howe International Bridge project was achieved on January 20, 2016, with the completion of the first phase of the procurement process and the announcement of three short-listed bidders for the project. In the coming months, the Request for Proposals will be launched to select a private sector partner for the construction and ongoing operation of the new crossing.