It’s a business tax break to fight the trade war.
At south-Barrie manufacturer JEBCO Industries this morning, federal Secretary of State for Labour John Zerucelli explained the benefits of the new “productivity mega deduction.”
“We are making it cheaper for businesses to invest in Canada right now,” he said. “Let’s say JEBCO buys a new, $1-million piece of eligible equipment and puts it to work. You (JEBCO) can now deduct the full $1 million in the first year.
“A 100 per cent deduction, right away, instead of spreading that deduction over years. Businesses get to benefit now,” Zerucelli added.
This new tax incentive will increase the amount of assets eligible for immediate expensing from roughly 15 per cent of assets to more than 65 per cent — including fibre-optic cable, greenhouses, mining property, oil and gas pipelines, software, research and development, computer equipment, aircraft and vehicles, patents, rail track, bridges and roads.
The federal government is also making immediate expensing permanent, giving businesses the long-term certainty they need to make major investment decisions.
Together, these changes will reduce the cost of investing in Canada and lower the marginal effective tax rate on new business investment from roughly 13 per cent to 6.4 per cent – the lowest of any major economy in the world and less than half the rate in the United States, according to federal officials in Ottawa.
“The major impact is that this is going to reduce the tax amount that’s paid in that first year. What it does is it frees up a significant amount of money and it makes Canada very appealing compared to other countries as a great place to invest,” said Andrew Cormier, chief financial officer and director of River Birch Global Water, which acquired JEBCO earlier this year.
JEBCO is a full-service manufacturing, fabrication company, specializing in pressure vessels, customized steel fabrication, wastewater treatment plants, machining, repairs, process equipment and advanced engineering solutions.
Wednesday morning’s event was to highlight how the federal government is helping Canadian businesses of all sizes invest in new equipment, adopt new technology, expand their operations and compete at home and around the world.
The “productivity mega deduction” is to allow businesses to immediately deduct the full cost of a much broader range of investments, giving them a powerful incentive to build, expand and create good jobs in communities across Canada, according to the federal government.
“In a period of global uncertainty, Canada is turning our strengths, including talented workers, innovative businesses and strong finances, into a competitive advantage,” Zerucelli said. “With the lowest tax rate on new business investment in the G7, we’re attracting investment, driving growth and creating good jobs for Canadians.”
