Budget plan extends manufacturing incentives

Ottawa will extend a suite of programs aimed at getting businesses to invest in new jobs and equipment, all while keeping its eyes squarely focused on paying down the deficit before the next election.

That was the takeaway for Canadas business community in the federal budget Finance Minister Jim Flaherty unveiled in Ottawa on Thursday.

Flaherty pitched his budget as a stable plan that targets job creation and economic growth. "Canada has picked the right path and the right plan," Flaherty said of his budget on Thursday.

"A responsible plan for jobs, growth and long-term prosperity."

Debt reduction and deficit repayments remain key to Ottawas fiscal plans, as the latest numbers show the deficit in the current fiscal year is $2.2 billion higher than Ottawa had projected as recently as November. As such, the details of the budget are tailored towards getting Canadas books back into the black by the 2015-2016 fiscal year.

"I need to make one thing very clear," Flaherty said. "Our government is committed to balancing the budget in 2015 period."

Thats likely to be music to the ears of Canadas business community. But unlike previous budgets, there was very little in new spending initiatives for Canadas business community.

Rather, the government has taken a number of incentive programs that first emerged in previous, post-recession budgets, and either extended them or tailored them in slightly new directions.

A plan that sees small businesses get a credit of up to $1,000 against the increase in its EI premiums for new hires has been renewed. And the lifetime capital gains exemption for small business owners, farmers and fishers has been extended by $50,000 to $800,000.

After previous budgets focused on resources, Ottawa renewed its focus on the hard-hit manufacturing sector in Ontario, which has had trouble competing in part because of Western Canadas resource boom that has been blamed by some for fuelling the loonie to new heights. Ottawa plans to continue a series of programs aimed at spurring exports and stimulating hiring in the sector.

To that end, theres $920 million to renew a program called FedDev Ontario, first created in the stimulus budget of 2009, which gives loans and grants to schools, non-profit groups and manufacturerswho pitchproductivity improvements that may include new machinery and equipment.

The new funding means the program which the government says have helped fund 341 new projects in Ontario since being implemented will be around for a while longer.

Within that, $200 million is going to extend the Advanced Manufacturing Fund aimed at stimulating the manufacture of new technology in IT, life sciences and other niche industries.

And theyve extended the temporary capital cost allowance for manufacturers another program first created in 2009 which lets manufacturers write off machinery and equipment to take advantage of the tax benefits more quickly.

Thats an incentive to get them to invest in new equipment, which should help improve Canadas moribund record on productivity.

Tax cheats targeted

While the government was quick to stress that there are no new taxes, its clear theyre hoping to draw from rules already on the books and catch tax dodgers.

Ottawa has created something called the Stop International Tax Evasion program, essentially a program that rewards Canadians for giving government information that leads to the collection of outstanding taxes being illegally sheltered overseas.

If more than $100,000 is collected, the tipster is entitled to a reward as much as 15 per cent of whatevers collected. Its a central plank of a plan that Ottawa hopes will bring in as much as $316 million next fiscal year.

But Ottawa is banking on that figure totalling more than $4.3 billion by 2015, as part of a series of initiatives the budget document says are aimed at "closing tax loopholes and improving the fairness of the tax system."

Pension help

The government also announced its intention to make progress on two long-time bugaboos what to do about distressed pension plans and the creation of a national securities regulator. But the budget document was short on specific details on what, exactly, it plans to do about both.

On the pension front, the government said it plans to "introduce changes to the distressed pension workout scheme" where Canadian companies with shortfalls in their pension plans seek Ottawas help for either more time to bridge the gap, or in some cases get financial help to do so.

Earlier this month, Ottawa granted Air Canada a lifeline of more time to fill in a $4 billion shortfall in its pension plan but imposed rigid caps on executive compensation and stock dividend payouts until it does so. In vague terms, the budget document continues on that theme, noting the government will "undertake consultations on this initiative" to make sure plans retain flexibility while protecting member benefits.

On the regulatory front, Ottawa renewed its call for a national securities regulator that can oversee the financial industry from coast to coast. Currently, securities law is governed by a patchwork of provincial rules.

In 2011, the Supreme Court struck down the governments proposal on the table at the time, declaring the specific details unconstitutional. "Canada is the only industrialized country without a national securities regulator," the budget reads.

"The government would be prepared to delegate if a critical mass of provinces and territories were willing to do the same," it continues, a nebulous olive branch to provinces who havent been receptive to the idea in the past.

All in all, the 2013 budget is likely to be somewhat underwhelming for the business community, as Ottawa tries to straddle the line between raising new revenues without squeezing businesses into submission. "This isnt going to go down in the pantheon of budgets," accountant Bob Plamondon said. "But it caters to [the Conservatives] business base in places while keeping spending under control."