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In Depth

Federal Budget 2007

Business

Firms to speed up expensing of new manufacturing equipment

March 19, 2007

CBC News

Finance Minister Jim Flaherty didn't include any new tax cuts for businesses in his latest budget, but companies didn't come away empty-handed.

To help the country's battered manufacturing sector, Flaherty said Ottawa will introduce a speed-up plan to let companies expense their investments in equipment. From now until the end of 2008, manufacturers will be allowed to completely write off those investments over two years, instead of the current standard of seven years.

"This is like a shot of adrenalin for our manufacturers," said Flaherty of the accelerated capital cost allowance.

"It will help Canadian businesses invest in new technology and better compete on the world stage," he said in his budget address.

The move is expected to cost the federal government about $1.3 billion in reduced revenues between the 2007 and 2009 fiscal years.

The Conservatives also said they will phase out the accelerated capital cost allowance for general investment in the oilsands by 2015. The government said that the oilsand sector is now healthy and vibrant, meaning the accelerated capital cost allowance is no longer necessary.

The allowance's elimination could also help the government win support from the NDP, which had been calling for the move.

Flaherty also said the government will crack down on tax avoidance through offshore tax havens.

"If creative tax planners find other loopholes, we will close those loopholes as well," Flaherty said in his address. "The free ride is over. Everyone's going to pay their fair share."

Ottawa also plans to end the practice of allowing companies to make tax deduction on their interest expenses on debt incurred to acquire shares of a foreign affiliate.

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