Archived - Chapter 5
Investing in a More Productive, Sustainable Economy
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Strengthening Research and Innovation
This budget will invest $1.7 billion in 2002–03 and over the next two years to support research and innovation, including:
- a $125-million-per-year increase in funding for Canada’s three federal granting councils beginning in 2003–04;
- a new Canada Graduate Scholarships program supporting 4,000 new scholarships at program maturity;
- $225 million per year to help fund the indirect costs associated with federally sponsored research through the granting councils beginning in 2003–04;
- $16 million over the next two years for northern science;
- investments of $500 million in the Canada Foundation for Innovation for state-of-the-art health research facilities and $75 million in Genome Canada for health genomics;
- $15 million to the Rick Hansen Man In Motion Foundation and $20 million to the Medical and Related Sciences project;
- $30 million for SchoolNet and the Community Access Program;
- an additional $70 million over two years for the National Research Council of Canada to strengthen the Industrial Research Assistance Program, support astronomy and establish new regional innovation centres; and
- an additional $190 million in equity to expand venture capital by the Business Development Bank of Canada and $20 million for Aboriginal Business Canada in support of entrepreneurship and business development.
Supporting Skills and Learning
This budget provides $285 million in 2002–03 and over the next two years for skills and learning, including:
- $41 million to better attract and facilitate the integration of skilled immigrants into the Canadian labour market and society;
- $60 million over two years to improve the Canada Student Loans Program;
- $100 million for the creation of the proposed Canadian Learning Institute; and
- $72 million to improve educational outcomes for Aboriginal people and ensure they are provided with training and employment opportunities on major projects across Canada.
Improving the Tax System
This budget builds on the Government’s Five-Year Tax Reduction Plan to further improve the tax system and enhance incentives to work, save and invest. This budget:
- supports Canadian families by increasing the National Child Benefit supplement and introducing a new Child Disability Benefit;
- encourages savings by Canadians by increasing the registered retirement savings plan annual contribution limit to $18,000 by 2006 and making corresponding increases for employer-sponsored registered pension plans;
- promotes entrepreneurship and small business through a number of tax changes, including an increase in the small business deduction limit to $300,000 over four years;
- strengthens the Canadian advantage for investment by legislating the elimination of the federal capital tax over five years, eliminating it for medium-sized corporations as early as 2004;
- improves the taxation of resource income in Canada by reducing the corporate tax rate of the sector to 21 per cent over the next five years while making changes to the tax structure of this key sector;
- extends the temporary mineral exploration tax credit; and
- enhances the Film or Video Production Services Tax Credit.
Advancing Sustainable Development
Budget 2003 includes measures totalling $3 billion to promote sustainable development and a healthier environment, such as:
- $2 billion over five years in measures to help implement the Climate Change Plan for Canada through: increased government support for Sustainable Development Technology Canada and the Canadian Foundation for Climate and Atmospheric Sciences; improved tax incentives in renewable energy; and funding for other climate change measures, including targeted initiatives and partnerships. Actions to promote energy efficiency, renewable energy, sustainable transportation and new alternative fuels, in such areas as building retrofits, wind power, fuel cells and ethanol, will be considered;
- an investment of $340 million over two years to address federal contaminated sites, improve air quality, better assess and manage toxic substances, further protect Canada’s species at risk, and support implementation of Canada’s commitments at the World Summit on Sustainable Development;
- $600 million over five years to upgrade, maintain and monitor water and waste water systems on reserves; and
- $74 million over two years as an initial investment for the establishment of 10 new national parks and 5 new national marine conservation areas and to restore the ecological health of existing parks.
Renewing Canadian Agriculture
In June 2002 the Government delivered on its previous commitment to provide predictable, long-term funding for agriculture by allocating $5.2 billion over six years to the sector. Budget 2003 builds on the new direction for agricultural policy through new investments in several areas:
- $220 million this fiscal year to provide an advance to the Crop Reinsurance Fund, ensuring that farmers will receive future payments;
- $100 million over the next two fiscal years to the Canadian Food Inspection Agency to help it maintain the food safety system;
- $30 million over the next two fiscal years to the Canadian Grain Commission to allow it to maintain its level of service to farmers;
- $113 million this fiscal year for infrastructure improvements at Canada’s four veterinary colleges; and
- $20 million over the next two years to supplement Farm Credit Canada investments for further promotion of innovation in the agricultural sector.
Enhancing the well-being of Canadians, through higher living standards and a better quality of life, lies at the heart of the Government’s economic and social policies. Achieving high and sustainable living standards and a better quality of life requires that economic and social progress advance together. By undertaking the right investments and creating favourable conditions for growth, the Government can help provide the foundation for such progress.
Beyond a stable fiscal and monetary climate, the key drivers of a stronger economy are those that allow Canada to improve its productivity performance. These include such factors as a tax system that encourages economic growth and job creation, and investments in new technologies and research. Equally important is ensuring that Canadians have the skills and confidence needed to participate fully in the new economy. And the country’s growth must be sustainable as well as strong. This means that the Government must deal effectively with climate change and other environmental challenges.
Canada has made great strides in recent years, eliminating the deficit and accelerating the growth in its standard of living. From 1997 to 2002 Canada’s growth in gross domestic product (GDP) per capita, the best measure of living standards, rose faster than in any of the other leading industrialized countries, including the U.S.
This remarkable progress comes with a clear message: continued long-term, durable economic growth will require ongoing productivity improvements. Faster productivity growth means more income and better jobs for employees, and more opportunities for Canadians for personal growth and development. Canada’s economic and social policies come together through investments in people, particularly in their health and their opportunities for learning.
The measures announced in this and previous budgets are designed to help ensure Canada’s productivity growth will continue to rise, and with it, Canadians’ standard of living. A key element in raising productivity will be to make Canada a magnet for talent and investment—a crucial part of how Canada positions itself as a "Northern Tiger." As part of this effort, the Government has made and will continue to make substantial investments to strengthen research and innovation, support skills and learning and improve Canada’s health care system. It will introduce measures that build on the Government’s Five-Year Tax Reduction Plan to further improve the tax system, enhance incentives to work, save and invest, promote entrepreneurship and small business, and strengthen the Canadian tax advantage for investment.
A more productive economy is not just about higher incomes for Canadians. It is also about ensuring that our economic choices integrate social and environmental considerations to ensure Canada’s development is sustainable. All sectors of the economy must confront and act on this challenge to position themselves for sustainable future growth and competitiveness.
Strengthening Research and Innovation
Research provides opportunities for Canadians to develop leading-edge skills and ideas. It also generates discoveries that are transformed by entrepreneurs into innovative products, services and technologies. The dividends of investments in research are a growing economy and a higher quality of life for all Canadians.
It was with this sense of opportunity that the Government made investments in recent years that have raised annual federal spending on research and innovation by over $2 billion (see Table 5.1). Indeed, over the 1998–99 to 2004–05 period, the Government will have invested a cumulative amount of over $11 billion in research and innovation.
Much of this investment has supported research conducted at universities, colleges and research hospitals, energizing these institutions and surrounding communities and leading to new economic opportunities. The Government’s investments have enabled universities to raise further support from the private sector and other sources. Sponsored research at Canada’s top 50 research universities reached $3.4 billion in 2001, an increase of more than 20 per cent from the previous year. Overall, income from sponsored research per full-time faculty member now exceeds $100,000, a first in Canada.
Increased Funding for Research and Innovation Provided in Previous Budgets
|(millions of dollars)|
|Canada Foundation for Innovation1||30||115||185||230||330||450||500|
|Canada Research Chairs||60||120||180||240||300|
|Medical Research Council of Canada/Canadian Institutes of Health Research||40||72||145||255||330||330||330|
|Natural Sciences and Engineering Research Council of Canada||71||111||118||118||154||154||154|
|Social Sciences and Humanities Research Council of Canada||9||26||38||58||67||67||67|
|Networks of Centres of Excellence||30||30||30||30||30||30|
|National Research Council of Canada||50||44||90||135||140||132||132|
|Atlantic Innovation Fund||23||68||88||78|
|Canadian Space Agency||41||152||237||250||260||235|
|Biotechnology research and regulation||15||45||50||55||55||55|
|Technology Partnerships Canada||140||190||190||190||190||190||190|
|1 Amounts shown represent actual or anticipated spending by not-for-profit entities in which the Government has invested in previous budgets.
2 Includes funding for SchoolNet, the Community Access Program, Smart Communities, GeoConnections, CA*net 4 and the Broadband for Rural and Nothern Development Pilot Program.
The Government will invest an additional $1.7 billion in 2002–03 and over the next two years to build on prior investments in research and innovation and to promote the commercialization of these investments.
The Federal Granting Councils
The three federal granting councils—the Canadian Institutes of Health Research (CIHR), the Natural Sciences and Engineering Research Council of Canada (NSERC) and the Social Sciences and Humanities Research Council of Canada (SSHRC)—fund world-leading research in communities across Canada and provide opportunities for talented graduate and post-graduate students to acquire valuable skills and research experience. The Government has increased its support for the granting councils each year since 1998, bringing their combined annual budgets to about $1.3 billion in 2002–03, almost 70 per cent higher than funding provided in 1997–98.
Budget 2003 continues these efforts to increase university research activity across all disciplines. The budgets of the three granting councils will be increased by a further $125 million per year, or about 10 per cent, beginning in 2003–04. This means an increase of $55 million per year for the CIHR, $55 million per year for NSERC and $15 million per year for SSHRC. This additional funding will help support new researchers and translate discoveries into commercial and social benefits for Canadians.
Canada Graduate Scholarships
Individuals possessing the skills and talent necessary to generate innovative ideas, adapt to changing environments and become proficient in new technologies are critical to the knowledge economy. Canada must produce more graduate students at all levels to ensure a reliable supply of these highly skilled and qualified workers.
The federal granting councils directly support graduate students through their scholarship and fellowship programs, and indirectly through awards for research performed at Canada’s universities. In this budget the Government is proposing to create a new Canada Graduate Scholarships program at an annual cost of $105 million when fully phased in. Canada Graduate Scholars will help renew faculty at Canada’s universities and will be the research leaders of tomorrow. The new program will complement the Government’s initiative to create 2,000 Canada Research Chairs, supporting excellence at Canada’s universities.
The Canada Graduate Scholarships program, when fully phased in four years from now, will support 2,000 master’s and 2,000 doctoral students each year, increasing the number of graduate scholarships supported by the federal government by 70 per cent to almost 10,000. Scholarships at the doctoral level will be for three years and provide students with an annual award of $35,000, twice the amount of the one-year scholarships provided to students at the master’s level. Funding for the program will be allocated among the three granting councils in proportion to the distribution of the graduate student community: 60 per cent to SSHRC, 30 per cent to NSERC and 10 per cent to the CIHR.
Indirect Costs of Research
As university-based research has increased in Canada in recent years, the indirect costs associated with these research activities has risen with them. In 2002 the Government provided a payment of $200 million through the granting councils to assist universities in meeting these indirect costs. That payment recognized the unique needs of smaller institutions by providing them with proportionately greater support.
Budget 2003 will provide $225 million per year through the granting councils beginning in 2003–04 to help fund the indirect costs associated with federally supported research at universities, colleges and research hospitals. The Government will develop new reporting and accountability mechanisms with universities, and will review the program in its third year to ensure this funding satisfies its objectives, including commercialization of university research.
Science and research in Canada’s North contribute to our understanding of such issues as Aboriginal health, sustainable development and the environment. It also addresses concerns regarding Canadian sovereignty and security in the North.
Budget 2003 builds on the federal commitment to northern science, providing $16 million over the next two years to expand federal programs. In particular, an additional $6 million over the next two years will be provided for the Polar Continental Shelf Project to provide air transport and land-based infrastructure to Arctic researchers. A further $10 million over two years will be provided for the Targeted Geoscience Initiative, allowing the program’s mission to be extended to the energy sector, including energy-oriented activities in Canada’s North. The granting councils will also be asked to enhance their support for northern research as part of the increased funding they receive in this budget.
Canada Foundation for Innovation
The Canada Foundation for Innovation (CFI) was established in 1997 to support the modernization of research infrastructure at Canadian universities and colleges, research hospitals and other non-profit research institutions across Canada. Since then the Government has invested $3.15 billion in the CFI, which has awarded research grants to more than 2,400 projects, almost half of them in the health sciences.
CFI investments are helping to transform the way research is done by creating a vibrant research environment and attracting and retaining excellent students and researchers. While the focus of these investments has been on equipment and housing for equipment, changes in research methods and the addition of more researchers and graduate students are making research space a limiting factor to ongoing success. In the health field, in particular, a more integrated and multi-disciplinary approach to research that spans biomedical, clinical and health services research has given rise to proposals for new and different facilities that will house sophisticated equipment and bring researchers together in new and innovative ways. To ensure that they remain leaders in health research and health care innovation, research hospitals are seeking to establish integrated same-site facilities.
This budget will provide an additional $500 million in 2002–03 to the CFI to enhance the Foundation’s support for state-of-the-art health research facilities. This investment will help consolidate the platform for advanced research in Canada and lever the skills and capabilities of Canadian researchers into new and powerful combinations and discoveries.
The study of genomics offers unique opportunities for exploration and discovery, with the potential to unlock the origins of disease. The potential benefits are improved treatment and prevention of serious illnesses such as cancer and diabetes. Genomics also holds out great hope for reducing and reversing the harmful effects of environmental degradation.
The Government has invested $300 million in Genome Canada to develop and implement a national genomics strategy. Genome Canada’s investments have energized genomics research in Canada and supported the establishment of five leading regional genome centres (in Atlantic Canada, Quebec, Ontario, the Prairies and British Columbia). Matching investments of $200 million have provided further support beyond the Government’s original investment.
Budget 2003 provides an additional $75 million to Genome Canada in support of large-scale projects for applied health genomics. These projects will build on basic science discoveries supported in Genome Canada’s first two competitions and result in the development of instruments and techniques to improve the prediction and prevention of disease.
Rick Hansen Leadership Fund
The Rick Hansen Man In Motion Foundation is dedicated to finding a cure for paralysis and improving the health and quality of life of people with spinal cord injuries. The Foundation is establishing a Leadership Fund to help attract and retain researchers and to support them in translating discoveries into clinical therapies. This budget provides $15 million to the Foundation to help establish the Leadership Fund and support its activities over the next seven years.
The Medical and Related Sciences Project
The Medical and Related Sciences (MaRS) project is an initiative founded by leaders from Canada’s academic, business and scientific communities to fuel the commercialization of medical research. MaRS will encompass the full spectrum of discovery in the medical and related sciences, from a sophisticated discovery centre to extensive incubator facilities for small and medium-sized companies. It will also serve as the nucleus of a virtual network of discovery linking other universities and research hospitals. Consistent with the Government’s focus on improving health research infrastructure and supporting commercialization, this budget will contribute $20 million to the MaRS project.
SchoolNet and Community Access Program
Canada is one of the most connected nations in the world. Infrastructure connecting homes, businesses, schools, libraries and other public institutions to the Internet is leading-edge. Moreover, Canadians are second to none in developing and commercializing innovative Internet applications and content. Funding was provided in previous budgets to help extend the highly successful SchoolNet and Community Access Program. This budget provides an additional $30 million for the programs in 2003–04. Looking ahead, the Government will review all of its programs connecting Canadians to information and knowledge to determine how best to collaborate with Canadian industry, the provinces, communities and others.
National Research Council of Canada
The National Research Council of Canada’s (NRC’s) Industrial Research Assistance Program (IRAP) assists small and medium-sized businesses (SMEs) in developing and using new, innovative technologies and processes. Based on a cross-Canada network of firms, advisors, research institutes and other organizations, IRAP is making a real difference to the growth potential of SMEs. This budget provides $25 million per year to the NRC to expand IRAP’s core programming including its network of Industrial Technology Advisors. This amounts to a 20-per-cent increase in IRAP funding.
Budget 2003 also provides $10 million per year to the NRC to establish new regional innovation centres in Regina and Charlottetown and to secure Canada’s participation in leading-edge astronomy projects, including the Extended Very Large Array project in New Mexico and the Atacama Large Millimetre Array project in Chile.
Business Development Bank of Canada
The Business Development Bank of Canada (BDC) helps complement private sector financing of innovative small and medium-sized Canadian businesses. The BDC fulfills its mandate through lending, subordinated debt and venture capital financing.
The BDC’s focus is on helping knowledge-based and export-oriented companies grow and prosper. In some cases the Bank provides specialized financing services to particular groups, such as women entrepreneurs. By March 2002 the BDC’s venture capital portfolio totalled $270 million, almost double its level in March 2000. In support of further growth of its venture capital activities this year and in 2003–04, the Government will purchase an additional $190 million of BDC common shares. This capital will allow the BDC to provide additional equity financing for knowledge-based and export-oriented businesses, and to increase the financing available to women entrepreneurs.
Aboriginal Business Canada
As part of its overall strategy to support Canadian SMEs, the Government will encourage Aboriginal entrepreneurship and business development through increased funding to Aboriginal Business Canada. Over the next two years $20 million will be provided to Aboriginal Business Canada to expand its support for Aboriginal entrepreneurs in starting up new businesses and expanding into new markets, furthering measures to increase job skills and job creation. This represents an increase of more than 25 per cent in the annual level of funding, bringing the budget of Aboriginal Business Canada to $48 million per year. Northern Aboriginal entrepreneurs seeking to take advantage of new resource development opportunities would be eligible to apply for this funding.
Strengthening Research and Innovation
|(millions of dollars)|
|Canada Graduate Scholarships||25||55|
|Indirect costs of research||225||225|
|Canada Foundation for Innovation||500|
|Rick Hansen Leadership Fund||2.2||2.2|
|Medical and Related Sciences project||10||10|
|SchoolNet/Community Access Program||30|
|National Research Council of Canada||35||35|
|Business Development Bank of Canada (non-budgetary)||102||88|
|Aboriginal Business Canada||10||10|
Supporting Skills and Learning
To compete internationally and provide a better standard of living for its citizens, Canada must continue to make investments to ensure an increasingly well-educated, adaptable and skilled workforce. Advancements in skills and learning will be vital to improved productivity and competitiveness and to a better quality of life for Canadians. With this budget, investments will be made in three key areas: increasing and enhancing the contributions of skilled immigrants to the economy and society; helping to maintain access to post-secondary education; and ensuring young Aboriginal Canadians have the skills and learning needed to contribute fully to the economic life of their communities and Canadian society. The budget proposes a number of strategic investments, totalling $285 million in 2002–03 and over the next two years, for these priorities.
Immigrants have historically made a fundamental contribution to the Canadian labour market and society, and the importance of their contribution will increase in the face of declining labour force growth and an aging population. This will require improved efforts to attract and select skilled immigrants and to facilitate their full integration into the labour market and society.
For advancements in skills and learning to take place, it will be critical that Canadians continue to have access to the quality post-secondary education that they need. An important element of maintaining this access is the financial assistance provided by the Canada Student Loans Program.
Canada’s Aboriginal population is much younger than the non-Aboriginal population. As young Aboriginal Canadians move through the education system and into the labour market, they will account for an increasing proportion of Canada’s working-age population. As a result, it will be important to ensure they are well prepared to take advantage of opportunities.
Canada needs to attract and recruit more skilled workers and students from abroad to help mitigate skills and labour shortages. Employers have expressed concerns about delays and complicated application processes, while partners in student recruitment have requested the federal government do more to facilitate the arrival of international students, ensuring a higher quality of service and facilitating study permit processing procedures.
To address these concerns and ensure that Canadian employers have timely access to skilled workers, this budget will provide $6.6 million over the next two years to launch a fast-track system for skilled workers with permanent job offers from Canadian employers. This budget also provides $8 million over the next two years to facilitate the processing of study permits for foreign students.
When immigrants arrive in Canada nearly 80 per cent settle in the metropolitan areas of Toronto, Vancouver and Montréal. To encourage immigrants to settle in smaller communities throughout Canada, the Government will invest $3.8 million over the next two years to work with its partners on more effective approaches to attract skilled workers to communities across the country.
Many newcomers face barriers preventing them from reaching their full potential in the Canadian labour market, including complex credential assessment and recognition requirements and limited language skills relative to what is needed to work in their field of expertise. To address these challenges, the federal government will invest $13 million over the next two years to work in partnership with provincial and territorial governments, regulatory bodies and employers to facilitate foreign credential assessment and recognition. In addition, it will invest $10 million over the next two years as seed money for partners to deliver labour market language training on a pilot basis at more advanced levels than currently provided.
Canada Student Loans Program
The Canada Student Loans Program plays a key role in improving access to post-secondary education by providing loans and other financial assistance to more than 330,000 post-secondary students each year who have demonstrated financial need. To ensure that the Canada Student Loans Program continues to meet its objectives, this budget is taking steps to modernize and strengthen the program.
- More money will be put in students’ hands through increased exemptions for income earned while in school and from merit-based scholarships. Currently there is a single exemption of $600 for both in-study income and scholarships. The annual exemption will be increased to $1,700 for income earned while in school, and a separate exemption of $1,800 will be established for merit-based scholarships.
- To enable graduates to better manage their student debt, Debt Reduction in Repayment, which is intended to assist borrowers experiencing long-term difficulty in repaying their loans, will be enhanced by:
- increasing the income eligibility thresholds;
- removing the current restriction limiting debt reduction to 50 per cent of outstanding debt—borrowers will now be eligible for an initial loan remission of up to $10,000; and
- creating an additional reduction of up to $5,000 one year after the initial debt reduction if the borrower is still in financial difficulty. A further reduction of up to $5,000 will be available two years after the first reduction for those borrowers who remain in financial difficulty.
As a result of these measures, borrowers in difficult financial circumstances could have their Canada Student Loan debt reduced by up to $20,000 over three years.
- Individuals who are in default on their Canada Student Loans or who have declared bankruptcy will now have access to interest relief.
- The Canada Student Financial Assistance Act will be amended to make protected persons, including convention refugees, eligible for Canada Student Loans, and to make provisions with respect to the enforcement, management and implementation of the Canada Student Loans Program.
These measures represent an investment of some $60 million over two years, starting in 2003–04.
Examples of Debt Reduction in Repayment
David is a single graduate with Canada Student Loan debt of $15,000 and monthly payments of $174. His gross monthly income is $1,000. David has used up all the interest relief available to him and five years have passed since he graduated.
Under the existing measure, David’s Canada Student Loan debt is reduced by $7,500, leaving monthly payments of $87.
Under the proposed measure, David’s debt will be reduced by $10,000, resulting in monthly payments of $58.
If David is still experiencing financial difficulty one year after the initial debt reduction, he could be eligible for a further reduction in his debt. If his income remained the same as the previous year, David’s debt will be reduced by $2,847 to produce a monthly payment of $25.
As a minimum monthly payment of $25 is required, David will not be eligible for further reductions in his debt. However, under the proposed measure, his Canada Student Loan debt will have been reduced by $12,847 over two years.
Graduate, Single Parent
Carole is a single parent with one child. She has Canada Student Loan debt of $15,000 with monthly payments of $174. Her gross income is $2,000 per month. It has been five years since Carole graduated and she is not eligible for further interest relief.
Under the current measure, Carole is not entitled to have her Canada Student Loan debt reduced.
Under the proposed measure, Carole’s debt will be reduced by $10,000, leaving monthly payments of $58.
If Carole is still experiencing financial difficulty one year after the initial debt reduction, her debt will be reduced by a further $694 to produce a monthly payment of $50.
Carole will not be eligible for further reductions in her debt, but her Canada Student Loan debt will have been reduced by $10,694 over two years.
Canadian Learning Institute
At the National Summit on Innovation and Learning in November 2002, the federal government announced its intention to work with its partners to develop a Canadian Learning Institute. A key objective of the Institute will be to broaden and deepen data and information on education and learning. This will address gaps in the knowledge of education and learning, and result in payoffs for Canadians in making future decisions about investments in learning.
Consultations with provinces, territories and other stakeholders are underway on the mandate, structure and governance of the Institute, and the Government will proceed on the basis of the advice received. This budget sets aside a one-time contribution of $100 million in 2003–04 for the establishment of the Canadian Learning Institute.
First Nations Education
The Government of Canada is committed to improving the education outcomes of First Nations children. Currently the Government spends over $1 billion annually on First Nations elementary and secondary education and $300 million a year on post-secondary education for eligible Indian and Inuit students. As stated in the recent Speech from the Throne, "the most enduring contribution Canada can make to First Nations is to raise the standard of education on-reserve."
In 2001 the Government provided additional funding of $30 million a year for a special education program. This new program is intended to support children living on reserves who face special learning challenges in school because of physical, emotional or developmental barriers to learning. But more needs to be done.
The Government will review the report of the Minister of Indian Affairs and Northern Development’s National Working Group on Education and take additional action to improve educational outcomes for Aboriginal people. This budget provides $35 million over the next two years to respond to the Working Group’s recommendations. This funding will address critical issues such as the high turnover among teachers in some First Nations schools, and the need to affirm and support the active involvement of parents and other family members in their children’s education.
New Post-Secondary Scholarship for Aboriginal Canadians
Despite steady gains in educational achievement, the percentage of Aboriginal Canadians with post-secondary degrees lags well behind the Canadian average. To support and encourage the achievement of higher levels of education, the Government will establish a new scholarship program with a one-time $12-million endowment, to be administered by the National Aboriginal Achievement Foundation.
Aboriginal Skills and Employment Partnership
The Government will meet the Speech from the Throne commitment to tailor training programs to help Aboriginal people participate in economic opportunities (such as northern gas pipelines and similar projects) by providing $25 million over the next two years. This funding will facilitate Aboriginal access to training and employment opportunities in a limited number of major projects across Canada. This will be a collaborative partnership with significant contributions expected from the private sector, Aboriginal groups, provinces and territories. It will further reinforce the Government’s commitment to support skills development and lifelong learning opportunities for all Canadians.
Aquatic Resources Management
Coastal Aboriginal communities are becoming increasingly important partners in the sustainable management of aquatic resources. This budget commits $12 million over the next two years to a new program within the Department of Fisheries and Oceans Canada that will enhance the ability of Aboriginal communities, working together, to participate in the fisheries decision making and management process. The program will enhance professional participation in resource decision making in an area with strong social and cultural significance for many Aboriginal groups, and will increase job opportunities in the commercial fishery.
Supporting Skills and Learning
|(millions of dollars)|
|Canada Student Loans Program||27.1||32.1|
|Canadian Learning Institute||100|
|First Nations education||10||25|
|Post-secondary scholarship for Aboriginal Canadians||12|
|Aboriginal skills and employment partnership||10||15|
|Aquatic resources management||4||8|
Improving the Tax System
The tax system plays an important role in creating a stronger, more productive economy. An efficient tax structure can enhance incentives to work, save and invest. It can also support entrepreneurship and the emergence and growth of small businesses. A competitive tax system is also critical in encouraging investment in Canada, leading to greater economic growth and job creation.
In 2000 the Government set out a five-year $100-billion tax reduction plan that provided significant personal income tax reductions and strengthened the foundation for economic growth and job creation. The plan:
- reduced personal income taxes by lowering tax rates, eliminating the deficit reduction surtax and restoring full indexation—by 2004–05 the plan will reduce federal personal income taxes by 21 per cent on average and by 27 per cent for families with children;
- reduced the capital gains inclusion rate from three-quarters to one-half and introduced the small business capital gains rollover—enhancing incentives for entrepreneurs and small businesses to invest; and
- reduced the general corporate income tax rate from 28 per cent in 2000 to 21 per cent in 2004—contributing to creating a Canadian tax advantage for investment.
The Government’s Five-Year Tax Reduction Plan has provided timely and significant economic stimulus, playing a key role in sustaining Canadian economic performance in the global downturn and the uneven global recovery. This calendar year and next the Government’s Five-Year Tax Reduction Plan is providing significant tax relief—about $24 billion in 2003 and more than $30 billion in 2004.
Five-Year Tax Reduction Plan: 2003 and 2004 Calendar-Year Tax Relief
(billions of dollars)
|Total tax relief||24.2||30.6|
|Personal income tax||18.1||22.5|
|Corporate income tax||2.5||3.7|
Annex 2 provides more detailed information on the implementation of the legislated Five-Year Tax Reduction Plan.
This budget builds on the Five-Year Tax Reduction Plan. It takes steps to further improve the tax system by introducing measures that support Canadian families, encourage savings and investment by Canadians, promote entrepreneurship and small business, and strengthen the Canadian tax advantage.
Supporting Canadian Families:
Increasing the National Child Benefit Supplement and Introducing the Child Disability Benefit
This budget provides tax relief for low-income families by increasing the National Child Benefit supplement component of the Canada Child Tax Benefit (CCTB) by an annual amount of $150 per child in July 2003, $185 in July 2005 and $185 in July 2006 (see Chapter 4). With these increases, the maximum CCTB benefit is projected to reach $3,243 for the first child in 2007. This will bring the estimated annual support delivered through the CCTB to over $10 billion in 2007—an increase of over 100 per cent since 1996. This budget also introduces a new Child Disability Benefit, which provides up to $1,600 annually to low- and modest-income families with a disabled child (see Chapter 4).
Encouraging Savings by Canadians: Increasing the RPP/RRSP Limits
Private domestic savings are a critical source of capital in the economy as well as a fundamental instrument for individual Canadians to finance their retirement and meet other needs such as buying a home or supporting the education of their children. The tax treatment of savings is an important factor for the formation of private savings because it affects the after-tax return on savings and therefore the incentive to save.
In Canada registered pension plans (RPPs) and registered retirement savings plans (RRSPs) are the principal tax-assisted savings vehicles. The deferral of tax on savings in these plans reduces the tax burden on savings and therefore increases the incentive to save. Savings in RPPs and RRSPs total over $1 trillion and are a key source of funds for investment in the economy.
RPPs and RRSPs together form the third pillar of Canada’s retirement income system, along with Old Age Security and the Guaranteed Income Supplement, and the Canada and Quebec Pension Plans. RPPs and RRSPs play a major role in assisting Canadians in planning and funding their retirement. They also reduce the costs to employers of providing compensation packages, including retirement plans, that are competitive; RPP and RRSP limits can thus be a factor in the decision of mobile, skilled workers to accept employment in Canada, and in the ability of employers to attract and retain such workers.
The ability of taxpayers to save in RPPs and RRSPs is governed by limits on the pension benefits that may be provided under "defined benefit" RPPs and on the contributions that may be made to RRSPs and "money purchase" RPPs. Setting appropriate limits on savings in RPPs and RRSPs is an important objective of public policy. However, over the years there have been successive delays in implementing planned increases in the RPP and RRSP contribution limits to $15,500 that were first proposed in 1984. The result is that the existing RRSP contribution limit is $13,500, and the real value of the limits in 2003 is well below their levels in 1976.
As part of the strategy to improve the tax system to encourage economic growth and job creation, and building on success in securing the first two pillars of Canada’s retirement income system, this budget proposes to increase the RPP and RRSP limits. First, the currently scheduled increases in the RPP and RRSP annual contribution limits to $15,500 will be accelerated by one year. As a result, the 2003 contribution limits for RRSPs and money purchase RPPs will increase to $14,500 and $15,500, respectively. These RPP and RRSP limits will then be increased in steps to $18,000 by 2005 and 2006, respectively. Corresponding increases will be made to the maximum pension limit for defined benefit RPPs, bringing it to $2,000 per year of service by 2005. The limits will be indexed to average wage growth for subsequent years.
The Three Pillars of Canada’s Retirement Income System
Canada’s retirement income system is based on three pillars:
Through sound economic and fiscal management, the Government has succeeded in securing the strength and long-term stability of the first two pillars.
Having secured the first two pillars of the retirement income system, the Government is now moving to strengthen the third pillar by increasing the RPP and RRSP limits. This budget increases the RRSP annual contribution limit to $18,000 by 2006 and indexes it to average wage growth in subsequent years. It makes corresponding increases to limits for both money purchase and defined benefit RPPs.
The increases in RPP and RRSP limits will support savings and investment. Higher limits will also better meet the retirement savings needs of Canadians, including skilled workers and small business owners constrained by the current limits. They will also improve the ability of employers in Canada to attract and retain highly qualified personnel.
Existing and Proposed RPP/RRSP Limits
|Money purchase RPPs: annual contribution limit|
|Defined benefit RPPs: maximum pension benefit (per year of service)|
|RRSPs: annual contribution limit|
Moving forward, it is important that the tax system continue to provide effective mechanisms to support saving. The Government has received numerous representations from individuals, researchers and businesses that Canada’s tax system should be more conducive to saving. The Government intends to carefully review these representations and to conduct analysis in order to identify possible approaches for future improvements. In particular, the Government will examine whether tax pre-paid savings plans could be a useful and appropriate mechanism to improve the tax treatment of savings and to provide additional savings opportunities for Canadians.
Promoting Entrepreneurship and Small Business
Entrepreneurs and small businesses are a key source of economic growth and job creation in Canada. The tax system can support the growth of small businesses by allowing them to retain more of their earnings. It can also enhance opportunities and incentives for individual Canadians and other investors such as venture capital funds to invest in small enterprises. The Five-Year Tax Reduction Plan strengthened support for entrepreneurs and small businesses through measures such as the reduction in the inclusion rate for capital gains and the introduction of the small business capital gains rollover. This budget builds on the Five-Year Tax Reduction Plan to further support entrepreneurship and small business.
Examples of Tax Measures That Support Small Businesses
Small business deduction: A lower tax rate of 12 per cent applies on the first $200,000 of qualifying income. With this budget, the limit for application of the lower 12 per cent rate will rise from $200,000 to $300,000 over four years.
Rollover of investments in small business: Investors may, subject to certain limits, defer the taxation of capital gains on investments in eligible small business shares if the proceeds of disposition of their shares are reinvested in other eligible small business shares. With this budget, entitlement to this deferral is expanded by eliminating the individual investor limits on the amount of the original investment and reinvestment that may be eligible for the deferral and by extending the allowable period for the reinvestment.
Capital tax threshold: The federal capital tax does not apply to the first $10 million of capital of a corporation. With this budget, as part of the proposed elimination of the capital tax, this threshold will increase from $10 million to $50 million, effective 2004.
RRSP limit: RRSPs play a major role in assisting small business owners to meet their retirement savings needs. With this budget, the RRSP annual contribution limit will increase to $18,000 by 2006.
$500,000 lifetime capital gains exemption on the sale of small business shares: Investors do not pay tax on their first $500,000 of capital gains on small business shares.
Deduction of capital losses on shares and debt of small business corporations against other income (allowable business investment losses): Taxpayers may deduct allowable business investment losses on shares or debt of small businesses from income from other sources.
Scientific Research and Experimental Development (SR&ED) tax credit: For small businesses, SR&ED tax credits are earned at a higher rate (35 per cent compared with 20 per cent for other businesses) on their first $2 million in qualifying expenditures. Unused SR&EDtax credits earned on current expenditures at the 35-per-cent rate are fully refundable. Unused credits on other SR&ED expenditures qualify for a refund at a reduced rate of 40 per cent.
Small Business Deduction
A key tax measure that supports small business corporations is a reduced 12-per-cent income tax rate on the first $200,000 of qualifying income. This lower tax rate helps small businesses to retain more of their earnings for reinvestment and expansion.
In order to provide additional support to small business, this budget proposes that the amount of annual qualifying income eligible for the reduced 12-per-cent federal tax rate be increased from $200,000 to $300,000. This increase will be phased in over the next four years starting with a $25,000 increase in the limit for 2003. The limit will be further increased in $25,000 increments in each of 2004, 2005 and 2006. By 2006 all qualifying income up to $300,000 will be taxed at the 12-per-cent rate.
This measure will provide small businesses with up to $9,000 per year in additional after-tax earnings to help them grow.
Capital Gains Rollover for Small Business Investors
The small business capital gains rollover, introduced in the 2000 budget, allows investors, subject to certain limits, to defer the taxation of capital gains on investments in eligible small business shares if the proceeds of disposition are reinvested in other eligible small business shares. This measure plays an important role in promoting innovation and growth by making it easier for small businesses, especially start-up companies, to access the risk capital needed to expand and grow.
The current $2-million threshold on the original investment as well as the reinvestment that is eligible for the deferral limits the scope of the measure and its effectiveness. This budget removes both limits.
In addition, the measure will be enhanced to allow a reinvestment to be eligible when made at any time in the year of disposition or within 120 days after the end of the year.
Venture Capital and Qualified Limited Partnerships
Canadian pension funds are a potentially significant source of venture capital—capital that is critical to the emergence and growth of small businesses, particularly in higher-risk, innovative sectors of the economy. However, an interest in a limited partnership—the preferred investment vehicle of the venture capital industry—is generally treated as foreign property under the Income Tax Act 30-per-cent limit on the foreign property holdings of deferred income plans. This can offset the attractiveness of limited partnerships for pension funds.
Units in a qualified limited partnership (QLP) are generally not treated as foreign property. Because of this, they provide a vehicle for pension funds wishing to make venture capital investments through a partnership.
The income tax rules set out several conditions that must be met for qualification as a QLP. As a result of consultations with the venture capital industry, Budget 2001 removed the condition that no limited partner (or group of non-arm’s-length limited partners) in a QLP could hold more than 30 per cent of the partnership. This removed an investment impediment for pension funds to participate in venture capital investments. Since then other technical aspects of the QLP rules have been identified as restricting the ability of a typical Canadian venture capital fund to structure itself as a QLP. This budget proposes additional technical changes to the QLP rules to respond to these concerns by removing impediments in the eligibility criteria for a QLP.
Automobile Benefit and Expense Provisions
Small businesses and their employees often express concerns about the cost and complexity associated with the income tax treatment of automobile benefits for employees and automobile expenses for employers.
This budget proposes changes to improve these automobile benefit and expense provisions. It recommends the reduction of the standby charge for individuals who use employer-provided vehicles primarily for business, and the exclusion of certain pickup trucks used at remote or semi-remote work sites from the standby charge, operating expense benefit and automobile expense provisions.
Strengthening the Canadian Tax Advantage
A competitive tax system is necessary to attract investment to Canada. The Government’s five-year $100-billion tax reduction plan established a tax advantage for investment in Canada as a fundamental component of a strategy to foster a strong and productive economy.
The plan is lowering the general rate of corporate income tax from 28 per cent in 2000 to 21 per cent in 2004. With the cuts implemented to date, the average (federal and provincial) corporate tax rate in Canada is now below the average U.S. rate. Moreover, with the reduction in the capital gains inclusion rate to one-half under the tax reduction plan, the average top capital gains tax rate is now lower in Canada than the typical top tax rate in the U.S.
This budget builds on the Canadian tax advantage for investment. It proposes the elimination of the federal capital tax over a period of five years, completely eliminating the tax for medium-sized corporations as early as 2004. It proposes to extend to the resource sector, over a period of five years, the reduction in the corporate income tax rate from 28 to 21 per cent, while improving the tax structure. It extends the temporary mineral exploration tax credit for investment in flow-through shares. It also enhances the Film or Video Production Services Tax Credit.
Going forward, the Government will review other aspects of the tax structure in order to improve the efficiency of the tax system and to strengthen the Canadian tax advantage. In this regard, it will continue to assess, in particular, the appropriateness of capital cost allowance rates that, as a general principle, should reflect the useful life of assets and thus provide adequate recognition of capital costs.
Federal Capital Tax
Both the federal and provincial governments in Canada levy taxes on the capital of corporations. Unlike income taxes, which are paid when a corporation has taxable income, capital taxes must be paid regardless of whether a corporation is profitable. In this manner, capital taxes add directly to the cost of doing business.
Capital taxes influence the decisions of both foreign and domestic investors to invest in Canada. Capital used outside of Canada is not subject to federal and provincial capital taxes. Because capital taxes are not profit-sensitive, they increase risk for investors. Because they also have to be paid in the early years of an investment before a project generates profits, they add to up-front financing costs. In short, by reducing the rates of return on investment, capital taxes are a significant impediment to investment and therefore to the creation of jobs in Canada.
The federal government levies two taxes on the capital of corporations: the federal capital tax, and the special capital tax on large financial institutions. The federal capital tax is levied on all corporations with more than $10 million of capital used in Canada; it is reduced by the income surtax paid by the corporation. The special capital tax on large financial institutions is levied on banks, trust companies and life insurance companies.
This budget proposes to eliminate the federal capital tax, as follows:
- First, the capital threshold at which the tax applies will be raised, from $10 million to $50 million effective 2004. As of 2004 medium-sized businesses under the $50-million threshold will no longer have to pay the tax.
- Second, the rate of the tax will be reduced in stages over a period of five years so that by 2008, the tax will be completely eliminated.
No changes are proposed to the special capital tax on large financial institutions. This tax ensures that all large financial institutions pay a minimum amount of tax to the federal government each year.
The elimination of the capital tax over five years will be fully legislated in order to provide businesses and investors with the certainty needed to factor the tax reduction into their business decisions. In this manner, the phase-out of the tax will begin immediately to stimulate investment in new plants, new technology and the renewal of Canada’s capital stock, thus making a significant contribution to a productive, sustainable and growing economy.
The elimination of the federal capital tax will strengthen the Canadian tax advantage. When the federal capital tax is eliminated in 2008, the average federal/provincial corporate tax rate in Canada will be 6.6 percentage points lower than in the U.S. This comparison is unaffected by the recent tax changes proposed by the U.S. administration.
Improving the Income Taxation of the Resource Sector
The reduction in the general corporate income tax rate from 28 to 21 per cent that was legislated in the Five-Year Tax Reduction Plan applied to the most highly taxed sectors, including services. The reduction did not apply to manufacturing and processing income, which was already taxed at the 21-per-cent rate, or to resource income as the resource sector benefits from a number of sector-specific tax measures.
In the October 2000 Economic Statement and Budget Update, the Government indicated its interest in consulting on options to extend the lower corporate income tax rate of 21 per cent to resource income, while at the same time improving the tax structure. The Department of Finance consulted a large cross-section of the industry.
On this basis, the Government proposes to improve the taxation of resource income by phasing in, over a period of five years:
- a reduction of the federal statutory corporate income tax rate on income from resource activities from 28 to 21 per cent;
- a deduction for actual provincial and other Crown royalties and mining taxes paid and the elimination of the existing 25-per-cent resource allowance; and
- a new tax credit for qualifying mineral exploration expenditures.
Transitional arrangements will be proposed, in particular relating to the Alberta Royalty Tax Credit.
The proposed changes to the tax structure for the resource sector will improve the international competitiveness of the Canadian resource sector, in particular relative to the United States. By establishing a common statutory rate of corporate income tax for all sectors and by treating costs more consistently, both across resource projects and between the resource sector and other sectors of the economy, the changes will promote the efficient development of Canada’s resource base. The proposed framework will be simpler, streamlining tax compliance and administration and sending clearer signals to investors. Overall, the proposed changes will support productivity, economic growth, and jobs for Canadians.
The Department will review these changes to the tax structure for the resource sector with industry, provinces and interested parties prior to the finalization and tabling of the implementing legislation. A technical paper to be released by the Department of Finance shortly following the budget will set out the proposed changes in greater detail.
This budget also extends the existing temporary mineral exploration tax credit provided to individuals who purchase eligible flow-through shares until December 31, 2004, and provides an additional year, to the end of 2005, for issuing corporations to make expenditures related to these flow-through share arrangements.
Film or Video Production Services Tax Credit
The Film or Video Production Services Tax Credit (FVPSTC) was introduced in 1997 following consultations with all sectors of the film industry to encourage the production in Canada of foreign films and videos. The FVPSTC is a refundable tax credit of 11 per cent of the cost of Canadian labour engaged in foreign films and videos produced in Canada. The FVPSTC, together with tax measures introduced by some provinces, has supported the development of Canadian talent and infrastructure that have made Canada a world-class location for film and video productions. Following extensive discussions with the industry, this budget proposes to build on this support by increasing the rate of the FVPSTC from 11 to 16 per cent.
Canadian film or video productions benefit from a refundable investment tax credit of 25 per cent of labour costs under the Canadian Film or Video Production Tax Credit (CFVPTC). In keeping with the plans announced in Budget 2000, the Government has been consulting with the Canadian film industry to develop criteria for a streamlined mechanism for delivering the CFVPTC. These consultations will continue with a view to ensuring that the structure and operation of the CFVPTC are appropriate to achieve intended support for Canadian film and video productions.
Improving the Tax System
|(millions of dollars)|
|Encouraging savings by Canadians|
|Increase RPP/RRSP limits||25||105||165|
|Promoting enterpreneurship and small business|
|Small business deduction increase to $300,000||60||110|
|Capital gains rollover for small business investors||10||10|
|Venture capital and qualified limited partnerships|
|Automobile benefit and expense provisions||20||20|
|Strengthening the Canadian tax advantage|
|Federal capital tax||60||395|
|Improving the income taxation of the resource sector||10||55||100|
|Extension of mineral exploration tax credit||25|
|Film or Video Production Services Tax Credit||25||25|
Advancing Sustainable Development
By encouraging responsible management of the environment and natural resources, Budget 2003 supports sustainable economic growth. It builds on the Government’s step-by-step approach to addressing climate change by investing in new measures that will be implemented in collaboration with other partners. It takes important steps to improve the quality of Canada’s air and water; makes targeted investments to deal with contaminated sites on federal land, toxic substances management and species at risk; and supports action to meet Canada’s commitments made at the World Summit on Sustainable Development. This budget also greatly increases Canada’s wilderness and natural areas through the creation of new parks and marine conservation areas.
Overall, Budget 2003 invests $3 billion in support of climate change and the environment. This is on top of $2.3 billion the Government has invested in these areas since 1997.
Taking action to reduce greenhouse gas emissions will help to address climate change globally while bringing a number of benefits to Canadians where they live and work—benefits such as cleaner air, better health and more liveable cities.
Following consultations with provinces, territories, municipal governments, industries, non-governmental organizations and Canadians, the federal government released the Climate Change Plan for Canada, which outlines key areas of action to address climate change. This plan will continue to evolve based on discussions with all partners and will be implemented in a fiscally prudent, step-by-step manner.
Since 1997 the Government has announced almost $1.7 billion in climate change investments. Building on these measures, this budget provides additional funding of $2 billion over five years to support climate science, environmental technology and cost-effective climate change measures and partnerships in areas such as renewable energy, energy efficiency, sustainable transportation and new alternative fuels.
Recent Federal Initiatives in Support of Climate Change
Since 1997 the Government has announced $1.7 billion in spending for measures to address climate change. These measures include:
Other federal initiatives already in place include special tax provisions for renewable energy projects and the federal government’s green power procurement commitment, which currently provides a premium payment for renewable energy purchased to meet federal government requirements.
These measures will help Canada seize the economic opportunities offered by our environmental challenges and support a more productive and innovative Canadian economy. New funding for strategic and municipal infrastructure will also support the Government’s objective to reduce greenhouse gas emissions in Canada (initiatives providing $3 billion in new federal funding for infrastructure are detailed in Chapter 4).
Sustainable Development Technology Canada
Environmental technologies are essential ingredients in a sustainable and productive economy. Canadian environmental technologies offer the potential to reduce greenhouse gases and other harmful air emissions while generating significant economic benefits.
Sustainable Development Technology Canada received an initial endowment of $100 million in 2001 and has been effective in generating partnerships, through alliances and consortia, to develop and demonstrate technologies with the potential to reduce emissions. This budget strengthens the Government’s support for the development and demonstration of technology related to climate change and clean air by investing an additional $250 million in 2003–04 in the Foundation.
Canadian Foundation for Climate and Atmospheric Sciences
Improving further our understanding of climate systems and the occurrence of extreme weather is an important foundation for developing an appropriate response to environmental challenges such as climate change.
The Canadian Foundation for Climate and Atmospheric Sciences received an initial endowment of $60 million in 2001 to further enhance Canada’s research expertise in the area of climate sciences. Given the Foundation’s success in building partnerships among researchers and universities, this budget provides an additional $50 million in 2003–04 to increase climate and atmospheric research activities, including research related to northern Canada.
Other Climate Change Measures
To support the implementation of the Climate Change Plan for Canada, Budget 2003 will allocate $1.7 billion over five years to support innovation and cost-effective measures leading to greenhouse gas emission reductions in Canada. Actions to promote energy efficiency, renewable energy, sustainable transportation and new alternative fuels, in such areas as building retrofits, wind power, fuel cells and ethanol, will be considered. At least $200 million of the $1.7 billion set aside for other measures will be dedicated to further investments in longer-term climate change technologies. The funding allocation will also be used, in part, to build partnerships to achieve cost-effective greenhouse gas emission reductions through project-based collaboration and cost-sharing with provinces and other partners. To the extent possible, measures should incorporate funding from other partners and bring additional environmental benefits. Further, all measures will need to demonstrate the extent to which they each contribute to Canada’s emission reduction objectives.
To meet Canada’s emission reduction objectives in the most cost-effective manner, the Government will draw on external expert advice regarding climate change initiatives. The Government will continuously monitor and measure the effectiveness of all actions against its objectives.
To reflect the increased strategic importance of climate change to the country, government programs, particularly those in the Industry Portfolio, such as Technology Partnerships Canada, the granting councils and the regional development agencies, will be asked to report on how their contribution to Canada’s climate change objectives can be improved within existing resource levels.
Excise Tax Exemption for Bio-Diesel Fuel
Currently the federal excise tax is not applied to the ethanol or methanol component of blended gasoline when it has been produced from biomass or renewable feedstocks. This budget proposes that the ethanol or methanol portion of blended diesel fuel also be exempted from the federal excise tax on diesel fuel.
In addition, it proposes that bio-diesel, which is produced from biomass or renewable feedstocks, be exempted from the federal excise tax on diesel fuel when used as a motive fuel or blended with regular diesel fuel.
Extending Tax Incentives for Renewable and Alternative Energy
In 2001 the Government announced consultations with industry to identify additional improvements to capital cost allowance Class 43.1, which provides accelerated tax depreciation for certain renewable and alternative energy investments. Based on these consultations, this budget broadens eligibility for Class 43.1 to include certain stationary fuel cell systems, equipment acquired for electricity generation using bio-oil (created from biomass found in forestry and plant residues), and certain types of equipment used in greenhouse operations, such as ground source heat pumps.
The Government will continue to review the list of eligible investments under Class 43.1 to ensure appropriate tax treatment for renewable energy and energy conservation investments.
To further improve our stewardship of the environment and contribute to the sustainable development of our economy, this budget will invest an additional $1 billion to address federal contaminated sites, improve air and water quality, support the assessment and management of toxic substances, further protect Canada’s species at risk and their critical habitat, support the World Summit on Sustainable Development Plan of Implementation, and establish and maintain parks and conservation areas.
Federal contaminated sites are an unfortunate legacy of past practices, with unanticipated environmental consequences and contamination inherited from others, such as abandoned mines in northern Canada. Current legislation and policies strive to prevent the creation of new contamination from federal sources and obtain financial security for mining projects to cover the costs of any eventual clean-up.
In order to address existing contamination, the Government will commit funding of $175 million over two years. This will establish a centrally managed fund making ongoing resources available to address the highest-risk federal sites.
The Government is committed to further supporting the clean-up of the Sydney tar ponds. The Joint Action Group, created by the federal, provincial and municipal governments to make recommendations following public consultation on Sydney tar ponds remediation options, is expected to complete its final report this spring. The Government will then work with provincial and municipal partners on ways to provide support for remediation activities that are consistent with federal responsibilities and policies on shared-liability contaminated sites.
As part of the Government’s commitment to improving air quality in Canada, the budget provides $40 million over two years to promote best practices and develop regulations to address air pollution in a number of sectors across Canada, and to work with the United States to further improve transborder air quality. This will include pilot projects in key affected areas, such as the British Columbia Georgia Basin/Washington Puget Sound Basin and Canada/United States Great Lakes Basin airsheds.
Safe Water Systems
In the Speech from the Throne the Government committed to ensuring the implementation of water quality guidelines in areas of federal jurisdiction. A comprehensive review of water and wastewater systems on First Nations reserves has identified the areas most in need of action to protect the health of these communities. This budget provides $600 million over the next five years, including an initial investment of $200 million in the next two years, to upgrade, maintain and monitor water and wastewater systems on reserves, and the Government will make ongoing efforts to ensure that all reserve communities have dependable water systems.
Canadian Environmental Protection Act
An appropriate regime for pollution prevention and addressing the legacy of unassessed chemicals in the Canadian marketplace is necessary to ensure the health of Canada’s environment and its citizens. The Government will continue its support of programs under the Canadian Environmental Protection Act intended to deal with toxic substances. This budget will allocate $75 million over the next two years to address the legacy of these substances.
Species at Risk
The Species at Risk Act fulfills a government commitment to protect Canada’s species at risk and their critical habitat. The budget provides $33 million over two years for the implementation of the Act. This is in addition to the $45 million allocated annually in 2000 for a national strategy on species at risk.
World Summit on Sustainable Development
Following Canada’s participation at the World Summit on Sustainable Development (WSSD), which was held in Johannesburg, South Africa, in September 2002, the Government will provide $4 million in funding this year and $13 million over the next two years for the WSSD Plan of Implementation, for activities in areas such as international health and environmental initiatives, and international partnerships addressing forestry and sustainable cities.
Investing in National Parks
Canada owes it to Canadians and to the world to be a wise steward of its natural beauty. Canada’s system of national park and national marine conservation areas protects these valuable natural assets for the enjoyment of current and future generations. But this system is incomplete. As announced in the Speech from the Throne, the Government will establish 10 new parks and 5 new marine conservation areas, and implement a plan to restore the ecological health of existing parks. In the first two years this will require an investment of $74 million.
Advancing Sustainable Development
|(millions of dollars)|
|Sustainable Development Technology Canada||250|
|Canadian Foundation for Climate and Atmospheric Sciences||50|
|Other climate change measures||200||200|
|Excise tax exemption for bio-diesel fuels|
|Extending tax incentives for renewable and alternative energy||5||5|
|Federal contaminated sites||75||100|
|Safe water systems||100||100|
|Canadian Environmental Protection Act||32||43|
|Species at risk||13||20|
|World Summit on Sustainable Development||4.2||6.8||6.3|
Renewing Canadian Agriculture
A New Direction
The challenges faced by Canadian farmers have become greater and more varied in recent years. In addition to difficult growing conditions, Canadian farmers must now deal with increased international competition, rising demands for food safety and quality, and lower prices in part due to international subsidies.
To address these challenges, Canada’s agriculture ministers launched a joint federal/provincial/territorial initiative on reforming agricultural policy. In June 2002 the federal government announced a $5.2-billion, six-year commitment to a new Agricultural Policy Framework (APF) and a bridge funding arrangement.
The APF sets a new direction for federal agricultural policy, with the objective of increasing the long-term profitability of farming and giving farmers the skills and tools they need to face future challenges. It is a comprehensive strategy aimed at branding Canadian food products, improving food safety, promoting environmentally safe farming practices and fostering scientific innovation in the sector. In addition, it renews and improves stabilization programming and provides, for the first time, ongoing support for disaster mitigation.
Beyond the funds committed to the APF, Budget 2003 provides additional funding for crop insurance, food safety and innovation.
Dealing With Harsh Growing Conditions
On the Prairies in particular, last year’s growing season was one of the harshest in memory. Farmers suffered through drought; at harvest they had to contend with rain and untimely snow. As a result, the Crop Reinsurance Fund, funded by the federal government, as well as governments and farmers in participating provinces, faced significant shortfalls. To ensure that farmers can rely on future payments, this budget will advance the $220 million necessary this fiscal year to cover a deficit in the Fund.
Enhancing Food Safety and Quality
In the past few years there has been increasing public concern over the issue of food safety. Canadians want to be sure that the food they eat is safe. Consumers of food imported from Canada want the same assurances. Recognizing this, the Speech from the Throne committed the Government to further improve the safety of Canada’s food supply. Budget 2003 acts on this commitment by allocating $100 million to the Canadian Food Inspection Agency over the next two years to help the agency perform its central role in ensuring food safety.
The Canadian Grain Commission (CGC) plays a key role in establishing grain standards and ensuring Canadian grain quality and safety. To allow the CGC to maintain its level of service to farmers, the federal government will extend additional funding of $15 million per year over the next two years.
Understanding the important role that veterinarians play in ensuring a safe food supply, the Government will also make a one-time investment of $113 million for infrastructure improvements at Canada’s four veterinary colleges, representing 60 per cent of the total cost of these improvements.
Investing in Innovation
As the sector becomes more diversified, farmers and businesses will require new ways of raising funds to bring new products, processes and services to market. To support the industry’s growth and diversification, as outlined in its corporate plan, Farm Credit Canada (FCC) will launch new venture capital initiatives in March 2003 to promote agriculture and agri-food innovation. With its national mandate, the FCC is well positioned to respond to changing investment demands across Canada. The federal government will provide funding of $20 million over the next two years to supplement the FCC’s planned agriculture and agri-food venture capital investments.
Renewing Canadian Agriculture
|(millions of dollars)|
|Crop Reinsurance Fund||220|
|Enhancing food safety||50||50|
|Farm Credit Canada (non-budgetary)||10||10|
|Canadian Grain Commission||15||15|
|(millions of dollars)|
|Strengthening research and innovation||677||558.2||470.2|
|Supporting skills and learning||12||170.6||102|
|Improving the tax system||35||335||850|
|Advancing sustainable development||4.2||779||541.5|
|Renewing Canadian agriculture||333||75||75|