Tax changes, rural investment should be in new budget: committee

The federal government should incorporate an industry suggestion to spur telecom investment by making changes to the tax system into the upcoming 2016 budget, according to the House of Commons standing committee on finance. In a report presented Friday, the committee added to that suggestion by recommending the money that results from those changes be used for rural broadband. It was among 56 recommendations made by the committee stemming from last month's pre-budget consultations, which featured four days of meetings where the committee heard from 92 invited witnesses and received 175 written submissions. The report said the government should consider changing three classes of capital cost allowance (CCA) rates to fund a rural broadband program that the committee suggested be created through cooperation between the government and "eligible telecommunication companies." Businesses can claim capital cost allowances for depreciable expenses. The committee recommended changing the rates of classes 8, 42 and 46, "which address communications networks equipment, including broadband networks." Currently, classes 42 and 46 have CCA rates of 30 per cent, while class 8 property has a 20 per cent CCA rate. The report did not specify to what the government should change the rates, but witnesses, including the Canadian Wireless Telecommunications Association (CWTA) and the Information Technology Association of Canada, recommended boosting the class 46 rate to 50 per cent. CWTA was pleased to see the recommendation included in the committee's report, Kurt Eby, the association's director of regulatory affairs and government relations, said in a phone interview Monday. Eby appeared before the committee on Feb. 17 during the consultation process and was asked during the meeting if the companies represented by the CWTA would be interested in a trade off — accelerated depreciation rates in exchange for more investment in rural areas. Eby said he didn't know "if it is the solution to a rural issue." The committee was told that changing the class 46 rate to 50 per cent could lead to annual increased investment of $225 million. But that's not a tax savings, Eby said Monday, noting "you're still writing off the same thing, it's just at a slightly accelerated pace." "That said, it will incent investment everywhere — in urban areas, where investment is always needed, and in rural areas, where investment is always needed," he said, adding that while not the entire solution to rural access issues, "it's definitely part of the solution." Independent telecom analyst Bill St. Arnaud was less optimistic about the suggestion, calling the committee's recommendation to create a rural broadband program "another boondoggle." "Another pouring of money into the telcos' pockets in the name of rural and broadband. It amazes me. We've had half a dozen rural broadband programs," St. Arnaud said in a phone interview. This includes the 2014 Connecting Canadians commitment of $305 million and the CRTC's directive for the use of $422 million in deferral funds to link underserved communities. He said previous programs haven’t been successful in solving the issue. "Very little gets done in rural and remote areas," St. Arnaud added. The capital cost allowance change would only be beneficial to incumbents, he said, because the smaller companies aren't profitable enough to take advantage of it. A means of creating competition would be a more effective way for the federal government to get underserved areas (not just rural ones) connected, he said. The committee's report also suggested the federal government implement a 700 MHz public safety broadband network pilot program in local communities "to build systems that would allow public safety users to test the applications and to identify the solutions that could be used to improve the efficiency and efficacy of emergency services." Increased funding should be provided for CBC/Radio-Canada, the Canada Council for the Arts, Telefilm Canada and the National Film Board, the report said. The Liberals promised to do so in last year’s election campaign. The 2016 federal budget, the first for this Liberal government, will be released March 22. — With reporting by Charelle Evelyn at cevelyn@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Tax changes, rural investment should be in new budget: committee

News | March 14, 2016

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Tax changes, rural investment should be in new budget: committee

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