Federal budget betrays hands off approach to Canada’s IT sector

There isn’t much in the recent Federal budget that Canadian IT professionals and companies can feel really excited about.

In part, this is due to finance minister Jim Flaherty’s decision to put $10 billion of the larger-than-expected surplus of $13 billion towards debt reduction.

That leaves room for sparse spending, and the technology industry has been doled out some nuggets.

For instance, new money for top-level research and to assist skilled immigrants in gaining entry to the country may help ease the IT skills shortage currently bemoaned by many companies and IT advocacy organizations.

But beyond that there’s really not much to write home about.

Tax breaks to stimulate the tech sector aren’t significant enough, according to the Ottawa-based Information Technology Association of Canada (ITAC).

ITAC’s mandate is to work for the growth and development of Canada’s information, communications and technology industry.

Overall, the Conservatives are displaying a hands-off approach when it comes to the IT sector.

How does the budget fare on issues industry insiders have identified as crucial – such as the need to address the shortage of skilled talent?

This is a longer term issue “that Canadian companies – not just government – need to deal with if they are going to be successful,” says Robert Courteau, president and managing director of enterprise software vendor SAP Canada Inc. in Toronto.

Admittedly the budget does offer something here.

It sets aside $22 million, over the next two years, to process skilled immigrants’ cases quicker, and thereby get more talent into the country.

Also, the $20 million earmarked to create 20 new industrial research chairs at the Ottawa-based Natural Sciences and Engineering Council of Canada (NSERC) includes a chair for ICT.

That money could help universities launch new ICT-related research projects, according to the NSERC Web site.

The chair holder will also focus on training highly skilled personnel.

Comparing Flaherty’s budget to British Columbia’s provincial budget announced recently by B.C. finance minister Carole Taylor is an interesting exercise.

From an environmental standpoint, the B.C. budget is far more progressive, with a clear focus on battling greenhouse gas emissions with some tax shifting and incentives.

The new carbon tax will funnel $1 billion to climate action programs and incentives.

This includes a tax exemption on Energy Star appliances, and a venture capital program aimed at green technology companies.

A program to promote energy efficient consumer products, the Energy Star program is well known for its logo appearing on many computer products and peripherals.

Bottomline: B.C. companies now have more reason to cut  emissions and energy usage.

In marked contrast, apart from a vague reference to a tax incentive for clean energy generation, there’s no real focus on energy-use reduction by business in the federal budget.

Instead, $300 million will be invested in carbon-free nuclear energy generation, and $250 million will go towards research on capturing carbon before it escapes into the atmosphere, and storing it away safely.

The budget did offer a few reforms to the Scientific Research and Experimental Development Program (SR&ED) that ITAC was calling for.

But those measures didn’t go as far as the industry representatives would have liked, according to an ITAC statement.

SR&ED is a federal tax incentive program to encourage Canadian businesses to conduct research.

ITAC wants full refunds on capital phase outs and income phase outs, and it says far more substantive reform is needed to keep high-value knowledge jobs in Canada.

The government did raise the spending limit for tax breaks on the SR&ED program from $2 million to $3 million.

The ceiling was raised on taxable capital phase-out range from $15 million to $50 million, and the income phase-out range from $600,000 to $700,000.

Still, not enough technology firms qualify for tax breaks, ITAC says. The rule changes will do little to change how many companies choose to invest their money.

Some observers suggest real transformation in tech industry can ultimately come from the industry itself.

The onus is on individual companies to make the necessary investments and compete, SAP Canada’s Courteau . No one can afford to wait for a boost from the government.


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