Beyond The Commons

Aaron Wherry covers all the goings-on in and around Parliament Hill. Follow Aaron on Twitter: @aaronwherry

Categories: Beyond The Commons, Capital Read

Policy alert

by Aaron Wherry on Wednesday, March 30, 2011 4:34pm - 11 Comments

Stephen Harper continues to review measures set out in last week’s budget: yesterday an EI credit for small businesses, today an extension of the capital cost allowance.

If re-elected, the Tories would offer a two-year extension of the capital cost allowance, which is currently set to expire at the end of the year.
The program allows businesses to accelerate the timing of their capital cost deductions by 50%, deferring taxation and improving financial return on investments in new equipment and machinery.

Tags: Budget, capital cost allowance, EI, election, Election 2011, employment insurance, Stephen Harper, tax, taxation, taxes

More by Aaron Wherry

John D

Man, if there's one thing that excites voters, it's accelerating the timing capital cost deductions.

Mark

Yeah, there's nothing worse than policy that doesn't whip one special interest group into a frenzy.

Jim

Policies aimed at encouraging investment and employment may not be sexy for everyone, but there is a fairly large audience really paying close attention.

OriginalEmily1

Not on the campaign trail there isn't.

Thwim

Doesn't the CCA mean while they can reduce more taxes now, they'll have to pay more later? I'm not sure on how this one works at all. Some explanation would be appreciated.

John_Edgar

Well, for a start they should be calling it accelerated capital cost allowance.

The capital cost allowance is the deduction for tax purposes that a business is allowed which reflects the decline in value of a capital asset (i.e. the depreciation in value) like plant or machinery, or vehicles, or computer equipment. The intent of CCAs is to allow deductions from taxable income that reflects the declining value of capital assets over their lifetimes.

The accelerated capital cost allowance treatment (which I don't know a great deal about) allows companies to claim these deductions earlier as an incentive to buy more capital equipment.

As a simple example imagine the company buys a capital asset worth $1,000. The regular CCA might allow the company to write it off over 3 years so they would get a deduction from their taxable income of $333 each year for three years. The accelerated CCA program might allow the company to get the full $1,000 deduction in the first year (and none thereafter). All numbers are completely invented by the way …

[edited because I'm knackered and the explanation was kind of ... bad]

Thwim

Okay. That makes sense. So companies really aren't getting any more money from this. It's just front loading what they get so that they have higher tax burdens later.

Not a bad idea for when were in a recession and trying to come out. Not so hot an idea once recovery is underway.

Mike T.

Is it for all classes of CCA?
Crit_Reasoning

The CCA extension is perfect for Canadian manufacturers who want to take advantage of the current exchange rate (or at least mitigate the damage) by purchasing new equipment and machinery from the United States, thus improving productivity.
Stewart_Smith

I agree. (hopefully the Liberals steal it)
http://arsenisms.blogspot.com/ Fat Arse

The CPC is still abusing the taxpayer & getting free ad time for its budget (aka platform) on Government of Canada websites: http://www.budget.gc.ca/2011/home-accueil-eng.htm…