A FUTURE OF JOBS AND GROWTH
Mr. Speaker, the past year has seen some significant announcements of major projects that will have far reaching and long lasting impacts on our economy. The White Rose offshore development is proceeding, with the Marystown shipyard playing a substantial role. The Voisey�s Bay agreement will see a new world class mine in Labrador and a nickle refinery in Argentia utilizing the latest leading edge technology. And we are optimistic the successes this government has had in reaching agreements for White Rose and Voisey�s Bay bodes well for our ongoing negotiations for Lower Churchill hydro development. This continues to be a priority for this government, and one we believe should become a reality in the not too distant future.
As important as these projects are to our future, of no less importance is creating a business climate in this Province that will see continued economic growth and diversification in all regions, particularly rural areas. Employment reached record levels in 2002 and is expected to reach new highs again this year. Most of our employment growth is not because of major projects. Small business is creating 80 percent of all new jobs, and most of those new jobs are being created outside the greater St. John�s area.
Renewal Strategy for Jobs and Growth
Our economic plan, the Renewal Strategy for Jobs and Growth, is ensuring that the business community of this Province, but particularly small business, can take advantage of the broad range of opportunities that exist throughout all sectors of our economy. Our focus is creating the right climate for growth and to give the business community the tools they need to prosper wherever they operate in the Province, but especially in rural areas. The robust economic performance the Province is enjoying is in large part due to the success of our Renewal Strategy. We are pleased to be building on that momentum in this budget through a number of new measures aimed at creating an even more attractive economic climate for investment, innovation and job growth.
Payroll Tax Relief
In recent years, we have taken major steps to ease the payroll tax burden on small businesses. We are giving a commitment to further reductions and to eliminate the tax for all small businesses by the end of the next mandate, as our fiscal situation permits. For 2003, we are announcing payroll tax relief that will remove employers with annual payroll of up to $600,000 from the tax rolls, and reduce the payroll tax liability for employers with payroll between $600,000 and $700,000. This will remove an additional 160 employers from the tax roll, a total of 2,200 since 1998. An additional 120 employers will benefit from a tax reduction. Since 1998, we have put over $9 million back into the hands of employers through payroll tax reductions.
Small Business Corporate Income Tax Threshold
Small businesses presently enjoy a lower rate of corporate income tax than generally applies to the private sector. Eligibility for this low rate is determined by the level of taxable income of a corporation. The present threshold of income, above which a corporation will pay tax at the much higher general rate, is set at $200,000. This threshold will be increased by 50 percent to $300,000 over four years in annual increments of $25,000, starting with the 2003 taxation year. In taking this action, the Province has decided to mirror a similar increase in the federal threshold recently announced.
Corporate Income Tax Holiday for New Small Businesses
In addition to the threshold increase, a corporate income tax holiday will be provided for new small businesses that start-up during the next three years operating in designated growth sectors of the economy. Eligibility criteria will be the same as those currently in place for the Venture Capital (Direct Equity) Tax Credit Program. For eligible businesses located in the Northeast Avalon region a three year tax holiday will be provided and those located outside the Northeast Avalon will receive a five year tax holiday.
Venture Capital (Direct Equity) Tax Credit Program
The Venture Capital (Direct Equity) Tax Credit Program will also be enhanced. Presently, only individual investors are eligible for tax credits under the program. Eligibility is now being extended to arms length corporations. This will open up new sources of capital for existing businesses looking to expand and for entrepreneurs looking to start up a new venture.
New Provincially Based Venture Capital Corporation
Government will issue a public call for proposals within 60 days for the establishment of a provincially based, labour sponsored venture capital corporation by offering a provincial tax credit as an incentive to set up such a fund in the province. Flexibility will be provided in the call for proposals to allow for alternatives to a labour sponsored venture capital fund, including the possibility of support to a regionally or nationally based venture capital fund, if structured in a manner that meets provincial objectives.
Corporate Income Tax Holiday for Venture Capital Corporations
We will adopt additional measures to encourage new investment in private sector venture capital corporations to help local companies expand and create new jobs. Starting in 2003, any existing or new venture capital corporation in the Province whose objective is to invest in growth oriented economic sectors designated by government will be eligible for a ten year corporate income tax holiday. If the business objectives of the venture capital corporation also focus predominately on rural areas, an additional five year holiday will be provided, bringing their full holiday to a total of fifteen years. The tax holiday does not apply to the venture capital corporations eligible for the tax credit.
New Red Tape Reduction Committee
A new Red Tape Reduction Committee, comprised of experienced and respected entrepreneurs, will be established in 2003. Its mandate will be to identify opportunities to reduce, streamline or eliminate the regulatory burden of government "red tape" which can unintentionally act as a barrier to new job creation and business growth, especially for small businesses. This effort will not compromise legitimate public policy imperatives, such as the protection of the environment or workplace health and safety.
New Research and Innovation Fund
As investment in research and innovation is critically important for our Province to remain competitive and to avail of new economic opportunities, we are establishing a new Research and Innovation Fund with an initial investment of $5 million. Its objective is to foster greater research and industrial innovation within our higher education institutions. The Fund will be targeted at high growth "clusters of excellence" in areas such as marine technology, pharmaceutical research, biotechnology, and the oil and gas industry.
Its goal will be to leverage significant new R&D investments from federal institutions, including the Canadian Foundation for Innovation, as well as the private sector to help close the innovation gap between the Province and the rest of Canada. New strategic partnerships between government, Memorial University, other provincial research institutions and the private sector will also be encouraged in this initiative. Our initial $5 million investment is expected to generate up to $25 million in new R&D spending in the Province.
New Business Attraction Agency
The attraction of new investment, new companies and new industries to the Province in strategic growth sectors of the economy is an important part of our Renewal Strategy for Jobs and Growth. Following consultations last year with the private sector, regional development organizations and municipalities to determine a province-wide approach to meeting this challenge, we will establish a new Business Attraction Agency early in the new fiscal year.
We are contributing $1.5 million annually for this initiative and will seek the financial participation of the private sector as well. This new initiative will build on the success achieved to date by NETWORK Newfoundland and Labrador, our joint venture with Aliant Telecom to attract new customer contact centres to the Province. The new agency will also assume responsibility for the recently announced Near Shore IT Development Initiative to which Aliant and the Province each committed $750,000 over three years.
Customer Contact Centre Incentives
The budget also includes $6.5 million in business incentives for customer contact centres we have already been successful in attracting to and have operating in the Province. These incentives were critical factors in the decision of these companies to locate here. This industry did not exist in our Province a mere five years ago, but today employs over 3,500 people, about one third of them outside the St. John�s region.
RuralEXPO 2003
RuralEXPO 2001 was a great success in showcasing and promoting the economic potential and entrepreneurial achievements in rural Newfoundland and Labrador. It built on a key objective of the Renewal Strategy for Jobs and Growth, strengthening confidence and encouraging positive attitudes about the Province as a means of moving the overall economy forward. This budget includes $350,000 to host RuralEXPO in the fall of 2003. Details will follow after consultations with rural and community stakeholders.
Strengthening Rural Development Associations
We intend to strengthen the capacity of Rural Development Associations (RDAs) to help advance the implementation of the strategic regional development plans that have been prepared by the 20 Regional Economic Development Boards (REDBs). A comprehensive review of the role Rural Development Associations play in the implementation of REDB strategic plans is nearing completion. We will seek to ensure the Associations have the necessary capacity to participate in the specific implementation roles carved out for them by each of the 20 REDBs.
Regional Economic Development
This budget provides $9 million to implement a wide range of industry initiatives and community projects that have been approved under the most recent cost-shared cooperation agreement with the federal government, the Canada-Newfoundland and Labrador Comprehensive Economic Development Agreement, known as CEDA. This agreement expires March 31 and to date there is no replacement.
Should the federal government decide not to partner with the Province in an extension to CEDA or the proposed Canada-Newfoundland and Labrador Economic Development Board, we will use $5.5 million provided in the budget to ensure that key strategic economic development initiatives implemented by Provincial departments and agencies through CEDA continue in the future.
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