Incentives Galore!

A recurring theme on this blog is the subject of using taxpayer dollars to lure industry either through tax breaks, grants or other investments. The commentary ranges from outrage to gung ho support. My own opinion, stated many times, is that they are a necessary evil. Other jursidictions pile on the cash, why should New Brunswick miss out on good economic development opportunities on some principle that very few jursidictions (if any) adhere to?

But I have to reiterate that my preference would be that all jurisdictions in North America would agree to scrap these tools.

I heard a long discussion on the CBC’s The Current this morning about the tax incentives used to attract film production to Canada. I don’t remember the figures but between the provincial and federal governments it is in the tens of millions each year. The industry indignantly claims that while we lose out on tens of millions, the net economic benefit is positive so we should continue to subsidize. The same argument is used for all the heavily subsidized industries in Canada – agriculture, automotive, aerospace, film and oilsands development (probably the largest recipient of incentives other than agriculture). The problem with this logic is that if every industry got involved and demanded their 30% or 40% tax breaks (or equivalent in grants, etc.), then governments would be hard pressed to raise the dough to pay for public services.

Now the argument is that the heavily subsidized industries are transient – that is, if you don’t give them the goodies, they will go to another country. And there is truth to this. But there are also industries that are locating places just because it is a great place to locate. Although good examples of that are slipping.

I guess ultimately my biggest beef is that all the big government gravy train industries -agriculture, automotive, aerospace, film and oilsands development – aren’t in New Brunswick. The province that needs development arguably more than any other – and all the big tax breaks don’t apply. In New Brunswick, we give a few grand to call centres, or a couple of hundred grand to a SME or two. For awhile we were doling out the cash for the fishery but I don’t how much of that goes on these days.

No, ultimately if you want the big bucks, you go to Quebec or Ontario (specific sectors of course), British Columbia if you want to do computer animation – there’s a lucrative package awaiting you there. If you want to set up aerospace, Quebec will open the vault and the oilsands, well the tax/royalty incentives put up by the provincial and federal governments were to stimulate development at $50/barrel oil – we are now at $100.

But tax breaks/grants are like anything else, I guess. Industry gets used to them. Prices them into their business model. Share prices adjust to reflect them if they are large enough. The guys making $100k+ working in the oilsands owe some of that cash to tax breaks, I guess.

In conclusion, I think New Brunswick needs to find its own gravy train industry. The feds have put over a billion into sustainable, green technologies through a specific fund – almost all in the Greater Toronto Area. The famed Technology Partnerships Canada has doled out over $6 billion – almost all in the Toronto to Quebec City corridor. The film development incentive programs are almost exclusively used in Quebec, Ontario and British Columbia. Agriculture incentives (including the biofuels $1 billion) are also heavily concentrated. We all know where the vast majority of government R&D spending goes.

We need a gravy train industry. One that soaks up government dough and tax breaks but is concentrated in New Brunswick.

Sounds weird, doesn’t it?

But am I wrong?

This entry was posted in Uncategorized. Bookmark the permalink.

0 Responses to Incentives Galore!

  1. Anonymous says:

    off-topic, but I thought you might be interested:

    UNdata: A World of Information

    The DESA Statistics Division has just launched a new internet-based data service for the global user community. It brings UN statistical databases within easy reach of users through a single entry point. Users can search and down load a variety of statistical resources of the UN system.

    “The UN-system has accumulated over the past 60 years an impressive amount of information. UNdata, developed by the Statistics Division of DESA, is a new powerful tool, which will bring this unique and authoritative set of data not only to the desks of decision makers and analysts, but also to journalists, to students and to all citizens of the world, ” says Sha Zukang, Under-Secretary-General for Economic and Social Affairs.

    Since its foundation, the United Nations system has been collecting statistical information from member states on a variety of topics. The information thus collected constitutes a considerable information asset of the organization. However, these statistical data are often stored in proprietary databases, each with unique dissemination and access policies. As a result, users are often unaware of the full array of statistical information that the UN system has in its data libraries. The current arrangement also means that users are required to move from one database to another to access different types of information.

    UNdata addresses this problem by pooling major UN databases and those of several international into one single internet environment. The innovative design allows a user to access a large number of UN databases either by browsing the data series or through a keyword search.

    The project has been developed in partnership with Statistics Sweden, the Gapminder Foundation and with partial financial support from the Swedish International Development Cooperation Agency.

  2. Anonymous says:

    You can’t be ‘wrong’ about such a position, its simply a political choice. However, even as a youngster we were often taught that the ‘but everybody else is doing it’ is pretty flimsy.

    However, the central point to be made is the assumption that New Brunswick doesn’t already do that. We know from industrial decisions-potash, bennett environmental, factory farms, nackawic, molson, bell canada, this latest bridge building thing, etc., that the the problem is NOT that NB is ‘not trying’.

    Perhaps they are ‘not trying hard enough’ and so only getting the lousy pickings, unlike Nova Scotia. That’s a disputable point.

    However, pick up the book ‘jobscam’ from the ‘’ publishers. This is a very good book on how corporations use economic development to whipsaw governments into the lowest bid.

    There are guys whose entire job it is is to lower those bids-often corporations already know where they are going but just use the process to get more incentives.

    With the canadian dollar at parity and with such low levels of R&D development, plus slave labour in central america and asia, well, lets just say the prospects are not looking rosy.

    But thats an important policy decision and one that I think should be made democratically through a referendum. On the opposite side of that spectrum is our friend nbtaxpayer who advocates low corporate taxes and getting rid of loopholes and incentives.

    I mentioned years ago (wouldn’t want anybody to think I’m riding NBT’s coattail) that an intersting policy decision would be ABOLISHING corporate tax altogether.

    Lots think that that is anathema, and I see their point. But hear me out. The feds WANT low corporate taxes. Currently, as readers of this blog know, corporations only contribute 3% of the budget anyway. That’s something like 200 million. IF the feds can be counted on to cover that for, say, two years, then that may be an interesting policy decision. Of course it would have to be tied to labour growth, otherwise there is no point, but its an interesting idea.

  3. Anonymous says:

    All the focus here has been on the large federal funding support for Ontario and Quebec’s gravy train industries.

    Don’t forget that entire federal departments were formed to support these sectors. Policy, legislation, trade agreements and taxation were developed to support them. Major federal research labs and testing facilities were developed. Export programs and offices were developed to support them. Universities were funded and so on.

    The point is, support for these gravy train industries is more than just handing over direct funding money. This is why the few crumbs that fall out of Ottawa and land in places like ACOA are not enough to make a difference; they are only enough for ON/PQ to label us as have-nots.

    We need, sustained, structured economic development support that encompasses more than just funding.

  4. David Campbell says:

    I posted this last year but I just got an email about it again. It is posted mainly for your amusement and NBT’s heartburn:

    Press release. / Communiqui
    {Message en francais ci-dessous)

    Canadian Subsidy directory (2008 EDITION)

    Legal Deposit-National Library of Canada

    The new Subsidy Directory 2008 is now available, newly revised it is the most complete and affordable reference for anyone looking for financing.
    It is the perfect tool for new and existing businesses, individuals, foundations and associations.

    This Publication contains more than 3200 direct and indirect financial subsidies, grants and loans offered by government departments and agencies, foundations, associations and organizations. In this edition all programs are well described.

    Canadian Subsidy Directory (All Canada, federal + provincial + foundations) CD-Rom (Pdf file)……………………….$ 69.95 Printed (430 pages)……………………..$149.95

    Also available for each province on CD-Rom only………..$ 49.95 Alberta British Columbia New Brunswick Newfoundland & Labrador Northwest Territories / Nunavut / Yukon Manitoba Nova Scotia Ontario Prince Edward Island Quebec ………………………..$ 69.95 Saskatchewan

    To obtain a copy please call toll free 1-866-322-3376 or local 819-322-5756

    Delete your email address at [email protected]

    Canadian Subsidy Directory
    14-A Des Seigneurs
    J0R 1R0


    Subventions Quibec (Annuaire des Subventions au Quibec 2008)

    Vous vous demandez s il existe un programme d aide financihre pour vos besoins personnels ou pour assister votre entreprise dans son itat actuel?

    Subventions Quibec vous offre un acchs unique ` tous les programmes d assistance financihre sous forme de subventions provenant des diffirents gouvernements et organismes du Canada. Subventions Quibec vous offre la liste de toutes les institutions gouvernementales qui participent aux nombreuses subventions destinies aux particuliers et aux entreprises du Canada.

    Subventions Quibec identifie, pour vous, sous son + Canadian Subsidy Directory ; quelques trois mille (3,000) programmes d aide disponible aux entreprises et aux particuliers itablis au Canada. Ces programmes vous sont offerts sous forme de bourses, de prjts et de subventions de toutes sortes

    Subventions Quibec identifie, en plus des trois mille (3,000) programmes identifiis dans le + Canadian Subsidy Directory ;, quelques mille huit cent (1,800) programmes d aide supplimentaires sous le couvert de + l Annuaire des Subventions au Quibec ;.

    Ce guide, destini aux particuliers ainsi qu aux entreprises ` la recherche de subventions et implanties au Quibec, dicrit les programmes d aide et subventions disponibles par le biais des diffirents paliers gouvernementaux et organismes.
    + L Annuaire des Subventions au Quibec ; est congu pour assister les
    particuliers et les entreprises dans leur recherche de financement, que ce soit sous forme de prjts, de bourses ou sous forme de subventions.

    Subventions Quibec offre de l information destinie aux particuliers pour
    leurs besoins personnels mais aussi aux entreprises de
    toutes tailles, de la sociiti ` propriitaire unique, la PME, l organisme `
    but non lucratif jusqu ` l entreprise multinationale.

    Subventions Quibec vous invite ` consulter ces deux (2) ouvrages pour
    dicouvrir plusieurs outils de financement disponibles
    sous formes diverses et accider aux subventions, aux bourses et aux prjts
    consentis par les autoritis compitentes en mesurant
    les conditions de votre situation personnelle ou celle de votre entreprise
    aux crithres d admissibiliti en vigueur.

    ASQ-2008 Cd-rom(format .pdf)………….$ 69.95
    ASQ-2008 Imprimi(Cd-inclus) ………….$ 149.95

    Informations…………………ligne sans frais 1-877-227-8551

    Subventions Quibec
    14-A Des Seigneurs
    J0R 1R0