CAPC Fiscal & Investment Subcommittee
Recent Activity Summary

November 2003

Auto Industry Competitiveness Study

• The Subcommittee reviewed the results of a study commissioned by Industry Canada and conducted by KPMG on "Competitiveness Analysis for North American Investments"
• The study analyzed jurisdictions in Ontario, Quebec, Northern US States & Southern US States (detailed analysis of Mexico was not part of study) and their respective competitive positions on attracting new automotive investment
• Key findings include:
• Canadian locations versus Southern US states show a cost advantage when Canadian dollar is below 75 US cents, but prior to any investment incentive packages
• Canadian plants are not cost competitive with Southern US States when incentives are included
• Canadian plants compare favourably to northern US States (strong Canadian dollar narrows that advantage significantly)
• Canadian plants rank very well in both productivity and product quality
• The Subcommittee noted that parity with Northern State US costs would not be adequate to attract investment into Canada
• There are a number of other factors impacting investment decisions that were not part of study
• The study reinforces fiscal & investment CAPC initiatives and the need for investment support in Canada
• The Subcommittee supported the conclusion, although noted it is a point in time study

Ontario Government Direction

• The Ontario Government will move to increase the manufactures and producers corporate tax rate from 11% to 12% (back to Sept 2001 levels). It is projected to maintain the revised tax rate into the future
• This change will need to go through the legislative process
• No Liberal party platform statements available on capital tax or alternative fuels incentives
• Liberal platform does commit to an auto sector investment fund and recognizes the importance of auto industry to the Ontario economy.
• The committee noted that an investment fund will be key to help offset some of the tax/incentive changes Ontario will introduce

Initiative Review

• The committee will now transition from a study stage to an action stage, with a prioritized set of action items and lead groups identified to be accountable for implementation of the action items (with support from full group)
• The Subcommittee reviewed its three main initiatives; Support for Investment, Support for Innovation & Technology and Infrastructure and prioritized the action items within each of those initiatives.
• The prioritized scorecard has consensus of the Subcommittee, with the top priority being: "Expand, better coordinate, improve flexibility and transparency of Automotive Investment Incentive programs"