You might have read the eye-catching headlines last month, which said that left un-checked, tax reforms south of the border would put 635,000 Canadian jobs at risk and potentially reduce Canada’s GDP by $85 billion – 4.9 per cent of the economy.

The Pricewaterhouse Coopers report commissioned by the Business Council of Canada specified that the petrochemical sector will be particularly hard hit by these reforms and U.S. cuts pose a “serious risk” to petrochemical manufacturing in Canada. These are issues that have been on the Chemistry Industry Association of Canada (CIAC) radar for quite some time and we believe the government must take urgent action to prevent the Canadian chemistry sector’s competitiveness from eroding further.

Canada could be doing more

Canada’s chemistry industry is an important contributor to our nation’s economy. In 2017, some $52 billion-worth of chemicals were shipped in Canada. This sector is directly responsible for 87,300 highly-skilled and well-paid jobs, as well as supporting another 525,000 jobs.

However, we could be doing so much more. The American Chemistry Council (ACC) estimates that over $258 billion in new chemistry industry investments have been announced or are underway in the U.S., driven largely by the shale gas phenomenon.

In addition, more than 60 per cent of this new money represents direct foreign investment in North America, which has usually attracted only about 10 per cent of the total. Recently, however, this share has plummeted to two per cent. The potential exists to get back to our historical share, but urgent action is needed to ensure that Canada can compete with other jurisdictions for the next wave of industry attention.

In August, in advance of the 2019 federal budget, CIAC submitted its recommendations to ensure a robust investment climate for the chemistry industry, along with an accompanying Accelerated Capital Cost Allowance (ACCA) Report to The Standing Committee on Finance and Economic Affairs. These recommendations are critical to ensuring the Canadian chemistry industry can attract its fair share of investment in the years to come.

Level the taxation playing field to stay competitive

Enacted in 2017, the U.S. Tax Cuts and Jobs Act (TCJA) has lowered the marginal effective tax rate on capital investment in that country from approximately 35 per cent to 19 per cent. While Canada has historically enjoyed a marginal effective tax rate advantage to overcome construction, utility, labour and logistics disadvantages, the TCJA now offsets that advantage.

A key aspect of this new legislation is the 100 per cent immediate depreciation rate for capital equipment. In Canada, an ACCA for manufacturing was introduced in 2015 to encourage investment in machinery and equipment. The immediate depreciation of capital investments lowers the upfront capital costs needed to finance a project by allowing a firm to deduct those expenses from an existing revenue stream. This tax incentive aimed to level the playing field in terms of competitiveness with the U.S., and CIAC is calling on the government to do so again.

CIAC is advocating for the Federal Government to adopt a temporary 100 per cent ACCA to be applied to value-add resource manufacturing for a minimum period of seven years or a full business cycle. 

We also believe it is time for the government to modernize and simplify Canada’s tax code, including a re-examination of corporate taxation rates, so every sector and industry can compete in the 21st century global economy.

Addressing waste management and transportation

As we grow chemistry production in Canada, we must ensure that systems are in place to recover the value of waste plastics as potential feedstocks. Canada could be a global leader in the recycling and recovery of plastics by investing in chemical recycling technologies and other innovation. CIAC is calling on the government to invest in programs that will allow Canada to become a leader in the commercialization of technologies to recycle, recover or transform all plastics by 2040.

Canadian chemistry executives also point to rail service as a key factor in deciding whether to locate a new facility or expand operations in Canada, second only to feedstock availability. As we have seen in the past few years, work stoppages and delays on our railways have a huge impact on the stability of the chemistry sector. That is why we are recommending investment in the effective and safe transportation of goods through a renewed National Trade Corridor Initiative, which would include investments in rail and ports, as well as re-funding and expanding the Rail Safety Improvement Program to include education and resources around the transportation of dangerous goods.

Canada has many of the key ingredients for investment success in place: established and integrated clusters, a talented workforce, access to low-carbon, cost-advantaged feedstock, and proximity to key markets. We believe our key recommendations will address the most pressing competitiveness issues needed to promote the chemistry sector and to keep business – and jobs – within Canada.

To read more about CIAC’s work promoting strong fiscal policies for the chemistry industry in Canada, please visit

 Chemical Industry Association of Canada

Bob Masterson is President and CEO of the Chemistry Industry Association of Canada (CIAC), which supports leadership in Canada’s chemistry sector. The Association represents more than 50 members and partners across the country, all of them signatories to Responsible Care® – the Association’s UN-recognized sustainability initiative.

Photo Credit: Chemical Industry Association of Canada