CATA Alliance 2003 ADVOCACY PRIORITIES

February 07, 2003

Budget 2003-4

David Paterson, National Director, Public Affairs, appeared before the House of Commons Standing Committee on Finance on October 24 to present our brief (See the Advocacy section of www.cata.ca) on the 2003-4 budget. CATAAlliance recommends: elimination of corporate capital taxes; revision of the SR&ED program to make public companies eligible for tax credits whether they are profitable or not; increased funding for post-secondary education; increased funding for broadband Internet access; and regulatory reform focused on high priority issues identified by industry.

The Committee's report, "Canada: People, Places and Priorities", includes our first two recommendations, and much of the third.

R&D PROGRAMS

• CATAAlliance has launched a major campaign to seek improvements to the SR&ED Tax Credit Program. It now provides refunds to medium and large companies, public or private, only if they are profitable. They cease to act as an incentive when companies need them most, when budgets are tight. As well, SR&ED does not provide any incentive to foreign-owned companies to invest in research in Canada, because tax treaties wipe out the credits. CATAAlliance is urging the Department of Finance to revisit the SR&ED Program, to ensure that it provides its vital incentive to R&D in all circumstances.
• CATA continues to lead a group of associations working with the Canadian Customs and Revenue Agency to improve the fairness and efficiency of the SR&ED program. For details on progress and helpful information on claiming SR&ED credits, see the SR&ED page of the Website.

Privacy

In 2000 the federal government passed the Personal Information Protection and Electronic Documents Act, PIPEDA, which establishes the rules for the protection of personal information by federally regulated organizations. On January 1, 2004, it will apply to organizations under provincial jurisdiction unless the province enacts "substantially similar" legislation for the private sector. With the exception of Quebec, which already has privacy legislation which meets the "substantially similar" test, all the provinces and territories will have to pass privacy legislation in 2003. Every Canadian business will have to comply with these new rules.

This legislative flood raises serious risks for Canadian businesses. The first is that they may find themselves faced with fourteen different standards for the protection of privacy, one federal, ten provincial and three territorial. In the age of the Internet, of e-commerce, the costs of compliance could be a major problem, especially for small business. The second risk is that some provinces may adopt rules which make it very difficult to do business.

Ontario

Ontario held consultations on the "Draft Privacy of Personal Information Act, 2002" last spring. (www.cbs.gov.on.ca) CATAAlliance responded that the draft PPIA: should favour implied, not express consent; separate custody from control of data; and simplify the merger and acquisition provisions. We also urge that the act be harmonized with those of Ottawa and the other provinces, to reduce the difficulty and cost of compliance.

The legislation has still not been introduced. Reports indicate it is a complex, 120 page document, on which the Ontario cabinet cannot agree.

Alberta

CATAAlliance joined in Alberta's privacy consultations, recommending uniformity with other provinces, implied consent and simplicity.

British Columbia

CATAAlliance joined in B.C.'s privacy consultations, recommending uniformity with other provinces, implied consent and simplicity.

Alberta and B.C. worked together in the development of their legislation. It is reported that their acts will almost identical. CATA will urge other provinces to adopt this model.

Secure Borders

CATAAlliance is a member of the Coalition for Secure and Trade-Efficient Borders, which was formed to help the federal government successfully deal with post-Sept. 11 border and security issues. At CATAAlliance's urging, the Coalition's Dec. 3 report to the government, Rethinking Our Borders: a Plan for Action, contained a section entitled, "The federal government must meet the information technology challenge", which pointed out that the government would need to commit serious management and financial resources to upgrade its systems to meet the new security needs.

Substantial progress has been made on the secure borders agenda as the U.S. and Canadian governments have worked together with industry to solve the problems identified by both countries. On the IT issue, Perrin Beatty, the Chair of the Coalition, has recently written to Deputy Prime Minister John Manley, recommending the adoption of four "Principles for an IT Framework to Enable a Secure and Trade Efficient Border". Details can be found on the Coalitions' Web site, www.cme-mec.ca/coalition.

Software Export Threat

A serious threat to Canadian software exports has emerged as negotiations to improve the General Agreement on Trade in Services resume. The problem is a proposal that goods which can be delivered electronically, like software, books and music, be classified as services, not goods. Software is now classified as a good, subject to the General Agreement on Tariffs and Trade, and enjoys essentially free trade on a global basis. If it becomes a service subject to GATS, governments will be able to create all sorts of barriers to Canadian exports, because the GATS rules are not nearly as tight as those of the GATT.

This subject has come to the fore as Foreign Affairs and International Trade drafts Canada's position for upcoming GATS meetings. Heritage Canada favours classification of these goods as services, as part of its "protect culture" strategy. CATA is part of a group which has written to Minister of Trade Pierre Pettigrew and Industry Minister Allan Rock, urging Canada to assume a global leadership position in promoting strong market access for the ICT sector, and to establish a proactive market access agenda for the sector. The software issue receives special attention in the letter. A copy of the letter, and of a CATAAlliance paper, "The Canadian Software Industry - A Trade Perspective" , is posted on our Web site.

Regulatory Reform

CATA has launched an advocacy campaign aimed at reforming the regulatory and tax systems. Both have reached a level of complexity and cost which seriously handicap our members. Parliament must address the problems which they cause, which inhibit Canadians ability to compete for global business. To support this campaign, complete the Regulatory Reform Survey on our Web site, http://www.cata.ca/cata/advocacy/regsurvey.html.

Recordable Media Levies

The Canadian Private Copying Collective, which represents the recording companies, has filed its biennial demand for extortionate levies on blank audio recording media. It seeks an increase in the levy on CD's from 21¢ to no less than 59¢, a mere 181%, and more than the price of a CD. It also seeks levies on new media like flash memory cards, removable micro-hard drives, and memory in MP-3 devices.

CATAAlliance has written to the Copyright Board, which sets the levies, urging they leave the CD levy at 21¢, and limit levies on new media to very low rates. If rates are too high everyone will buy both media and devices in the U.S., which will have a negative impact on jobs and business in Canada.

Members are reminded that under the rules of the levy, they can avoid it by importing CD's and other media for their own use directly from foreign suppliers.

Ontario

• At a meeting with Finance minister Janet Ecker Dave Paterson urged that Ontario: eliminate its corporate capital tax; solve the problems surrounding retail sales tax on computer software; and increase its investment in education at all levels.
• The Government of Ontario has developed a comprehensive procurement review agenda. CATAAlliance is urging the government to abandon two of its existing policies, its retention of all intellectual property rights arising from ICT procurements, and its insistence that contractors assume unlimited liability for indirect and consequential third party damages. We have polled members on these issues, and conveyed the results to the government. We understand that Ontario feels that they have moved 80% of the way to solving the problem. There are apparently truck-sized exceptions on IP, and a cap on liability. We will comment when we get the actual contract terms for review.
• In 1997 Ontario revised the application of its retail sales tax to packaged software. Last year when its auditors began to apply the new rules, which are both complex and vague, many companies were hit with large tax bills and penalties. The Ministry of Finance is now consulting the industry in an effort to clarify and simplify the rules. CATAAlliance has polled its members on the problem, and briefed the ministry on our position on October 31. The revised regulations have now been published for discussion. (See www.gov.on.ca/fin) CATAAlliance is active in a group of associations which advised Finance that its revisions have failed to solve the problem.
• The Workplace Safety and Insurance Board has launched consultations on "Coverage under the Ontario Workplace Safety and Insurance Act." You can find the paper at www.wsib.on.ca. The terms of reference suggest this is a thinly veiled plan to extend coverage to businesses which do not now pay WSIB insurance. The objective is to raise premiums to cover WSIB's large losses. CATAAlliance has stated its opposition to extension of workers' comp fees to service businesses like software development and computer services.

Alberta

The Government of Alberta has adopted the position that all intellectual property developed in the course of contracts with them is the property of the government. CATAAlliance is working with other associations to persuade Alberta to reverse this policy decision.

David Paterson, National Director, Public Affairs
(613) 236-6550
dpaterson@cata.ca