Canada’s aerospace industry is one of the most research-intensive manufacturing industries and an important driver of Canada’s innovation economy. Budget 2021 rightly recognized that our sector was one of those hardest hit by the pandemic, with a longer path to recovery relative to other sectors of the economy.
So it begs the question: why is the Federal Government now planning to implement a tax that will hurt this vitally important sector causing further challenges and costing jobs in Canada?
The tax, as proposed in Budget 2021, will have a dramatic, negative impact on Canadian manufacturing. It will kill jobs by crushing domestic demand in what is currently a bright spot of our industry – an area where Canada is a world leader in the manufacture and final assembly of business aircraft, including helicopters, turboprops and jets, and the associated supply chains for parts, systems and services.
By failing to exempt aircraft for business use from the tax, the government will discourage Canadian companies from buying Canadian made products, costing jobs, impeding domestic capacity and capability, and causing further supply chain issues. This new tax works at cross-purposes with the very measures the government announced just a few months ago to support the recovery of the industry!
The US offers a stark example of the pitfalls of these types of taxes, having experimented with a tax on aircraft in 1991, only to repeal it in 1993, citing American job losses.
When considering this issue – the facts are important. Very few business aircraft are for personal use. In a country the size and geography of Canada, they are essential to business operations and connectivity, and to the transportation of employees for sales, marketing, training and many other functions.
Canada’s expertise and leadership in business aircraft means the Canadian economy overall benefits. A recent report by the Department of Industry, Science and Economic Development and the Aerospace Industries Association of Canada indicates that almost 30,000 Canadian jobs supported by aerospace were lost in 2020 alone and the sector’s contribution to Canada’s GDP declined by $6.2 billion. However, business aircraft helped to buoy against the even steeper declines seen globally. Some of our competitors saw greater revenue losses with the plummet in production of large aircraft. Business aircraft is a strength for Canada, providing a solid foundation for recovery and jobs, and should not be punished in a misdirected effort that will target manufacturers and workers.
There is overwhelming public consensus that companies that manufacture products in Canada are of critical importance to the country’s economic recovery. No other jurisdiction imposes such a tax penalizing their own domestic aerospace industry. As an example, the US currently provides tax breaks for individuals and corporations purchasing private and business aircraft. Our loss will be a gain to US aerospace and other competitor nations who want what we have.
This tax is flawed. It will hamstring a national strength that could otherwise buoy an industry still working toward recovery, providing jobs and economic activity, and making tremendous strides when it comes to green innovation.
Business aircraft or business use should be excluded from the tax scope. Canadian firms should not be at a disadvantage relative to international competitors in terms of accessibility to business aviation. Ways exist to only tax personal usage of aircraft by relying on existing mechanisms that would be much less detrimental to the Canadian aerospace industry and ultimately the workers that make up this innovative industry.
As an aerospace nation, and a business aircraft manufacturing hub, Canada will be sending the wrong message, in addition to undercutting its own manufacturing activities and employment. All policy levers should be pulled in the same direction to support the recovery of the aerospace sector. We stand ready to work with government to achieve this.
Call it whatever you want, the reality is that if this tax is implemented as its currently designed, it will act as a disincentive for Canadian firms to buy from Canadian aircraft manufacturers and place and register their aircraft in Canada – putting us squarely at odds with our national interests.
It will be Canadian businesses and workers who pay.
Mike Mueller
President & CEO
Aerospace Industries Association of Canada
Anthony Norejko
President and CEO
Canadian Business Aviation Association
David Chartrand
IAM Canadian
General Vice-President
Moira Harvey
Executive Director
Ontario Aerospace Council
Wendell C. Wiebe
Chief Executive Officer
Manitoba Aerospace
Suzanne Benoît
President
Aéro Montréal
Victoria Belbin
Chief Executive Officer
Atlantic Canada Aerospace & Defence Association