Small and mid-size businesses get Y2K tax break  Extended to October 31, 1999 !

Small and medium-sized companies that buy equipment to deal with the millennium bug no longer have to wait to write it off, new federal tax rules say. Ottawa has decided to give immediate tax relief to these firms to help them cope with the cost of preparing their systems for the year 2000. The tax break was recommended by the government-appointed task force on the year 2000 and the parliamentary committee on industry.

"This is very good news," said Catherine Swift, president and chief executive of the Canadian Federation of Independent Business and a member of the task force. "Half the value in this is getting people's attention focused on the problem."

The writeoff will be an accelerated capital cost allowance deduction, which means smaller companies can immediately deduct the whole cost of any hardware or software bought to update their systems. Without these rules, they would have been forced to write down the equipment over several years. A Finance Department spokesman estimated the change will result in $120 million in deductions in 1999.

The millennium bug is a design flaw in older computer systems that makes them read a year as two digits, so 1998 is read as 98. After Jan. 1, 2000, systems reading dates in this way will read the year as 00. That could create havoc in automated systems, including older personal computers, networks, climate control, security and transportation control systems, machinery and office equipment. Swift said research conducted in March shows 40% of firms in Canada haven't done anything to ensure their systems can cope with the year 2000 problem, Y2K for short.

"I think they're aware it's an issue, but not enough people have paid serious attention to it," she said. "It's a well-timed initiative and it complements the actions that businesses are taking," said Bob Keyes, senior vice-president of international affairs for the Canadian Chamber of Commerce.

The chamber, the Institute of Chartered Accountants, Industry Canada and the Canadian Bankers Association started a series of seminars yesterday to help small businesses cope with the millennium bug. About 350 people showed up at the Ottawa session, which will be repeated in other cities in the next few months.

To be eligible for the tax break, the new computer equipment or software must be year 2000-compliant and bought to replace non-compliant equipment acquired before 1998. But companies must act quickly to get the tax break. Only equipment and software bought between Jan. 1, 1998. and June 30, 1999, is eligible.