Finance Committee on Sept. 25th, 2006

[Yves Millette]

In terms of what Intuit Canada was proposing, what we're looking at was really improving our relationship with the government agencies and government agencies with the private sector.

In our specific case, with the CRA, we've moved forward several objectives. The reality of taxation in Canada is that it is complicated. You need to be very innovative and very fast in order to be able to respond to changes in legislation and changes in the tax act.

In terms of recommendations on how to simplify the tax act, I don't think we have the expertise to make it easier. I'd have to defer to the honourable member.

[The Chair, Conservative, Brian Pallister]

You still have one minute left.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

I have no more questions, thank you.

[The Chair, Conservative, Brian Pallister]

Monsieur Dykstra. You have seven minutes, sir.

[Rick Dykstra, Conservative, St. Catharines, ON]

Thank you, Mr. Chair.

I'd like to begin by asking Mr. Lee a couple of questions with respect to the whole aspect of emergency response training and the relatively low cost that you've indicated, $500,000 to implement a nation-wide program. I wouldn't mind you expanding on that a little bit as to how we'd be able to do that.

[Jim Lee]

The cost is a question that has been raised time and time again. The reason we can do it as cheaply as we can is that there is a program there ready to go that is fully funded by the federal government in the U.S. Our problem is that we can't bring it to Canada without having to fund it. We don't have to reinvent the wheel here. That's why we can keep the cost down: we can bring it in, get it in place, and start training first responders right away. And we do it in a way that our trainers go out to the municipalities, so there is no cost to the municipality other than supplying a classroom. That's the reason.

We've been told time and time again that we're flying under the radar at $500,000. We should have added a zero to that and said it was $5 million and the government probably would have jumped on it, but we can't honestly do that. We think for $500,000 we can start training.

[Rick Dykstra, Conservative, St. Catharines, ON]

You pointed out about $8,000 for a pilot project. I'm assuming that would just mean in one community you would implement the program once to show the benefit.

[Jim Lee]

Yes. We've done that in the past. We've done it in border communities. Actually, in Niagara Falls, Ontario, we did a pilot program with regard to train incidents, and that's why we thought maybe it would work there, so let's try it with our hazardous materials and our CBRN training. We're proposing that.

[Rick Dykstra, Conservative, St. Catharines, ON]

Thank you.

This is to either Mr. Wassmansdorf or Mr. Lind.

One of the earlier questions when we met in the spring that we had asked the finance department was how could we track that the GST cut was actually being passed on to consumers. One of the points that was brought up was of course that in the home-building industry it may be easy for trades and also suppliers to be able to use that one percent as an opportunity to increase the costs of their goods, versus passing on that savings. I would appreciate you commenting on whether that suspicion is true or whether in fact in this country the construction industry is indeed passing on that saving.

[David Wassmansdorf]

Richard does a lot of renovations and jobs, so maybe we could start with Richard's experience.

[Richard Lind]

Thank you.

Mr. Chair, each contractor has a different way of pricing the jobs and whether or not they include the HST or, in our case, the GST nationally in the price of their projects. So, indeed, for those who have kept the tax as a separate item, it showed up immediately on July 1 as being 14% in Nova Scotia instead of 15%.

On the extent to which other trades and suppliers and other contractors in the new home construction have been able to pass that on to the consumer, in one fashion or another it did get passed on to the consumer. The important thing is that each of those businesses does have to take a regular analysis of what its costs are and what its overheads are running at and what level of profit is feasible. So I'm sure that 1% reduction was included in those recalculations, which some businesses do on a monthly basis and others less frequently. It does go into the calculation.

[David Wassmansdorf]

I don't think that builders, for example, all of a sudden saw that one percent as a grab. It will find its way into the economy one way or another. In some cases builders held off on price increases on their houses in anticipation, so it would have worked its way in.

[Rick Dykstra, Conservative, St. Catharines, ON]

One of the other comments you made was in respect to the CMHC's capital uses for others and your concern around whether that was going to be usurped for other reasons than a potential homeowner being able to access the funds. Within the context of the budget, recently we have been looking to expand the potential of funds available within that framework. I just wondered at your comment on “for other uses” and whether or not you agree with the implementation of expanding the current use of that.

[David Wassmansdorf]

In terms of using CMHC's capital or doing different things with CMHC in terms of improving the mortgage-backed security program or eliminating surcharges, whatever CMHC has been doing in terms of their business planning that may have affected mortgage insurance cost would be reflected in what's left with moneys left. At the end of the day, CMHC has actuarial studies that they have to do. They have to make sure that they meet OSFI requirements, and we want to make sure that levelling of the playing field between CMHC and the private sector continues.

If I could go one step further, we would look to continuing to see the support for the notion of more competitors in the marketplace as well as with respect to mortgage insurance.

In terms of taking the money and putting it towards other things, I don't necessarily see that as a good thing.

[Rick Dykstra, Conservative, St. Catharines, ON]

Thanks.

In the presentation that was made, a call to action recommending a review of current policies, I thought the way we could do that would certainly make lots of sense in terms of trying to find accountability and savings. I just wonder what your thoughts are on this being viewed as whether it was only one company coming in to do it versus the government looking out to make sure they are using proper procurement practices.

[Yves Millette]

The government should look to many companies for expertise.

The government, just like private industry, is faced with a severe skills shortage, and as we think about being competitive in the future we need to look not only at our own made-at-home solutions but also at partnership and looking at different ways to bring services to Canadians.

The one thing that private enterprise does is it excels well when it understands clearly what the outcomes are you are driving for. For us, often it's that dialogue of understanding clearly what the objective is you're trying to drive for, what you would like us to do. That's what I'm encouraging government in general to do with all private sector companies.

[The Chair, Conservative, Brian Pallister]

Thanks, Mr. Dykstra.

We will move to Madam Wasylycia-Leis, for seven minutes.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Thank you very much, and thank you to all of you for your presentations.

Clearly today, at our table, we have a dichotomy, a real polarization of views. On the one hand, there's a message from business suggesting that more corporate tax breaks will actually spur the economy and the benefits will trickle down. Others, like the teachers and health professionals, and probably the firefighters, suggest that an investment by government in certain targeted areas actually can grow the economy and deal with inequities at the same time.

The problem with the business argument on the trickle-down stuff is that we haven't seen any of that happen. We've been trying corporate tax breaks for a long time. Right now we're in a situation where the corporate tax rate, relative to GDP, has dropped from about 3.2% to 1.6%, and profits are higher than ever--we have a 14.6% profit rate, the highest in the country ever. We've seen government revenue from the corporate sector drop from about 15% to 11%, whereas personal income tax is now growing from about 45% to 65%. Contrary to what Mr. Dancey and others have said, the opposite is the case. The burden has shifted to individuals, and inequities are growing.

What I think we have to do now is listen to the voices of teachers, nurses, health care professionals, trade unionists, and firefighters and say that it's time to try something else.

I'm going to start by asking Harvey and Sally how we make this case, especially given today's context, where we've just heard that millions more dollars are being cut from health research--everything you talked about, Sally, in terms of having a database that's reliable and useful--gone, millions are lost in terms of literacy, youth employment, skills development, and crime prevention. How are we ever going to build a productive economy that's competitive if we keep going in that direction?

That's the first question.

[Sally Brown]

Thank you. We welcome the question.

How do we make it happen? We've been struggling with that for a while. At first, the focus on prevention and the need to invest in that was pooh-poohed, because there was no evidence that it worked. That is now profoundly untrue; there is evidence everywhere, so it's not based on lack of evidence.

Secondly, I think there's been a huge misunderstanding that people can just change their behaviour without help, that if you just excoriate people to stay in school or eat better, this will work. It won't work. The government has accepted that in certain areas, regulation and interventions and exceptions are needed. When they have done that, through a comprehensive approach, it has always worked. I guess what we're saying is, let's become evidence-informed as governments and do what obviously will work and where the downstream benefits will result in economic benefits over the longer term.

Does it take a bit of a leap of faith, because it's not going to happen in two years, it's going to happen in twenty years? Absolutely. But all the evidence is in, and it's time we accepted it and moved on.

[Harvey Weiner]

Just to add to that, it seems to me that one step that can be taken, and I've referenced it before, is to try to break down the $200 billion that are currently being spent by government in terms of what is being spent percentage-wise on prevention and what is being spent on redemption for, in many cases, non-discretionary expenditures. No one is suggesting that the old and the sick should not receive proper health care. No one is suggesting that those who've committed crimes should be let go and put on the street to commit more crimes, etc. I think if we do that kind of analysis and we look at studies done by organizations that in no way, shape, or form could be considered as being, shall we say, anti-corporate, such as the OECD, you have studies that demonstrate that, all other factors being equal, by increasing the average education level of adults in society, you will increase the GDP from 4% to 7%, which it seems to me is the objective in terms of productivity.

The other issue we have to take into account is we have a continuing cycle and the only way to break the cycle is by starting with children and youth. Children and youth don't vote--at least they don't until they're age 18. Politicians naturally gravitate to where they can see the votes. We're not going to break the cycle unless we start at that level.

It would seem to me—and Sally has made the point—that there's plenty of evidence there, but none who are blind can see, or none who don't wish to see, etc. Let's take that evidence. I think a good step would be to do an analysis of current expenditures. I am convinced we would find that a disproportionate amount of that $200 billion is being spent to redeem certain things that could have been prevented by appropriate intervention.

[The Chair, Conservative, Brian Pallister]

Mr. Wassmansdorf, you've been trying to get in on Madam Wasylycia-Leis' response. If it's all right with her, we'll give you time to respond, but not much.

[David Wassmansdorf]

Thank you, Mr. Chair.

In the four or five times that I've been before this committee, the member and I have had some conversations in this regard. I'll speak specifically to housing as a particular measure.

We believe as an industry that a way.... Well, I can give a quick anecdote. This morning when we met in a hotel, the waiter came into the room—and he knows who we are—and he said, “You know what? There are two things you guys need to worry about: putting roofs over people's heads and making people know that there is food on the table.” It's an anecdote, but it gets to the point.

With respect to housing, we've suggested that one of the major issues is that it tends to be an income problem. There are places, and we talked about Winnipeg as an example, where there are specific issues we need to deal with, where we need to build new housing. But in other parts of the country a portable housing allowance would help to deal with that and an expenditure in that regard would be an effective way of getting people good housing that is available right now. That would be an effective way of dealing with a part of the social issue happening in this country.

[The Chair, Conservative, Brian Pallister]

Thank you.

Mr. Weiner, I think it would be fair to observe that you made the comment about politicians in reference to children not voting. But I think it would be fair to say there might not be $600 billion of debt in the country if children could vote too. We could look at spending in a couple of different ways in that respect.

My questions are for you, Jim. You have a very interesting brief here. I want to address, just more for information, your proposal on the compensation benefit. To be clear, it's an at-work-only benefit you're asking for. Is that correct?

[Jim Lee]

That's correct.

[The Chair, Conservative, Brian Pallister]

Hazard benefit for death or disability occurring in the line of duty.