Evidence of meeting #6 for Finance in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was tax.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

  • Pierre Le François  General Director, Association nationale des éditeurs de livres
  • Claire Morris  President and Chief Executive Officer, Association of Universities and Colleges of Canada
  • Darryl Smith  President, Canadian Dental Association
  • Bob Harvey  Member, Tax and Fiscal Policy Committee, Certified General Accountants Association of Canada
  • David Bradley  Chief Executive Officer, Canadian Trucking Alliance
  • Pierre Sadik  Senior Policy Advisor, Sustainability Specialist, David Suzuki Foundation
  • Nathalie Bourque  Vice-President, Global Communications, CAE Inc., SR & ED Tax Credit Coalition
  • Peter Look  Vice-President, Tax, Nortel, SR & ED Tax Credit Coalition
  • Carole Presseault  Vice-President, Government and Regulatory Affairs, Certified General Accountants Association of Canada
  • Susan Mullin  Vice-President of Development, Association of Fundraising Professionals
  • Margaret Lefebvre  Executive Director, Canadian Association of Income Funds
  • Chris Tabor  Manager, Queen's University Bookstore, Canadian Booksellers Association
  • Michael Atkinson  President, Canadian Construction Association
  • Gerry Barr  President and Chief Executive Officer, Canadian Council for International Cooperation
  • Amanda Aziz  National Chairperson, Canadian Federation of Students
  • Mark Yakabuski  President and Chief Executive Officer, Insurance Bureau of Canada

4:05 p.m.

Liberal

John McCallum Markham—Unionville, ON

Thank you, Mr. Chair, and thank you to all the witnesses.

I'd like to begin with Madame Bourque, because for us I think the SR and ED idea is a good one. We have the idea that it's good to create a Canadian economic advantage now that we've lost our currency weakness advantage. The first point would be significantly lower corporate tax rates, and the government followed suit on that in the economic statement.

I notice that Mr. Del Mastro dumped all over our proposal as pandering to Bay Street tycoons, but he may have realigned his view after the government announced they were going in that same direction.

I think SR and ED is also possibly creating an important Canadian advantage, as the place to do R and D is Canada and we have tax advantages. We've traditionally believed we have those advantages over the rest of the world. My question to you is whether these advantages may have been eroding, or maybe that is not the reality. Why do you think it's important for us to move in that direction?

4:05 p.m.

Vice-President, Global Communications, CAE Inc., SR & ED Tax Credit Coalition

Nathalie Bourque

Thank you for the question.

When the program was put together, I think companies were probably making better profits. The program is now 20 to 25 years old. Now we're facing not only a stronger Canadian dollar, but we're facing companies that are doing business in India, China, Brazil, Germany, and France, where research and development costs are much lower than in Canada. I think the program in itself is good. But in order to make sure that Canadian companies have all the incentives to continue to do the R and D here, we have to help them out.

Right now, we, just the 22 companies in the coalition, are sitting on about $2.5 billion of earned but unclaimed tax credits. Between the 22 of us we do $3.5 billion per year of R and D, but we can't continue just to accumulate the tax credits. This is why I think we're losing some of our competitive edge.

4:05 p.m.

Liberal

John McCallum Markham—Unionville, ON

Thank you very much.

Mr. Sadik, I'm interested in whether you could comment briefly on whether the David Suzuki Foundation has a view as to the leading role our Prime Minister played at the Commonwealth conference over the past weekend.

4:05 p.m.

Senior Policy Advisor, Sustainability Specialist, David Suzuki Foundation

Pierre Sadik

I haven't formulated an opinion on that. The foundation may put out a press release around that, but I don't have an opinion on that, Mr. McCallum.

4:05 p.m.

Liberal

John McCallum Markham—Unionville, ON

Thank you.

Mr. Harvey, you're a tax expert. On this subject of interest deductibility, we had some discussions in the finance committee. I believe seven experts told us they thought the thing to go after was something called debt dumping rather than something called double dipping. I wonder if you have a view on that issue.

4:10 p.m.

Member, Tax and Fiscal Policy Committee, Certified General Accountants Association of Canada

Bob Harvey

Thank you for the question.

I'm not familiar with debt dumping or double dipping specifically, but I can comment that the deductibility of interest and the rules surrounding it are one of the most extremely frustrating issues we have to deal with.

We would like to see the expert panel that we suggested address this particular issue as well as the many other issues on simplification. And the other issues are actually suggesting the expert panel.... When you're advising a client who asks you, “Is my interest going to be deductible because I've refinanced, I've done this, that, and the other thing”, it's very difficult to give him a solid answer and know that you're absolutely right under those circumstances.

It is an issue, however, that our association would be pleased to address, and we can bring more information to the table.

4:10 p.m.

Liberal

John McCallum Markham—Unionville, ON

Thank you very much.

Ms. Morris, as one who spent more time in university than politics, I certainly have a built-in bias in favour of supporting universities. I know that this government cut several hundred million dollars in funding for both granting councils and the indirect cost of research. It's not obvious to everybody why it's important to Canada to support the indirect cost of research at universities. It's not a particularly politically sexy idea that obviously gets votes, and maybe it doesn't get votes. But can you explain why you think it's important, not just for the universities you represent but for the country, that there be enhanced government support for the indirect cost of research?

4:10 p.m.

President and Chief Executive Officer, Association of Universities and Colleges of Canada

Claire Morris

Thank you for the question.

It is a fundamental part of supporting the research enterprise. We've long argued, and it's in our brief that you would have received late this summer, that this is one of the key components. We have good support to attract talent and we have the infrastructure that is created through the Canada Foundation for Innovation--the direct costs of research--and those indirect costs are the ones that support the environment in which the researchers work. If we're going to be truly competitive, if we're going to attract the best and the brightest researchers and retain them, they need to know they're working in an environment that can support them with those very real costs that I outlined earlier in my statement.

4:10 p.m.

Liberal

John McCallum Markham—Unionville, ON

Thank you.

If you're going to get through to this government on this subject, I think you have to use fairly simple language. So maybe you could explain to us what would be the consequences if there was no support for indirect research. What if the government simply said zero for that? What would happen to the universities, and what would that imply for Canada?

4:10 p.m.

President and Chief Executive Officer, Association of Universities and Colleges of Canada

Claire Morris

What would happen is that researchers looking at where they're going to be able to do their work would begin to look elsewhere very seriously because they would be operating in an environment that didn't support them. The reality is that when the universities don't get fully supported in the indirect costs, they then have to draw from their operating funds and thereby affect the quality of the teaching and the educational process for students. So it's robbing Peter to pay Paul.

It really is such an important part of the whole research endeavour, and when we look at our competitors around the world, they have all recognized the support that's needed.

4:10 p.m.

Liberal

John McCallum Markham—Unionville, ON

I have one last quick question.

4:10 p.m.

Conservative

The Chair Rob Merrifield

No, I'm sorry. It's a very complex issue, but your time is gone.

Monsieur Crête, please.

November 27th, 2007 / 4:10 p.m.

Bloc

Paul Crête Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC

Thank you, Mr. Chairman.

Mrs. Bourque, it seems to me that your comments are especially timely. Last year, I sat on the Standing Committee on Industry, Science and Technology, which made 22 unanimous recommendations. One of those recommendations was important and dealt with the refundable tax credit. I have tabled a motion proposing that the Standing Committee on Finance pass the tax-related recommendations. It is possible we will be debating that motion tomorrow.

In your brief, you clearly lay out its economic advantages. However, the government is concerned about costs. Could you give us a quick comparison, telling us what would happen if your recommendations were implemented, as opposed to what would happen if they were not?

It seems to me that, fundamentally, we should be seeing this, not as an expenditure, but rather, as an investment. I would be interested in your views in that regard.

4:15 p.m.

Vice-President, Global Communications, CAE Inc., SR & ED Tax Credit Coalition

Nathalie Bourque

Certainly, Mr. Crête. We haven't seen each other for quite some time.

There are two things to be considered. First of all, if we cannot carry on research and development in Canada as we are now, companies that are world leaders, such as Nortel, CAE and a number of others, will lose their advantage and will not be in a position to maintain either their sales globally or all the jobs they now provide in all areas, not just R&D.

Finally, our research and development is very beneficial to many other companies. SECOR, a well-known corporation, was asked to carry out a study. Every investment of $1 billion represents 10,000 jobs that are either gained or maintained. That corresponds to $175 million in economic activity and $200 million more in tax revenues for the federal government. I believe that research and development has very positive spinoffs.

Finally, we provide work to a great many other companies. If I am not mistaken, Nortel was saying today that it affects about 1,000 other companies. In our case, it's approximately 600 companies in the forestry sector that carry out a great deal of research. AbitibiBowater alone spends $200 million a year on research. When it shuts down one of its plants in a town, the entire town shuts down.

It's important that people realize that and understand the economic impact of research and development in Canada.

4:15 p.m.

Bloc

Paul Crête Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC

In your brief, you say that this makes companies vulnerable to TOBs. Could you tell us a little bit more about that?