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 students.

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

4:15 p.m.

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

Nathalie Bourque

Well, when we're not successful…

4:15 p.m.

Bloc

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

What is a TOB?

4:15 p.m.

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

Nathalie Bourque

It is a takeover bid, or the purchase of a firm by another firm, which can be either hostile or friendly. When you are sitting on a lot of money and a company can come along and buy you out and take the profits, you have no opportunity to agree.

Supposing CAE were to be bought by a U.S. company which decided that, in future, it would do most of its R&D in the U.S., India, China or somewhere else. The fact that we are unable to cash in those credits brings down our earnings per share, or EPS. Of course, our share price drops on the stock exchange, which has a direct impact. We become a target for a number of companies, and that can quickly have an effect.

4:15 p.m.

Bloc

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

In your brief, you quote from the Conservative Party's 2006 election platform.

It is unacceptable that Canada's expenditure on R&D, at 1.9 per cent of GDP, is below other G-8 countries and well below the OECD average of 2.3 per cent.

I gather that what you are recommending would allow Canada to move back into the forefront or, at the very least, reach the average for G-8 countries?

4:15 p.m.

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

Nathalie Bourque

We believe that such a measure would greatly assist us. The people who decide where R&D will be carried out are not laboratory researchers, but rather, boards of directors that have one goal in mind: value for shareholders. So, when they look at this, if they see benefits, they will want to do more.

4:15 p.m.

Bloc

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

The government has announced general corporate tax cuts. However, in your brief, you say that many businesses do not make enough profit to benefit from tax credits for the research they conduct. If I were a business owner, I would do research for a year or two, but if I were unable to get any money back, I would stop doing it, for lack of money.

I would be interested in hearing your comments.

4:15 p.m.

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

Nathalie Bourque

In our industries, we have to continue to do research. Companies such as Nortel Networks, Abitibi-Consolidated and Kruger have tax credits going back seven, eight or nine years. That is the case for most companies.

However, as I mentioned earlier, we are doing business in highly competitive industries. At the present time, many companies borrow $100 million from the bank to conduct research, pay interest on it, and so on. They then turn to the government and ask, having done that research and benefited from a program, whether they can reap the positive spinoffs they were expecting—in other words, the investment tax credit. However, for all sorts of reasons, there are no profits.

Some industries—forestry, in particular—are having problems these days. That is also the case for the information technology industry, all across the globe. Aerospace and defence are key sectors where enormous sums of money have to be invested. It is extremely difficult at the present time to benefit from tax credits.

4:20 p.m.

Bloc

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

Mrs. Bourque, does that mean that the general tax cuts alone are not enough to allow the manufacturing sector to ultimately sell products at a competitive price?

4:20 p.m.

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

Nathalie Bourque

They are certainly a step in the right direction, but they are not enough.

4:20 p.m.

Bloc

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

In closing, I would like to come back to the non-refundable tax credits. Companies have tax credits with their bank that they cannot use, but you have proposed a specific approach, and I would like you to say more about that, because I didn't really understand your proposal.

4:20 p.m.

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

Nathalie Bourque

Madam Clerk, I would like to ask Mr. Peter Look, from Nortel, to answer that question, if you don't mind.

4:20 p.m.

Conservative

The Chair Rob Merrifield

Be very quick. We only have 15 seconds.

4:20 p.m.

Peter Look Vice-President, Tax, Nortel, SR & ED Tax Credit Coalition

Thank you.

Our proposal is to take the historic pool of tax credits and allow companies to earn them off, so that over time the rules will not change and the companies will stay in Canada, become profitable, and ultimately benefit from the past.

The proposal is to make the prospective R and D credits refundable. In a fashion, that would provide an incentive for current R and D to be done in Canada, and jobs will remain. That's very succinct.

4:20 p.m.

Conservative

The Chair Rob Merrifield

Thank you very much.

We'll now move to Mr. Dykstra for seven minutes.

November 27th, 2007 / 4:20 p.m.

Conservative

Rick Dykstra St. Catharines, ON

I have a number of questions. We have a very good panel here today.

Ms. Bourque, you've had a lot of TV time today so I'll go quickly.

I don't think there's any argument that the SR and ED tax credit moving forward would be a positive thing for industry and business. We're talking about a potential $8 billion investment over five years.

I would like to think that based on the fact that the finance minister has put a group together to study it and come back with some recommendations, moving forward without making sure you have the proper plan would not be a wise thing for the government to do.