Finance Committee on Nov. 27th, 2007
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
4:15 p.m.
Vice-President, Global Communications, CAE Inc., SR & ED Tax Credit Coalition
Well, when we're not successful…
4:15 p.m.
Bloc
4:15 p.m.
Vice-President, Global Communications, CAE Inc., SR & ED Tax Credit Coalition
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
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
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
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
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
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
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.