Finance Committee on Oct. 22nd, 2009

[Sherrie Ann Pollock]

I'm going to let Mr. Penney look after this one.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

You passed the buck to Mr. Penney.

[David Penney, Secretary, Tax Executives Institute]

From the manufacturer's perspective, I think it's a broad enough classification. One of the issues related to it being temporary is that planning for capital expenditures just doesn't happen a month or two before you spend the money. So it would be very important to have it as a permanent fixture in the system.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Is five years a more reasonable timeframe?

[David Penney]

Yes; at least.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Can I ask the Tax Executives another question then?

You mentioned the corporate tax reductions that are being implemented now and that will continue to be rolled out to 2012. Obviously, a lot of organizations have actually asked us to raise corporate taxes and make our tax system more progressive.

Can you give us a sense of how you think this is going to continue to enhance the competitiveness of Canada's economy going forward, especially given that we know that the debt-to-GDP ratio, say, in the United States and other G-7 nations is much higher than in Canada? Where do you see Canada's corporate tax competitiveness going over the next five to ten years? How do you see that benefiting our economy?

[Sherrie Ann Pollock]

Providing we stay the course in the reductions that have already been announced and that hopefully will be implemented, we see marginal rates falling and the after-tax cash position of companies in Canada improving. Of course, at the end of the day, we want to ensure that we are an attractive country for investment, and we want to make sure that we keep people employed and productive. I think reversing capital tax reductions or slowing the announced reductions could send a negative or adverse message to the capital markets.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Do you anticipate corporate taxes in, say, the United States going higher?

We all know about the case of Tim Hortons choosing to come back to Canada. One of the reasons given was that our tax rates are now more competitive than they are in the state of Ohio.

Is that the type of thing you think we could expect to see more of if we continue to stay the course?

[Sherrie Ann Pollock]

I think our largest trading partner is the U.S., so we always have to monitor what's happening there. But we also have to recognize that we are trying to be more of a global player. So I think it's important to look at tax rates and tax competitiveness on a global scale and not just between Canada and the U.S.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

How do we stack up against European countries, for example?

[Sherrie Ann Pollock]

In European countries, to a large extent, their tax rates have been falling as well.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

So we have to continue.

[Sherrie Ann Pollock]

We have to make sure that we stay in line with our other G-7 partners.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Okay.

Mr. Penney, did you have a comment?

[David Penney]

I might just add that with respect to the U.S., I understand that they're really seriously looking at their tax system, their tax review. Without any doubt, it's going to be pointed out very clearly to the government that their corporate tax system is relatively uncompetitive and overly complex. So we're ahead of the game on that one, for sure.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Dechert.

I just want to follow up on a couple of items, first of all with Holcim and Mr. Galloway.

With respect to recommendation number one, I just echo the comments of my colleague. This is a constant debate, as you know, in Ottawa with departments and officials. Certainly, in your company or industry, if there are investments being made as a result of changes to the capital cost allowance, make us or officials in Ottawa aware of this. Certainly I take your point that if we made it permanent or extended it over a five-year period, groups like the chemical producers, who came to us, would obviously have a longer-term timeline to plan. So I certainly take that point.

I did want to address your third point, or perhaps have you address it. The committee stopped in Weyburn, and we saw the Encana facility there, where they capture carbon dioxide and use it for enhanced oil recovery.

My understanding is that with your industry, it is a big challenge. You go through the process of making cement and you produce CO₂. It is very tough to capture that CO₂. And if you can capture it, it's very tough to have the CO₂ in the type of purity you need for enhanced oil recovery.

I don't know if you want to comment on that, given that we did go to Weyburn and did have that experience as a committee.

[Bill Galloway]

I would say that 60% of our CO₂ comes from the heating process in the rock, and the other 40% comes from the actual fuel. We were following very closely all of the techniques, all of the technology, around capturing and sequestering CO₂, but our main focus today is to invest in other technologies and to try, in effect, to produce more with the same amount or less.

So we have invested in various scrubbing techniques. We invested in an $80-million vertical roller mill, which allows us to take all of our stack emissions and use them for heating of our process, and it scrubs out; in fact, some of the CO₂ ends up in the product. It is primarily a product called bran sand, which is from slag from the steel mills, and that becomes part of our process.

So that's what we are doing, in addition to all of the other technological things we can do. We have had a dramatic reduction in CO₂ over the last few years, and we are looking forward to this proposed 20% reduction—

[The Chair, Conservative, James Rajotte]

On an intensity basis or gross basis?

[Bill Galloway]

On an intensity basis today. We are actually one of the lowest emitters of CO₂ in the cement sector in Canada.

[The Chair, Conservative, James Rajotte]

Okay. I appreciate that.

I have time for one more question. I just want to follow up with Opera.ca.

I'm sorry I missed your presentation, but I was delayed.

You said on page 3 of the brief that, “The investment in the core operations of opera companies, as represented by support from the Canada Council for the Arts, has declined from 11% to 7% to 4%”.

Obviously you are asking for a general increase for the Canada Council for the Arts. I don't know much about it, but is the process fair to all players within the artistic community? You have a specialty within the opera field. Do you feel you get your fair share from the Canada Council for the Arts?

Maybe you could enlighten us on how that process works.

[David Ferguson]

I think we feel we are well represented in our submissions to the Canada Council and that we have received a reasonable share as an industry.

I think you would see, if you looked at arts organizations across this country, that all of them have seen a shrinking percentage of their revenue coming from the Canada Council, against the backdrop of increasing costs of operations and expansion of the scope of their activities. So this isn't so much about our piece of the pie.

Then within the opera world, there's always the debate about whether the big companies get more than their share, or the small companies aren't getting enough, etc. On behalf of our piece of the cultural sector, this is really about promoting the concept of bringing the government's support of the Canada Council for the Arts up to the level that was envisioned by that council in their strategic plan, which was a $300-million increase over a period of years.

[The Chair, Conservative, James Rajotte]

I am just out of time, but there has been a lot of discussion in the artistic community about ensuring that we fund programs so that when artists go overseas, they are well represented and well marketed. You also mentioned that on page 3 of your brief, but could you describe for the committee some of the activities that would be funded? My understanding is that the $25 million fund would fund both domestic and the foreign initiatives.

[Jane Hargraft]

Yes, I can speak to that. Opera Atelier does a lot of international touring. Just before I started here, two years ago, the first thing I did before I came was cancel a tour. It wasn't because there wasn't the federal funding—it was in place at that time—but the numbers weren't working. It's enormously expensive.

So as to what this program would do, part of the money would restore funding to do international touring. The fact is that when we go to developing markets, which is where Canadian businesses generally are, and the demand for Canadian arts are, because they're very well represented in Europe, Asia...they cannot pay our full fees.

So we need to get support. We also need to bring the presenters here so that they can see what they have the potential to bring.

It also—

[The Chair, Conservative, James Rajotte]

So it's both marketing and operational costs?