Finance Committee on Oct. 4th, 2011

[Denis St-Pierre]

I believe tax loopholes are the nature of higher taxes and the nature of having complex systems. If everything was a little more simple, you wouldn't need the tax loopholes because it wouldn't be that complex. When you use terms like “all or substantially all” in the Income Tax Act, instead of “85%”, or if you use “a reasonable period of time” instead of “36 months”, you open the door to tax loopholes because it's subject to interpretation.

Sometimes there's more clarity now, I think, when it's being legislated, but I'd say that's the exception.

[Randy Hoback, Conservative, Prince Albert, SK]

So you would probably be more in favour of closing these tax loopholes, getting more exact wording in some of these areas, so you have proper guidance when you do the income tax.

[Denis St-Pierre]

Sure, when you say the term “tax loophole”, by its whole nature people don't like that term to start with. It looks like it's not fair. I think everybody should pay their fair share of taxes. The issue with the loopholes is that the legislation is not clear, so it opens up the door to something.

It makes our job complicated too. Our clients know how to read; they have tax lawyers too. They say, “Well, why can't you as an accountant accept this strategy? This is an accepted loophole because here's the wording of the law.” It puts us in a difficult position that we would rather not be in. As an accountant, we want to be straight, honest, and to have integrity, and then we have that type of language in front of us.

[Randy Hoback, Conservative, Prince Albert, SK]

Earlier there was a comment that companies don't pay taxes. I think that's not a fair statement.

[Denis St-Pierre]

Yes, it's an unfair statement.

[Randy Hoback, Conservative, Prince Albert, SK]

I think a more fair statement is that companies pay dividends, and people who receive dividends, whether they're pension funds or RRSPs, pay taxes. That would be a more fair assessment.

[Denis St-Pierre]

A fair assessment is that once the money is in the pocket of the taxpayer, there's been an integration. There have been corporate taxes remitted and there have been personal taxes remitted. The total of that is the same as if the individual were in business. So whether you operate through a business or you operate under your own name, the amount of taxes sent to the government will equal the same, or they should equal the same, under integration principles.

[Randy Hoback, Conservative, Prince Albert, SK]

Okay. I see where you're going with that.

I'm going to move on to the real estate and the capital cost allowance. It's an interesting proposal.

I know Mr. Jean asked you a question on it, and I'm curious. If you were to go down that route—and I guess where I get into trouble is that a lot of times real estate doesn't depreciate in value, it actually appreciates—how do you justify to taxpayers that we should allow depreciation every year on the real estate, yet we all know that 5, 10, 15 years out that property is going to appreciate? How do you tell taxpayers that's still fair?

[Gregory Klump]

The appreciation of the price, being the capital gains end of things, and the depreciation of the building, recognizing that there's a certain amount of upkeep that is required in order for it—

[Randy Hoback, Conservative, Prince Albert, SK]

But those are expenses you would see any time.

[Gregory Klump]

Exactly. Those are two solitudes. Certainly the original proposal that the association had was for the deferral of both capital gains and depreciation, but it has since been modified because we were advised that that's a special carve-out for real estate that is never going to happen. Looking at the bigger picture, it would be great if capital gains were eliminated for everything, but recognizing reality for what it is—putting water in our wine—and in consultation with our members, to improve the chances for success for this proposal and put money into the government coffers by way of the taxation of those capital gains once the property is sold, the proposal was modified so it would just be the carry over of the depreciation to investment into new property.

When you ask the question on how you square that circle about the price of the place increasing over time with depreciation, they're really two solitudes.

[Randy Hoback, Conservative, Prince Albert, SK]

Then, of course—

[The Chair, Conservative, James Rajotte]

Last question.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

The ecoENERGY retrofit program was brought back with the last budget. Could you give us an example of how that's impacted your industry? I'm sure the lumberyards are pretty happy right now, but could you give me your opinion of the retrofit program for housing?

[The Chair, Conservative, James Rajotte]

Very briefly.

[Gary Simonsen]

Based upon a survey of our members, I think it's a welcome program.

[Randy Hoback, Conservative, Prince Albert, SK]

So you're generally happy with it.

[Gary Simonsen]

As far as I know, yes.

[The Chair, Conservative, James Rajotte]

Thank you.

I want to follow up on a few small points, and members can certainly follow up on any questions informally after the session.

Mr. St-Pierre, with regard to your recommendation on the panel of independent experts, this is something that's been recommended to me many times by the past chair of the Edmonton Chamber of Commerce, Carman McNary. I want to allow you to flesh that out a bit in terms of how big a panel you would recommend, how long to study and report, and composition. Do you have any thoughts on that?

[Denis St-Pierre]

For sure, this committee should be on that panel to start with. On the composition and all that, I would have to refer you to CGA Canada, Carole Presseault, vice-president. I believe she has a clear idea of what the question is. Unfortunately, she is not here, but I'll get Carole Presseault to contact you on the size and format—

[The Chair, Conservative, James Rajotte]

And timeline. Okay. I appreciate that.

I want to go to Mr. McMillan, on the 8,000 qualified students. I certainly concur with my colleagues in the sense that in my area the need for people is ramping up again, and it's only going to get worse. When you say there are 8,000 qualified people who cannot get into a college, that is certainly something that needs to be addressed.

You talked about physical infrastructure and operating budgets. One of the challenges we have with our colleges out west is a lack of teachers or professors, because often, for example, industry notices a person teaching plastics who it thinks would be great in its company and the teacher moves. Then the company asks why we don't have any professors in plastics.

Is that a challenge you're facing as well on the human resource side?

[Dr. Brian McMillan]

To some extent it is, but we've tried to partner with our local industries and say it is in their best interests. I will give you an example: aerospace. We have people working in aerospace who are teaching at the college on secondments, so we try to deal with it through secondments, Mr. Chair, but at times it is a challenge.

One of the nice things about colleges is that we also benefit from persons who are nearing retirement who might want to have a different type of employment opportunity, so we are able to leverage that sometimes.

[The Chair, Conservative, James Rajotte]

The second point is this. Are you cooperating with high schools in terms of very much gearing students towards perhaps an alternative route, or showing them there are various options available?

[Dr. Brian McMillan]

We are, very much so. In fact, we have seen quite a change with colleges in the last three to five years about who is attending, not just in Atlantic Canada. I would say the profile of the learners has changed substantively. We are now getting the honour students out of high school, which is right, I think, but there is still more work to be done. We also have done articulation agreements, with some of our high school students getting credit from college programs, and also with universities.

[The Chair, Conservative, James Rajotte]

I appreciate that.

My final point, Ms. Smith-MacDonald, is that I appreciate what you said in terms of federal tax changes, especially for lower income levels in the sense of actually taking people right off the tax rolls. That is absolutely essential.

I did want to just get your quick reaction to any impact of the changes with respect to the introduction of the working income tax benefit and also the extension somewhat of the national child benefit recently. Have you seen these two programs have some effect and some impact with regard to addressing poverty?