Finance Committee on Oct. 31st, 2011

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Marston.

We'll go to Ms. McLeod, please.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you, Mr. Chair.

I'd like to start with a question for Mr. Dunn.

I know you presented a very concise brief, but one of the threads we've taken from some of our other meetings is around the Income Tax Act and the technical changes. Many people bring the actual Income Tax Act, with the grey areas that have not been moved through the system. Do you have any comments related to that, in terms of whether we should be moving forward?

[Andrew Dunn]

Yes, we do. We believe that a key part of being attractive to any organization carrying on business--and any individual choosing whether to live in Canada or somewhere else--is stability. A key element of stability is having a legal framework in which the details are all laid out.

There is a backlog of legislation. There is a backlog of what are called comfort letters. When the Department of Finance considers an issue, reaches a conclusion that will be recommended to the minister, and that issue doesn't make its way to legislation, that's a comfort letter. There's currently a multi-year backlog of those comfort letters.

Deloitte takes that sufficiently seriously that we've actually loaned one of our great partners, Shawn Porter, who's a very strong technical resource, to the Department of Finance as a director for statutory framework. He is helping the finance department draft additional legislation in that circumstance. He's on secondment, cut off from the firm in that circumstance.

We believe it's important, and we believe we need to make progress.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you.

We have tried through minority Parliaments, and of course that's always a challenge, but has the consultation been comprehensive enough? Are we ready just to move forward, or do you believe there's a requirement for more consultations?

[Andrew Dunn]

I think that's an excellent question. It's a broad question to answer. We believe it's valuable for there to be consultation on important acts of policy change. We also believe it's important to indicate a policy direction and then have a framework for that kind of discussion to take place.

Much of the legislation that's waiting isn't actually about major policy change. It is simply about putting in place details that are technical but voluminous and need to be put into the statute to provide that element of certainty for organizations.

There are a lot of spin-off effects from this. Organizations can't account for changes that are not in final legislation in most circumstances, particularly where those changes are just in comfort-letter form. So it affects capital markets to the extent that organizations have unresolved benefits or uncertain consequences that they have to present to their investment community.

[The Chair, Conservative, James Rajotte]

You have one and a half minutes.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

I'd like to move to the Canadian Trucking Alliance. I appreciate your comments on GHG emissions. From your perspective and your organization's perspective, what are the challenges with the border crossings? As you are aware, we're looking toward the perimeter agreement, so could you give us a couple of quick comments on that issue?

[Stephen Laskowski]

The economy has done a pretty good job of cleaning up most of our border wait times, so the wait times at the border aren't as strenuous as they used to be.

On the perimeter agreement, we have a number of asks, and most of them are technical. Quite frankly, from a trucking industry perspective, a lot of them aren't very sexy issues. They're supply chain issues. They don't require a lot of investment, but they take a little bit of political manoeuvring on both sides of the border.

As far as ongoing spending, the alliance would like to continue to see maintenance of budgets with CBSA for not only physical infrastructure, but also on the electronics side, as we move to an electronic age.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. McLeod.

Mr. Giguère, you have five minutes.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you, Mr. Chairman.

I want to thank all the witnesses. You're providing us with highly relevant information.

I'm going to start with Mr. Dunn, from Deloitte & Touche. I'm quite familiar with the field of tax credits because I was an intern at Raymond Chabot Grant Thornton with Lucie Bélanger, who now holds a tax services management position in the SR&ED sector at PricewaterhouseCoopers. One of your requests is essentially that tax credits be granted to large public companies, regardless whether they are controlled by Canadians or not.

However, there is the issue of patent ownership. This is essential for Canada because patent ownership makes it possible to transform an invention into an investment and jobs. So why do you want to expand this internationally rather than restrict it to what is extremely profitable, that is to say Canadian patents?

[Andrew Dunn]

Thank you very much for the question.

Your question was why are we focused so much on supporting innovation for large organizations and patents. There are a couple of things.

In 2008 the OECD ranked the incentives for R and D across all the major economies. Canada was third for small businesses, but ninth for large businesses. In other words, Canada is already doing a very good job of supporting innovation for small businesses, but it could do more for multinationals. And it's not true that only small businesses create patents. Nortel is maybe not the best example of a long-term, healthy company, but it had 4,000 patents. So we're not sure that we necessarily see a correlation between simple patent numbers and success, if I can articulate it that way.

Having said that, we do believe it's important not to be focused just on the creation of new patents. Productivity involves looking at all elements of commercialization. And that includes things like shop-floor development, looking at new processes, and sometimes looking at minor changes to a product or a process that can be commercially substantial. And that is also an element of innovation that can have a big impact on the economy and it is something we think needs to be an element of focus as well.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

My second question is for Ms. Pearl-Weinberg, from the Investment Funds Institute of Canada.

According to the figures, in 2007, 85% of Canadians earned less than $50,000. Only 13% of those people invested in an RRSP, and only 6% had RRSPs sufficient to enable them to retire.

One actuarial study indicates that, if this continues in the same manner, Guaranteed Income Supplement expenditures will increase from $6 billion to $23 billion, which is enormous. This indicates to us that we have an obligation of result.

The Canada Pension Plan is currently the only plan that can assure us we will have pensions for seniors. This is not a tax. I would point out to everyone that these funds have are now money that must be invested immediately. This is not a tax; the Canada Pension Fund has investment capital. It's a public investment rather than a private investment. I would like to know how we can secure a 100% guarantee that people who are currently working will not be poor in 25 years.

[The Chair, Conservative, James Rajotte]

Just a brief response, please.

[Debbie Pearl-Weinberg]

A brief response. Okay, that is a big ask.

I don't know how we can get a 100% guarantee. I think the government is moving in the right direction with PRPPs.

One of the suggestions we have made about group RRSPs is helpful, because if you have an incentive for employers and small employers to be able to assist employees in contributing to RRSPs and to incent them to open an RRSP and perhaps save in an RRSP that is supplemented by their employer, that is a good start. But I wish I had an answer to how we could ensure 100%.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

We'll go to Mr. Adler, please.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Chair.

I just wanted to follow up on my earlier question to Ms. Pearl-Weinberg about the national securities regulator, but I want to direct it to Mr. Dunn.

Can you comment on the importance of establishing a national securities regulator here in Canada, rather than having the 13 different regulators that we currently have?

[Andrew Dunn]

Our view on that subject is that it is an attractive feature to have one regulator on that front and one layer of regulation. The nearest comparable thing in tax policy, I would say, would be with respect to various provincial sales tax regimes. We do believe that having a harmonized sales tax—one regime across different provinces—is valuable in that circumstance, and it is directionally similar to be talking about a national securities regulator on that front.

And in the mergers and acquisitions world there can be enormous time spent dealing with the nuances between the different provincial regulators for an issue or in respect of a security. I would say sometimes the differences between the provincial regulators have nothing to do with the quality of the investment or the quality of the disclosure but are simply style differences between what needs to be presented. And the degree to which that can be simplified I think is attractive to foreign multinationals looking for access to public capital markets, or to big businesses operating in Canada as well.

[Mark Adler, Conservative, York Centre, ON]

Yes. Okay, thank you.

Mr. Laskowski, I read your brief with great interest, but I do want to ask a follow-up to Ms. McLeod's question about the border. Is the current problem more of a regulatory issue right now, in terms of delays at the border, or is it more of an infrastructure issue, or a combination?

[Stephen Laskowski]

It depends on the day, and it also depends upon the crossing. I think the Government of Canada, over the ten years since 9/11, has done a nice job in attempting to respond to the various infrastructure issues. Plazas had to be completely rebuilt. The main struggle, and it's not without effort from governments all over, is dealing with the Detroit crossing. But aside from that, the infrastructure, the physical infrastructure, is going along the way.

The other side of the equation that I talked about previously has more to do with systems investment, also interpretation. Quite frankly—although I don't like this word, because harmonization gets used for all the rest of the reasons—working with the Americans in terms of harmonizing data requirements and reporting requirements to cross the border is an issue. It's brought costs to the Canadian supply chain, where costs could be eliminated if we were able to convince our American counterparts to make some changes to be in line with what we currently allow.

We hope the perimeter and the better border discussions take care of a lot of what we'll call housecleaning issues, and we continue the investment approach that we're currently undertaking.

[Mark Adler, Conservative, York Centre, ON]

Yes. But you can drive the 401 from Cornwall to Windsor up until the last mile without a stoplight, and then you've got—what is it...?

[Stephen Laskowski]

Nine of them.

[Mark Adler, Conservative, York Centre, ON]

—nine stoplights in the last mile to the Ambassador Bridge.

[Stephen Laskowski]

Absolutely.

My answer with regard to the wait times is real today. Wait times aren't an issue because of the economy, but everyone in this room hopes that.... When the economy picks up, we will see problems again at that crossing, if we don't have a solution. It is the major link in the central trading system, so that remains an issue we need to get on with. Hopefully we can convince Michigan that is the case.

[Mark Adler, Conservative, York Centre, ON]

Yes, and Matty Moroun.

[Stephen Laskowski]

Yes. That's code for Matty Michigan.