Evidence of meeting #77 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was poverty.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Harriett McLachlan  President, Board of Directors, Canada Without Poverty
Daniel Demers  Director, National Public Issues Office, Canadian Cancer Society
Patti Miller  President, Canola Council of Canada
Bernard Brun  Director, Government Relations, Desjardins Group
Pierre Gaudreau  President, Réseau Solidarité Itinérance du Québec
Leilani Farha  Executive Director, Canada Without Poverty
Luc Godbout  As an Individual
Henri Rothschild  President and Chief Executive Officer, International Science and Technology Partnerships Canada, Canada-Israel Industrial Research and Development Foundation
Juan Gomez  Director, Policy, Toronto Board of Trade
John Alho  Associate Vice-President (External), Government Relations, University of Manitoba

5 p.m.

NDP

The Vice-Chair NDP Peggy Nash

Okay, we will check.

5 p.m.

As an Individual

Prof. Luc Godbout

May I continue?

5 p.m.

NDP

The Vice-Chair NDP Peggy Nash

Yes, please continue.

5 p.m.

As an Individual

Prof. Luc Godbout

As you will see, the problems we identified are much more obvious for single-parent families. When children are part of the equation, the problem of implicit taxes becomes much more serious. Basically, what we did was base our calculations on half of the average income up to three times the average income, and we tried to see what happened each time the income was 1% higher than the average income. What we wanted to know was how much goes back to the federal and provincial governments when you earn $400 more.

And here we see that there's a problem. The study did not cover all of the provinces in Canada, but it did cover two provinces, Quebec and Ontario. What we saw was that the implicit tax rate — when you make $400 more — has a bigger impact on people with low incomes, namely those whose income is lower than the average income and who make less than $40,000. If you make $400 more, you pay more in income tax and in social contributions and get fewer tax benefits. This is not really because of increased income tax, since we use a progressive scale. It has more to do with the tax benefits you lose for every dollar more you make.

I have prepared some images, since it is more difficult to explain without images. Let's take the case of a single-parent family with two children. For Quebec, let's take the average income of $40,000. If the family makes $400 more, the government takes back 80% of that. So the family is making $400 more but gets only about $86 in its pockets, especially because of lost tax benefits.

The results in Ontario are similar. A single-parent family making $400 more will lose $111 in benefits from Ottawa, $91 in child tax benefits and $20 in GST credits. These two things mean that there is little incentive to work. You will see that from the document. These same problems exist for two-parent families.

Does this situation that exists in Quebec and Ontario also exist elsewhere in the world? I ran the numbers for the U.S. and the results are not the same. They do not have the same problems of high tax rates for people with low incomes in the U.S. I also ran the numbers for the other G7 countries. In the study that will be published tomorrow, you will see areas in which Quebec and Ontario have the highest numbers among the G7 countries in terms of variations in income taxes. I looked at the numbers for the Scandinavian countries, which, as we know, have high taxes. Their benefits do not decrease as their incomes increase. The result is that, in some small segments of the population here in Quebec and Ontario, taxes are higher when people earn $400 more.

In closing, I believe we have to study this problem further. We have to try to understand whether having the highest taxes for some income groups when they make $400 more could become a trap leading people into poverty. Could this become a disincentive to work? We have to try to understand how many taxpayers are impacted by this and ensure that the federal and provincial governments hold consultations to improve this situation. I believe this is a priority.

5:05 p.m.

NDP

The Vice-Chair NDP Peggy Nash

Thank you very much.

Thank you very much.

Mr. Rothschild, you're the next witness. You have five minutes, please.

5:05 p.m.

Dr. Henri Rothschild President and Chief Executive Officer, International Science and Technology Partnerships Canada, Canada-Israel Industrial Research and Development Foundation

Thank you, Madam Chairman, and members of the committee.

I represent both the Canada-Israel Industrial R and D Foundation and International Science and Technology Partnerships Canada, two organizations mandated by the Government of Canada to deliver an important economic development program which has relevance to budget 2013, and hence my presence here.

This program is aimed at connecting Canadian technology-based firms with counterparts in four countries: Israel, India, China, and Brazil. They were chosen because they're important trade, commercial, market, and technological partners. The rationale is simple: technological partnerships are effective ways of achieving a dual objective, thus staying at the leading edge of innovation through the pooling of know-how and accessing important new markets through strategic partnerships.

What have we achieved and learned?

Our initial experience with Israel, which began 10 years before the three other countries, has demonstrated that a modest but focused investment of only one million dollars per year by Canada, matched by our counterparts in Israel, has resulted in economic value defined by sales, investment, and market access that is estimated to be in the hundreds of millions of dollars, through the support of 90 bilateral R and D projects.

Just as a case study, of which we have many, SiGe, an information and communication technology company in Ontario, through a $500,000 grant for a project with an Israeli semiconductor design leader, has gained 30% market share for laptop power amplifier applications. It generated $10 million in sales per year, resulting in $290 million in investment and acquisition and maintaining 60 jobs in Canada.

Indeed, our experience with Israel has shown that such a program has paid off in a manner that exceeds most, if not all, instruments of economic and innovation policy. We've applied this approach, still with very modest funding levels, to India, China, and Brazil. The results are early, but indicate the following—

5:05 p.m.

NDP

The Vice-Chair NDP Peggy Nash

Excuse me, Mr. Rothschild. Could you speak a little more slowly for the interpretation?

5:05 p.m.

President and Chief Executive Officer, International Science and Technology Partnerships Canada, Canada-Israel Industrial Research and Development Foundation

Henri Rothschild

Sorry. I did submit.... Okay.

What our application in the other three countries has demonstrated is the incredible interest by the small and medium-sized community in this country in this kind of partnership. It's important for us to have presence in these countries with enormously growing markets, and it's very hard, especially for small companies, to do so. The partnership work that we do is very relevant to them.

For example, we've had over 500 expressions of interest of Canadian groups wanting to partner with China, representing 4,000 scientists and engineers at both ends. An important point to note is that 65% of the Canadian lead applicants are Canadians who have origins in China and recent origins in China. Most came as doctoral students, as post-doctoral fellows, or as other exchange students, reinforcing the recommendations presented by the report on international education, released just recently, on the value created by the international exchange of students.

Technology partnership leads to market application. We have a project with a company in Alberta, called Alta Genetics, which develops basically genetic testing of dairy herds to improve the safety and the quality of meat. It has already an investment of $200,000 through our program, over $7 million in revenue, and a presence in the Chinese market.

We've also determined that global partnerships stimulate the commercialization of technology from university to industry, as some 50% of our current Canadian applicants are themselves partnerships between academia and industry. This is important in the context of implementing the recommendation of the Jenkins report for trying to commercialize technology from academia to industry, an important issue for Canada.

This issue is something that's important for all governments around the world. Israel, a country with one-seventh the GDP of Canada, spends $250 million every year to partner its technology-based companies with over 25 countries around the world.

The Chinese program, for its part, has increased 20-fold in the last eight years. That trend is continuing, to a point where it will be difficult to engage China commercially without engaging it technologically.

The current program is basically $1 million per year per country. It doesn't come close to delivering on the potential and the opportunity.

Here we are in sync, in total sync, with experts in trade policy and senior officials in the Department of Foreign Affairs and International Trade in proposing a sustainable amount in the order of $20 million a year for five years. Based on our experience, what will this deliver? It will deliver something in the order of half a billion dollars' worth of collaborative research effort between Canadian small and medium-sized enterprises and the four countries in question, representing an expected $2 billion to $3 billion in revenue, with hundreds of high-value-added jobs.

Members of the committee, technology leads to trade, not the other way around. This is a major shift in the realities of international commerce. This will increasingly be so in the years ahead, as advancing innovation has become the major force of change in the world. By building on our strengths and in fact our comparative advantages, Canada can make important inroads in the growth markets of the world with modest but strategic and highly leveraged investments, such as the program I described. This will give meaning to the definition of what constitutes an integrated trade policy, which is an important agenda for this government.

As we have heard from many wise sources, including the Governor of the Bank of Canada, our market competitiveness will no longer come from a lower dollar but from improved market presence in high-growth economies. Programs such as ours give practical action items that achieve this very objective.

Thank you.

5:10 p.m.

NDP

The Vice-Chair NDP Peggy Nash

Thank you very much.

Mr. Gomez, you have five minutes.

5:10 p.m.

Juan Gomez Director, Policy, Toronto Board of Trade

Good afternoon.

My name is Juan Gomez. I'm the director of policy for the Toronto Board of Trade. Thank you for inviting me to appear this afternoon.

Founded in 1845, the Toronto Board of Trade is Canada's largest chamber of commerce, connecting 10,000 members and more than 200,000 business professionals and influencers throughout the Toronto region.

Next year, we'll be celebrating our 125th anniversary. The board advances the success of our members and the entire region by facilitating opportunities for knowledge sharing, networking, business development, and city building.

At the outset, I want to stress the importance of Canada's major city regions to the strength and vitality of our national economy. In the case of the Toronto region, its assets are a diverse economic base and robust labour and consumer markets. Accounting for about 45% of Ontario's and 20% of Canada's GDP respectively, the Toronto region's weight in national terms is comparable to that of other leading world cities. By way of comparison, greater London accounts for 19% of the U.K.'s total output, while the metro New York region produces almost 9% of American GDP.

Maintaining this economic dynamism is not easy, especially within an economic environment characterized by considerable political and economic uncertainty in key export markets like the U.S. and Europe. Key to the success of our region's and nation's economy is having both a credible fiscal plan and a clear strategy to drive private sector growth. As events in the U.S. and Europe demonstrate, not having a credible fiscal plan becomes a drag on economic growth, increases debt servicing cost, and threatens the ability of governments to pay for vital investments in human and physical capital. At the same time, without a clear strategy to drive private sector growth, government revenues are jeopardized, as is our ability to grow our economy.

Building our nation's economic competitiveness, and in particular our ability to compete globally in attracting foreign inward investment and acquiring new export markets must be a central focus of the budget and its spending priorities.

From the board's standpoint, a critical pillar to ensuring Canada's economic vitality is modern and well-maintained physical infrastructure. As economic research amply demonstrates, solid infrastructure is critical to business competitiveness and the success of our national and urban economies. We commend the government for recent infrastructure investments, including the federal gas tax fund, the economic action plan, and the Building Canada plan, and for making the gas tax fund permanent, all of which have strengthened Canada's infrastructure and economy. However, despite the progress made in addressing urban challenges, many still remain, whether it's public transit or physical infrastructure like roads and sewers.

Our first recommendation is to renew the Building Canada fund in order to support the infrastructure priorities of urban Canada. This should include maintaining the value of the gas tax fund to ensure it keeps up with rising costs. This could perhaps be achieved through an indexing or fixed percentage mechanism. We also see it as critical that there be long-term funding streams developed for core infrastructure like roads, ports, and public transit.

Our second recommendation is to ensure we build our nation's capacity to compete globally for trade and investment. Undoubtedly, successful negotiations on trade and investment agreements, including the European Union and India, and intensifying focus on high-growth countries in the Asia-Pacific region will directly benefit Canadian businesses and workers across Canada.

However, to fully take advantage of these opportunities, we must have firms that can compete with tough foreign competition and a business environment that is attractive to foreign direct investment. Critical to Canada's competitiveness is the strength of our regional business clusters. Clustered industries typically sell to markets beyond their local region and are more productive and innovative. For this reason, cluster-based strategies are an effective way to foster innovation, improve productivity, and strengthen the international competitiveness of Canada's regions.

We therefore invite the federal government, perhaps through FedDev Ontario, to work in partnership with the Toronto Board of Trade in carrying forward an important initiative we are now undertaking to grow and strengthen key clusters in the Toronto region, such as the food and beverage cluster and health and life sciences.

5:15 p.m.

NDP

The Vice-Chair NDP Peggy Nash

I'm sorry, but your time is just about up.

As well, I need to interrupt you. Can I get unanimous consent from the committee under Standing Order 115(5) that we remain until 5:30?

5:15 p.m.

Some hon. members

Agreed.

5:15 p.m.

NDP

The Vice-Chair NDP Peggy Nash

Thank you.

Do you have a couple of concluding words? Your time is just about up.

5:15 p.m.

Director, Policy, Toronto Board of Trade

Juan Gomez

Lastly, at the same time that the government looks for efficiencies in the delivery of government services, we must ensure we don't weaken our federal export trade support infrastructure. A successful strategy for Canada must support Canadian firms that wish to go global, and we must ensure we coordinate inward investment promotion efforts between the federal government, provinces, and municipalities.

That concludes our recommendations.

Thank you.

5:15 p.m.

NDP

The Vice-Chair NDP Peggy Nash

Thank you very much.

Mr. Alho, you have five minutes please.

October 16th, 2012 / 5:15 p.m.

John Alho Associate Vice-President (External), Government Relations, University of Manitoba

Thank you, Madam Chair.

Good afternoon. I'd like to start by thanking members on behalf of Dr. Barnard, president of the University of Manitoba, for your kind invitation to appear before the committee. He sends his regrets for not being able to personally join us here today.

First I will provide some context. The University of Manitoba was established in 1877 as western Canada's first university. The university serves 28,000 students, making it the largest university in Manitoba. As one of Canada's leading research-intensive universities, it is a member of the U15 and is ranked 12th out of the top 50 research-intensive universities across our country.

The University of Manitoba feels a sustained foundation for Canada's economic recovery and growth stems from three primary areas in which the federal government should continue its investments. Those three areas are investments in research, investments in international education, and investments in aboriginal higher education.

The university believes that the government should continue its investments in research particularly by enhancing the core funding for the three granting councils and the Canada Foundation for Innovation, CFI. Tri-Council support is the essential pillar supporting research activity across our country. Funding from CFI provides a world-class infrastructure that allows our researchers to collaborate with industry and research partners around the world. Research funding, together with support for graduate students, creates the opportunities and the skill sets that grow the economy and improve Canada's productivity over the long run.

The University of Manitoba is a leader in fostering research partnerships with the private sector. Over the past decade, the university has garnered eight NSERC synergy awards for innovation that recognize outstanding university-industry collaboration. In accordance with the federal science and technology strategy and the findings of the Jenkins report, the university encourages further investments in partnership programs like those administered through the granting councils that foster research partnerships between SMEs and universities.

The second point I'd like to make today is that investing in international education is critical for the economic growth of Canada. The university provides post-secondary education to over 3,000—

5:20 p.m.

NDP

The Vice-Chair NDP Peggy Nash

I was sorry to interrupt.

5:20 p.m.

Associate Vice-President (External), Government Relations, University of Manitoba

John Alho

The University of Manitoba has over 3,000 international students from nearly 100 countries. These students bring different perspectives to our campus and contribute to the local economy.

To attract the best and brightest from abroad, our first step is the coordination of marketing and branding of Canada as a destination for international study. The economic impact of such investment is quite significant. International students contributed over $8 billion to the Canadian economy in 2010. Moreover, international students, upon graduation, form a highly trained pool of potential immigrants, and those who return to their home countries serve as an international network that can be leveraged by business and public sectors.

At the same time, we should enhance opportunities for Canadian students to enrich their education through programs for study abroad. These students gain a global perspective and are exposed to different ways of thinking. They develop knowledge of different cultural and business environments and, upon their return, increase Canada's international opportunities.

Finally, we would recommend that the government increase investments in aboriginal higher education. It's estimated that 1.5 million Canadians will be of aboriginal ancestry by 2026. One-third of aboriginal Canadians have not completed a high school diploma and only 8% of Canada's indigenous populations have earned a university degree. If this trend continues, many of Canada's aboriginal peoples will not have the opportunity to participate fully in the economy of tomorrow.

The University of Manitoba welcomes over 2,000 indigenous students totalling over 7% of our population. These are among the highest totals in Canadian universities. Although the majority of these students enter the University of Manitoba through the usual high school programs, the university has established a suite of access programs that provide support for those who need it.

Reaching students in the K-12 system well before they enter university is crucial. The university works with high schools to demonstrate not only the value of post-secondary education, but also its feasibility. We believe that such reach-back mechanisms can transform the post-secondary situation and the lives of many aboriginal Canadians.

The federal government needs to support these types of university programs that address the unique needs of Canada's indigenous populations, while improving accessibility and quality of education delivered at the primary and secondary schools.

Greater federal investments in family and community and financial support for aboriginal students are of the utmost importance. By training a highly qualified labour force able to meet the emerging needs of our economy, and through research and innovation, Canada's universities play an important role in enhancing Canada's international competitiveness.

The University of Manitoba encourages the government to build on measures outlined in budget 2012 and elsewhere by investing additional funding in university research through the granting councils and CFI; by investing in international education, both to attract top talent to Canada and to provide Canadians with opportunities to study abroad; and by making additional investments in programs supporting aboriginal education.

Thank you.

5:20 p.m.

NDP

The Vice-Chair NDP Peggy Nash

Thank you very much.

We'll now begin. I think we'll get time for one round of questioning only.

Mr. Caron, you have the floor.

5:20 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

I thank all of you for being here today. The presentations were very interesting.

I will start with Mr. Godbout. It's unfortunate that I don't have the documents in front of me. It makes it difficult to wrap one's head around the idea.

Unless I am mistaken, the idea of implicit tax looks at the distributed benefits in addition to the tax burden in order to measure the impact on certain family groups. Is that right?

5:25 p.m.

As an Individual

Prof. Luc Godbout

Indeed, it's very unfortunate that we don't have the documents. Everyone was looking at me questioningly. I think it was a bit of a waste of time to go through this exercise without the documents.

Implicit tax measures something specific. For example, if someone earns $100 more, what is the tax burden on that $100? Therefore it does not measure your average tax burden since there are other calculations that do that. It takes into account not only income tax, but also social security contributions to the Quebec Pension Plan, the Canada Pension Plan and employment insurance. What makes it unique is that it also takes into consideration any losses in tax benefits. It shows what tax benefits are lost if you earn $100 more.

When we do this exercise with the richest people, for example those who earn $250,000 or more per year, if they earn $100 more, they will have to pay roughly 50% in taxes to the federal and provincial governments combined. They will not make any more social security contributions since those payments will already have been made. Since they have been ineligible for tax benefits for quite some time already, they wouldn't lose any additional tax benefits.

As for those who are less wealthy, particularly the income group between $20,000 and $40,000, we note that they start paying taxes and continue making social security contributions, but they lose tax benefits.

5:25 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

I only have five minutes. I wanted to specify—

5:25 p.m.

As an Individual

Prof. Luc Godbout

These people lose tax benefits, and that's what is important to underline here. That's why we have some areas with rates of 80% among single-parent families in Quebec and Ontario.

5:25 p.m.

NDP

Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC

That's interesting. I can imagine, for example, that a family or person who earns an extra $400 on their $20,000 salary will contribute a greater amount of social security taxes, along with losing tax benefits. You said that that is not the case in other countries. Yet, other countries like the United States and those in Scandinavia also have tax benefits.

Why is the impact felt more here than it is in other countries?

5:25 p.m.

As an Individual

Prof. Luc Godbout

In the other countries, these benefit programs are universal. The tax benefits don't diminish as people earn more. In Canada, you may recall that there were family allowances up until the early 1990s. Everyone received $20 and that amount was not reduced. A decision was made to distribute this money differently and to add more. Those who don't have a lot of money receive more, and those who are richer receive less, if any at all. That is completely acceptable. The problem arises when everything is reduced, but taxes increase and tax benefits diminish. That's when the tax burden on each additional dollar becomes very high.