Finance Committee on Oct. 24th, 2012

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

Thank you.

Ms. Amsden.

[Barbara Amsden]

We recognize that we're talking about the deficit, and we do think that it needs to be brought down. We think we can reallocate from other areas, rather than necessarily spending new. We think that the general tax rate for corporations is competitive and that it will help us.

As to where we could see some “tax spending”, it could be reallocated to what are known as flow-though shares, which could remain with oil and gas, but be extended to biotech and green and high tech. That would create some new jobs, and hopefully sustainable ones.

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

Thank you.

Mr. Staples, you were talking about scrapping the F-35 fighter program. Our friends will tell us that we absolutely have to replace the F-18s. What do you say to them?

[The Chair, Conservative, James Rajotte]

Please be brief.

[Steven Staples]

Our position is that the CF-18s do need to be replaced. I think there's a question of timing as to how much is left in them. We've spoken to National Defence experts. Retired colonels, who were responsible for the programs, said there's actually quite a bit of life left in them, depending on how they're used. So we have time to look at other options and do a proper, competitive, open process.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Hoback, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Mr. Chair.

I'd like to welcome all the witnesses here this afternoon. It's great to see you. Your testimony is very important. Unfortunately, we only get five minutes to talk, so I don't get to talk to everybody. I know I'd like to talk to Mr. Scholz and Ms. Amsden, but I won't get time to get there, so I'll talk afterwards. Your labour issues and some of the comments you made are definitely issues in Saskatchewan.

Ms. Walmsley, I want to focus on you and some of the suggestions you made in your recommendations. One of the recommendations that stuck out a bit was the list of stock exchanges. Can you give us some background information on how that list is created? How should that list be modified? Is there a process we need to be going through to see that list being updated all the time, so that it's always fluid, instead of being static and getting looked at every number of years?

[Katie Walmsley]

That's an excellent question.

We've been exploring this issue with the Department of Finance, both the background and options to keep the list up to date. I'm not clear on the history of the list. What I am aware of is that the process today to add exchanges to the list is very complicated. Foreign exchanges have to go through an application process and in effect prove their regulatory controls are in place and prove their worthiness to Canada. The challenge with that, as the committee I'm sure is well aware, is that Canadian tax law is not well known around the world. A lot of the exchanges that are not listed are in the emerging markets, and it's probably not a priority in their mind to get on the Canadian list. In the last five years, to my knowledge, there have only been two exchanges added to the list: Bermuda and the Canadian National Exchange.

Our recommendation to the government is to look at an alternative process, because we don't think the current process is working and we don't think it is going to maintain the list; and look at other third-party options to validate the process, look at whether they're IOSCO members and OECD members, and look at whether Canada has a signed tax treaty with the country. We think there are a lot of options to make the list more relevant.

My final point would be that, because we have a list, it almost looks as though we are endorsing certain exchanges. The exchange list is predominantly, as I said, Canada, the U.S., and Europe. Our recommendation is to make sure the list is kept modern and up to date, and to allow Canadians to diversify their retirement savings and to have options beyond the more traditional western markets.

[Randy Hoback, Conservative, Prince Albert, SK]

This government has been very active and aggressive in trade abroad with different types of trade agreements with different countries.

Is this something that should be part of our trade deals, something we should be looking at when we do a trade deal, for example, with Panama, Colombia, TPP, or CETA? Is that something we should be looking at?

[Katie Walmsley]

That's certainly an option.

Right now, if we are negotiating trade with a country where their exchange is not on our list, Canadians cannot invest their RRSPs in an equity that's on a foreign exchange in that country.

[Randy Hoback, Conservative, Prince Albert, SK]

Why should we even have a list? Why wouldn't we just allow anybody to go there?

[Katie Walmsley]

That's a good question.

We've explored other countries to see whether a similar list exists. To our knowledge, we're not aware whether, in the U.S., for example, there is a similar list of specific exchanges. I believe it would be an option to eliminate the list, because there is a risk the government is in effect endorsing certain exchanges. The reality is that there is a due diligence process that any investor or investment manager goes through. Just because a company is on a certain exchange does not necessarily make it an appropriate investment.

[Randy Hoback, Conservative, Prince Albert, SK]

Ms. Amsden, is there anything you wanted to add to Ms. Walmsley's comments?

[Barbara Amsden]

We have written on the same issue. There are some things that could be done fairly quickly by accepting any exchange that is in an OECD country, because you have certain standards that are in application. I had never thought of it the way you did; potentially that could be something we could give in a trade mission, as long as we're getting some satisfactory answers in terms of the quality of the accounting and systems behind it.

[Randy Hoback, Conservative, Prince Albert, SK]

You talked about tax and professional management fees, the GST in that portion. Why do you think you should be exempt? I have a hard time understanding that one.

[Katie Walmsley]

We're not necessarily recommending full exemption; we're suggesting potentially turning the clock back to at least July 1, 2010, and looking at GST only. That would eliminate the additional tax in all the harmonized provinces.

The issue really comes down to this: the government has prioritized retirement savings and has addressed the fact that we need to do something to help Canadians save more. There is pension reform going on to help underfunded pension plans. This is one form of helping Canadians have more capital, pay less tax at the time of saving, and have more retirement savings in the future.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Hoback.

Mr. McGuinty, please.

[David McGuinty, Liberal, Ottawa South, ON]

Thank you, Mr. Chair.

I would like to turn to Mr. Scholz for a moment. He did not get the chance to finish his presentation by talking to us about a national natural gas strategy.

Mr. Scholz, I'd like to come back to your testimony. You were clipped off just when you were alluding to, I think, a natural gas strategy.

Could you take maybe less than a minute just to walk us through what your thinking is in this regard?

[Mark Scholz]

Thank you very much, Mr. McGuinty, for allowing me to talk a little bit about this.

I think we have a huge opportunity here within Canada. Right now we have an abundance of natural gas, which is one of the cleanest-burning fossil fuels. The price point for this fossil fuel is tremendous. I think we should be encouraging the adoption of natural gas into electrical power generation. I think we should be looking at incentives to look at converting commercial trucking fleets to natural gas, where we can....

Frankly, from our perspective, in terms of what we're drilling, 80% of our wells are oil. When we have fluctuations in the cost of oil, and we don't really have much as an alternative to drill for, if we can provide some incentives on the supply side and the demand side of natural gas, I see a tremendous benefit for our industry, just as I do on the side of our attempts as a country to reduce our greenhouse gas emissions. That's certainly an incredibly important piece for Canada to pursue—our carbon emissions.

[David McGuinty, Liberal, Ottawa South, ON]

That's exactly where I wanted to take you next, Mr. Scholz.

The American chamber of commerce's 21st century research institute on energy is now advising both political parties on Capitol Hill that the United States is going full steam ahead into natural gas, including shale gas and shale oil.

The Chinese have found massive deposits of natural gas in the southwest. They are building pipelines to their cities on the eastern side of the country.

I wanted to ask you about the need to address natural gas, and about how we can do that if we don't actually have an adult discussion in Canada right now about a national energy strategy.

For example, we don't know how fossil fuels will connect to renewables, which will connect to hydro, and connect to nuclear, and connect to biofuels going forward. We don't know, with regard to the existing fiscal measures that are in place, what the net effects will be on our energy future. We don't know what the programmatic expenditures are having on our energy future. We certainly don't know how any of this is connected to Mr. Harper's promise to reduce greenhouse gases by 17% in absolute terms in the next 13 years.

Now, we're way behind every other OECD country that we've looked at. How do we do a natural gas strategy in the absence of a more fulsome national examination of what our energy future is all about?

[Mark Scholz]

That's a tremendous point, Mr. McGuinty.

In fact, our association is extremely supportive of a national energy strategy. I think we need to look at what our energy mix looks like 10, 20 years down the road.

Natural gas, from our perspective, is a tremendous alternative to be pursuing, particularly with electrical generation. Right now, just to give you an example, on our rigs we are in fact being extremely innovative, powering some of our equipment with natural gas and bi-fuel technology, whereby we can actually take some of the natural gas right from the wellhead to power our rigs. That's in fact directly reducing our carbon footprint.

We have to think critically on this. I agree that we need to sit down and have an adult conversation about how we can best utilize the abundance of natural resources on the natural gas side, and wind, nuclear, and hydro.

You're right. The conversation needs to happen.

[The Chair, Conservative, James Rajotte]

You have 45 seconds, Mr. McGuinty.

[David McGuinty, Liberal, Ottawa South, ON]

Ms. Amsden, just very quickly with regard to the markets, you mentioned that 60% of the TSX was effectively energy and financial services.

What's going on in the markets right now when people make choices around investing in companies? To what extent are they examining, for example, energy efficiency performance or overall sustainability performance? And do they have the metrics to do it?

[Barbara Amsden]

I don't know if they have the metrics to do it. That's the short answer. I think people care, but as to how easy it is to have an actual measure that people will be able to check quickly and easily, I don't know that it's there.

I'm interested enough in it myself that I will follow up with you on what I can find out once I get back to my office.

[David McGuinty, Liberal, Ottawa South, ON]

Thank you.