Finance Committee on Sept. 21st, 2006

[Deborah Windsor]

The answer to your first question is that the average income of Canadian writers from their writing income--whether it be books, magazines, whatever, because they are multipreneurs to generate an income--is, based on a study done last year by Canadian Heritage, $13,000 a year.

I think the next question you asked was about the actual amount of funding to Canada Council--

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Do you have a specific recommendation for the funding level you would like to see?

[Deborah Windsor]

Yes, we would like to see it doubled, as was promised by Minister Oda.

I missed the third question.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

The last one asked how many writers were directly affected by the bankruptcies in the publishing industry.

[Deborah Windsor]

In the Stoddart case, I knew that the books were lost, so we put out a call to ask writers how many had been affected, and if they could prove it by their royalty statements. We found more than 700 that one fall, for millions of dollars.

[Ron Brown]

To follow up, I've been personally affected three times by those situations.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

Thank you very much.

[Deborah Windsor]

Thank you. It's nice to know another Haligonian is here.

[The Chair, Conservative, Brian Pallister]

You have a minute, if you wish to use it, Mr. Savage.

[Michael Savage, Liberal, Dartmouth—Cole Harbour, NS]

No, I think I've made my point. I love writers, and I think we need to do more for them.

[The Chair, Conservative, Brian Pallister]

That was much appreciated. Thank you all.

I want to emphasize how much the committee, and all of us, appreciate you and the time you've taken to prepare your presentations and the work you do on behalf of your organizations and the people who count on you. We thank you for being here. We very much appreciate it.

We will now suspend for a couple of minutes.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

Could I have a point of order first?

[The Chair, Conservative, Brian Pallister]

There is a point of order from Madam Wasylycia-Leis.

[Judy Wasylycia-Leis, NDP, Winnipeg North, MB]

We had a reference to a study that I think we should get as committee members from the Nunavut people, and that is the Expert Panel on Equalization and Territorial Formula Financing. The report is called Achieving a National Purpose: Improving Territorial Formula Financing and Strengthening Canada’s Territories.

[The Chair, Conservative, Brian Pallister]

Speaking of people we count on who are unappreciated, our researcher will make sure we all get that. Thank you very much.

Again, thank you all.

We will suspend for about five minutes and allow the next panel to replace these folks in those chairs while our committee gathers some food.

[The Chair, Conservative, Brian Pallister]

The finance committee will recommence our deliberations on the pre-budget consultative process.

We welcome our guests today. We assure you that we can eat and listen at the same time, and we will welcome your presentations.

You will have five minutes. If you so desire, take a look up here and I'll give you a little hand signal when you have about a minute to go, just to let you know in advance, so you should draw your presentation to a conclusion.

I invite any guests who have cell phones with them to turn them to shock, if they wish.

We'll begin our presentations with Gerry Barr, from the Canadian Council for International Co-operation.

Five minutes, sir.

[Gerry Barr, President and Chief Executive Officer, Canadian Council for International Co operation]

Thank you very much, Mr. Chairman.

As you said, my name is Gerry Barr. I'm the president and CEO of the Canadian Council for International Co-operation. It's a membership body that takes in about 90 of Canada's leading civil society organizations working around the world. The council is also one of the principal organizations in Canada active in the Make Poverty History campaign that now engages the energy of many hundreds of citizens' organizations and more than a quarter of a million Canadians, who are pressing the government to take key steps targeted at eradicating global poverty and, here in Canada, at ending child poverty.

Of course, it's not the first time our organization has been before the committee to urge Canada to play its proper role as a foreign aid donor, commensurate with the strength of Canada's economy. Canada also needs to improve the quality of its aid, and that's why we welcome enormously Bill C-293, voted forward yesterday in the House of Commons for committee consideration. There is support in all parties for the idea that Canada should now commit both to more and better aid.

We hope that MPs will send that message powerfully once again when the time comes to vote on Motion-223, introduced this week by Caroline St-Hilaire of the Bloc Quebecois, which calls for a concrete financial strategy to achieve the aid target of 0.7% of gross national income in foreign aid spending and new aid legislation. So it is a very pertinent motion to the reflections of this committee, and it's coming up soon.

When you look at Parliament today, plainly there is a will to do better on all sides of the House, but is there a way? I think that's really where this committee and of course the Minister of Finance come in. CCIC is seeking a commitment from the current government to a strategy that would raise Canada's aid contribution to 0.5% of GNI by 2010; to increases in the international assistance envelope, targeted at official development assistance purposes of 18% annually; and subsequently to achieve the internationally accepted target of 0.7% of GNI by 2015.

Our organization estimates that Canada's ODA performance in 2006-07 will be $4.5 billion—in reality, unchanged from last year—notwithstanding a planned 8% annual increase. Canada's aid to GNI performance for 2006-07 is estimated at 0.32% and is likely to decline to 0.3%, producing a plain downward trend in Canada's donor performance overall. The decline results from a strong growth in the Canadian economy that will easily outreach the modest projected increases of 8% annual growth in Canada's aid budget. In fact, the current strategy of 8% annual increases in Canada's aid budget is unlikely to improve Canada's current GNI performance much by 2010.

During the last election, Mr. Harper took on a personal target for increasing aid spending to the level of average donor performance by 2010. At the time Mr. Harper made that commitment, the average donor performance was 0.42%. There are ways to achieve that target. We'll set them out in a brief, which I'll be able to provide to the committee in several days, once the estimates have come out.

Parliament has a goal of 0.5% by 2010, which was articulated about a year ago in June when it gave consensus support to this committee's 12th report to the House. It seems likely that, thanks to Madam St-Hilaire, Parliament will again offer an opinion on the subject—and we judge that this will be successful too. That is the optimum public consultation for this committee, and I urge you to pay heed to Parliament when it speaks on this.

Thank you.

[The Chair, Conservative, Brian Pallister]

To continue, from the Canadian Space Industry Executives, we have Mr. John Keating, the CEO.

You have five minutes, sir.

[John Keating, Chief Executive Officer, COM-DEV, Canadian Space Industry Executives]

Thank you, and good morning. Bonjour.

At the outset, I want to thank the members of this committee for giving us the opportunity again to participate in these important deliberations regarding upcoming budgets.

My name is John Keating. I am the CEO of a company called COM-DEV. With me today are some other members of Canada's space team: Paul Cooper, from MDA, in Toronto, Montreal, and other parts of Canada, best known for the organization that built the Canadarm 1 and Canadarm 2, RADARSAT, and the soon-to-be-launched RADARSAT-2; Ken Gordon, from Telesat, Canada's leading satellite service company, the guys who provide the silent glue that holds our telecommunications infrastructure together in Canada; and Dave O'Connor, from Magellan/Bristol in Winnipeg, designers and builders of Canada's new small type bus. Together with many other firms across the country, we are Canada's space team, providing technology and infrastructure to facilitate the ongoing growth of our economy and strengthen our social and economic union.

You will have received a copy of our submission to the committee, which outlines our perspective on the current situation facing Canada in this area. We've also circulated to members some examples of why space is important to Canadians. Space technologies are largely taken for granted. They are, however, absolutely essential to our everyday lives. I'd summarize our brief as follows.

Canada and Canadians are justly proud of our achievements in space. As the third nation in space, Canada has a magnificent track record. Although our program is small in comparison with other nations, we've established ourselves as world leaders in key niche technologies. Our success has been built on a common understanding that space offers unique solutions. With Canada's vast land mass, a three-ocean coastline, and untapped mineral and environmental riches, space is a strategic capability that has been and will be instrumental to Canada's success.

However, as you will have read in our brief, the government-industry partnership that contributed to our current position has been allowed to break down. At a time when our competitors around the world are benefiting from very substantial investments in national and international space programs, Canada has seen its investments in space technology and research decline, in real terms, by 40%. Meanwhile other nations in Europe, the United States, Japan, Russia, and developing countries such as Brazil, India, and China are all investing heavily in new space programs to meet strategic national priorities.

So what does this mean for Canada's space sector? First of all, I'm proud to report--I have to tell you--that my own company, COM-DEV, is doing very well. We've just announced a terrific third quarter. Our revenues are up 32% over last year. Margins and return on equity are at high levels, our backlog is very healthy, and our prospects going forward into the next year are very robust. So we're doing very well. Others in this sector are posting similar performance. So given these results, why should we be here today expressing our collective concern about the decline in the Canadian government's space investment?

The reason is that we're successful today in part because we are reaping the benefits of the technology developed five to eight years ago. The space business has long cycles indeed. On a global basis, growth and innovation in this sector are driven by technologies created in national programs. In Canada's case, these include such programs as RADARSAT and the Anik F2 broadband communication satellite.

Although the government's investment in space accounts for only a small part of annual space expenditures--in Canada, it's only 10%--it's a strategically important part. Government programs enable the development of leading-edge technologies and provide an opportunity to prove that technology by being the first user. Industry, then, aggressively markets this technology to the rest of the world. This has been the secret of our success. That's why our modest space program has consistently created world-leading technologies and scientific excellence. Today we see a declining investment in Canada and dramatically increased investment elsewhere in the world. The dilemma for us is how do we in Canada stay at the forefront of technology development when the investments required are only to be found offshore?

As our submission states, the Canadian space program urgently needs government attention. We need leadership at the Canadian Space Agency, and we need direction. That direction can only come through a consultative process leading to a new and invigorated national space plan. We need a plan for Canada, one that's targeted in our national interests: in security, coastal and Arctic sovereignty, environmental monitoring, resource management, and advanced communications infrastructure. All of these objectives can be provided through secure indigenous Canadian technology alternatives.

Speaking for the leading players in Canada's space industry, we urge members of this committee to confer with the Minister of Finance and the Minister of Industry to recommend that action on Canada's space priorities be brought forward for consideration in budget 2008. There is much work to do. We in industry are ready to work with the government to define the way forward. Failing to act could well result in the loss of strategic national capability and our independent access to space. These are necessary to meet the clear and urgent needs of Canada, both now and in the future.

Thank you very much for listening to me.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Mr. Keating.

We'll continue with the Business Tax Reform Coalition, the president, Roger Larson.

Five minutes, sir.

[Roger Larson, President, Canadian Fertilizer Institute; Member, Business Tax Reform Coalition]

Thank you, Mr. Pallister, and members of the committee.

I'll clarify my role. I am president of the Canadian Fertilizer Institute and a member of a coalition called the Business Tax Reform Coalition. The members of the coalition include the chemical industry in Canada, plastics, steel producers, the Conseil du Patronat du Quebec, forest products, the petroleum sector, the information technology sector, the mining industries, etc. We're a coalition of 13 large trade associations spanning a number of sectors. We are competing directly globally from a small open Canadian economy.

Our members have production of over $350 billion, exports of over $250 billion, and direct employment of 1.7 million people. Our jobs are high paying, jobs that Canada will need in the 21st century to sustain our standard of living. Members of our coalition do what Canadians do best, taking the resources that our country provides and applying highly skilled Canadians to provide the economic base of our country.

The Business Tax Reform Coalition would like to note that the government is on the right track in improving Canada's tax competitiveness with the reduction of the corporate tax rate to 19% and the elimination of the capital tax. We also want to thank the finance committee for its foresight in developing this year's theme, Canada's place in a competitive world.

We welcome this opportunity to specifically identify how a competitive tax regime might help address competitive issues. Our members collectively represent the challenges that Canadian industry faces in an increasingly competitive world. We have a high Canadian dollar, sustained high energy prices and intense competition from emerging economies like China and India. While these are external factors, they challenge industry and government to focus internally on measures to adjust to these forces and to allow Canadians to compete in the global marketplace.

Capital is mobile. Production chains are global. Industry needs to do its fair share in terms of business strategies, and government has a role to play in ensuring that its policies and fiscal regulatory framework encourage investment in Canada and equips Canadians to compete in the global marketplace. On this front, much has already been done and is being done. Canada has invested in skills upgrading. Canada has invested in education. Canada is exploring immigration opportunities to address skills shortages. And Canada is investing in infrastructure to facilitate goods movement in global supply chains.

Nevertheless, Canada does not present a clear competitive advantage to potential investors, and as a consequence, we are losing out in attracting the newest and best technologies needed to permit leadership and growth, job creation and environmental performance. What is missing is investment in new equipment, technology, and machinery. Capital investment per worker in Canada is lower than it is in the United States and in other countries in the OECD. Canada has become a net exporter of capital and must compete for investments with other jurisdictions around the world.

Current investment in the manufacturing sector is insufficient to cover assets, retirement, and depreciation. We need to restore Canada as a place to invest in new manufacturing equipment and technologies and secure Canada's role in global supply chains. We need to develop a competitive tax regime and send the right signal to potential investors around the world. We're recommending that we introduce a two-year accelerated capital cost allowance for machinery and equipment, and we're asking that the government schedule a reduction in corporate income tax rates to 17% for all manufacturing and open a clear advantage for Canadians.

Thank you, Mr. Chairman.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. Larson.

We will continue with Pekka Sinervo from the Coalition for Canadian Astronomy. You'll have five minutes, sir.

[Pekka Sinervo, Representative, Association of Canadian Universities for Research in Astronomy (ACURA); Dean of Arts and Science, University of Toronto; and Co-Chair, Coalition for Canadian Astronomy]

Thank you.

Good morning. On behalf of the Coalition for Canadian Astronomy, it is a pleasure to speak before the committee today.

I serve as one of the three co-chairs for the coalition, representing the Association of Canadian Universities for Research in Astronomy. I am also the dean of arts and science at the University of Toronto. In attendance with me is Michael Jolliffe, the industry co-chair of the coalition.

I would like to touch on a few key points from our written submission.

The coalition strongly believes government must strategically invest in scientific research to ensure that Canada remains competitive in the global knowledge-based economy. We understand that government must constantly make decisions as to what it must fund and what not to fund. We believe strategic scientific investment is at least as important as investments in traditional manufacturing or resource industries. This funding must be seen as an investment in Canada's economic future and a public good, just as vital to our economy as roads, ports, or other infrastructure.

We know the government faces pressure from many interest groups to fund many different scientific initiatives; however, astronomy is the only discipline that has a clear plan that brings together Canada's scientific, academic, and industrial resources to achieve continued scientific excellence. We are asking the government to fund the remaining elements of our long-range plan for astronomy and astrophysics, what we call the LRP. This would require an investment of $235 million over the next seven years.

As our brief demonstrates, astronomy pays huge dividends to our economy, providing hundreds of jobs, several hundred million dollars in business revenue, and countless advances in technology and expertise that have propelled Canadian industry to world leadership in many diverse fields.

However you measure it—scientifically, academically or economically—astronomy is a Canadian success story. Historically, Canada has received a 2:1 direct return on all of its federal government investments in astronomy research. The knowledge gained in supporting astronomy leads to new business opportunities in sectors far removed from the field.

One quick example is AMEC, Michael Jolliffe's firm, which is a world leader in the design and development of telescopes and their enclosures because the federal government committed to an international partnership in the mid-1970s. AMEC's work on various telescope projects and spin-offs from these projects—including, believe it or not, theme rides—have now returned over $300 million to Canada's economy, not including a pending $100 million contract that depends on continued support from the federal government.

AMEC is just one of the many Canadian companies benefiting from Canada' s involvement in astronomical pursuits. These benefits to Canadian industry will be realized only if we continue to have top-level astronomers in Canada.

To that end, the coalition's success has also generated an explosion of interest in astronomy at the university level with the creation of new astronomy departments, doubling the number of students in astronomy in graduate and post-doctoral studies.

As well, astronomy has a disproportionate number of Canada research chairs. This has all occurred because of the support of the federal government.

Science has changed. Just like most other aspects of the economy and society, scientific pursuits are now international and they are big, costing in the hundreds of millions of dollars and with life spans of tens of years. Canada's astronomy community has adapted to this changing reality; unfortunately, government funding mechanisms have not.

The government needs to rethink its approach to scientific funding to ensure that those disciplines with a proven track record of success are given sufficient priority. Without priorities, Canada will be, at best, in the middle of the pack in numerous disciplines. With priorities, Canada can emerge as a world leader in a few select areas. We believe the latter delivers more benefits to Canada and to Canadian science and the economy.

Our submission describes how the astronomy community has overcome some of these funding challenges and presents a model for how Canada can make effective long-term investments in science to ensure its leadership in those areas where we have that capacity.

We believe our coalition is a model for other disciplines, offering a coordinated approach to scientific research that involves all relevant stakeholders.

Finally, returning to the bigger question, why should astronomy funding be part of this budget?

Investments in astronomy allow Canada to remain competitive through the development of new technology, the creation of a skilled workforce, and the emergence of a future generation of astronomers in our universities. Canada is perfectly positioned to capitalize on the investments made to date.

Our plan, the LRP, will deliver the economic returns to Canada that it should and will allow Canada to remain competitive. This is not a vague or vaguely defined proposal. Our plan is focused and coordinated. Research, development, and innovation are the heart of a competitive country. Funding the LRP is one of the best ways of ensuring Canada's long-term competitiveness.

Thank you very much.

[The Chair, Conservative, Brian Pallister]

We will continue now with the Association of Fundraising Professionals.

Rob Peacock, please proceed.

[Rob Peacock, President, Association of Fundraising Professionals]

Mr. Chair, committee, good afternoon.

On behalf of the Association of Fundraising Professionals, or AFP, I want to thank the standing committee for allowing us to speak today, but before I really talk, I want to thank the committee for its support of the elimination of the capital gains exemption on marketable securities in this year's budget. This committee supported that provision for several years and it's actually under your committee's leadership on this issue that it was finally helped to come to complete fruition. All of us at AFP and the charities across the land are so grateful for your leadership on this issue. It has been incredibly important for the voluntary sector.

AFP is the largest community of fundraisers in the world, with over 28,000 members represented in 180 chapters in five different continents. AFP works to advance philanthropy though ethical fundraising, with the development in 1964 of the Code of Ethical Principles and Standards of Professional Practice. I am the past-chair of the association in Canada. In Canada, we have more than 2,700 members working in 14 active chapters. The Toronto chapter, in fact, is the largest chapter of fundraisers in the world.

While it may not seem at first glance that this provision, as well as those that AFP is proposing today, have everything to do with competitiveness, the focus of his year's pre-budget consultation helped immensely, providing for the programs and services offered by the voluntary sector directly affecting education, health care, training, and social services.

In fact, I know the dean here at the University of Toronto. This is my alma mater. They were in a recent $1 billion campaign at the University of Toronto, and it was in fact the beginnings of the capital gains exemption that really helped propel that particular effort, which transformed philanthropy as we know it in this country.

Understand that the programs and services offered by the sector are not small and insignificant. Some 87,000 charities in Canada, which receive more than $10 million in contributions and so forth, affect over $100 billion worth of our economy. In fact, it's estimated that the sector accounts for nearly 7% of our country's gross domestic product, which is greater than many business sectors, including agriculture and the automotive industry. The proposals that increase the capacity of charities to provide these programs are critical. Unfortunately, the same kinds of barriers and obstacles that used to apply to gifts and securities need to be applied to land and real estate. That's why we're here today.

The Survey of Financial Security 2001 shows that more than 16% have assets of land beyond their principal residence. Many of these donors want to give gifts of land and real estate. Eliminating the capital gains tax creates a strong incentive for donors to give gifts. Most charities will simply sell the land and use the funds or the property in support of their programs and services. This incentive will help benefactors in propelling them to give thoughtful consideration to those types of requests that come forth from the charities that are seeking funds.

Given the evidence from our experience with gifts of securities, AFP does not believe that any sort of trial period is needed for eliminating the capital gains on gifts of land and real estate. If this committee will recall, it took nine years before this past winter for the committee, with the budget, to eliminate completely the capital gains. That was done forthwith, with the recommendations of both the standing committee for virtually eight of the nine years, as well as the Senate banking committee, which in 2004, in the pre-budget consultations, recommended in an interim report that we do have elimination of the capital gains on both land and property.

Winding up, Mr. Chair, we would also propose that the government give thoughtful consideration to a government-sponsored day called national philanthropy day.

We thank you very much. We also support our other sister organizations who are also asking for the capital gains exemption for private foundations.

Thank you.