Finance Committee on Sept. 25th, 2006

[Andrew Jackson]

Our unit labour costs have been falling.

[The Chair, Conservative, Brian Pallister]

Excuse me, gentlemen. I apologize for the intrusion, but we'll move on to Mr. Pacetti.

There are just about three minutes, sir. If you could get your preamble down a bit, that would be good.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you. Yes, I'm not much of a preamble guy anyway.

I have two quick questions. Mr. Miller, out of curiosity I'm trying to understand the reason for the Ontario Police Association to make their brief. One of your recommendations is that you believe the government should commit to an additional 2,500 new officers. Is that just for the Ontario police? How would you propose the funding be channeled?

[Bruce Miller]

That commitment was across Canada, but certainly we would put forward that Ontario should get its fair share of new police officers based on Ontario's population as compared with the rest of the provinces. That money goes toward municipal and provincial levels.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

How do we fund that, through what program? We don't fund the OPP or the QPP, from my understanding.

[Bruce Miller]

It was a commitment made by the government during the election campaign. I also have to point out that when we did our public opinion polling, it was interesting to note, talking about—

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I'm just asking you how we would fund it. We don't fund, that I'm aware of, the provincial police forces. I'm just asking how we would fund it.

[Bruce Miller]

It would be a new funding program.

What I would like to point out concerning deficit situations is that it's interesting to note that when we surveyed Ontarians a couple of years ago—at the time there were concerns about government shortfalls—81% of Ontarians said the one area that should not be cut is police services, and 58% were willing to pay more for the policing.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I appreciate that. It's just a question about how, if we were interested in recommending it, we would do it.

My final question is for Mr. McKenzie, regarding your proposal. From my understanding there are a lot of other workers out there as well, the so-called undocumented workers. What's your situation on that? Would it be cheaper to put some money towards a program of regularizing or documenting the undocumented workers? Your trade association must have a position on that.

[Brett McKenzie]

When you refer to undocumented workers, are you talking about unqualified and unskilled workers working within the industry, or are you talking about foreign workers coming into Canada?

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I'm not sure whether they're unskilled; let's say undocumented. They would probably be skilled but undocumented—or else I don't think they would be working.

[Brett McKenzie]

In Ontario right now there is a push on with the Ontario government, in the Ministry of Labour, looking into that situation and making sure people have the proper skills and credentials. I think there's an enormous number of unemployed qualified, skilled Canadians currently who cannot for fiscal reasons travel outside of their home location to go to work, because there's no incentive for them. If they cannot travel from here to Alberta and receive a tax incentive, common sense tells me someone will not leave home and leave their family to make less money than they would collect on the EI system.

I don't know whether I've addressed your question.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Not at all.

Thank you.

[The Chair, Conservative, Brian Pallister]

On that unfortunate note, madam and gentlemen, we appreciate on behalf of the committee your time today and very much appreciate your comments and the briefs you previously submitted to us. Thank you.

We'll invite the next panel to make the exchange as quickly as possible. We will recommence momentarily.

[The Chair, Conservative, Brian Pallister]

I invite our committee members to resume their positions and I will welcome our second panel.

I'd also encourage those who are not participating to take their conversations to another part of the building, and we'll move on with our meeting.

Thank you, panellists, for being here. We very much appreciate your taking the time, and we look forward to your presentations.

Five minutes is what you're limited to. I'll give you an indication when one minute remains. We'll try to keep it on track so that we leave time for the exchanges that are so important in this process, which you just witnessed taking place in the previous panel.

To start us off, we have the International Association of Fire Fighters. The representative is Mr. Lee. Would you like to commence, sir?

[Jim Lee, Assistant to the General President, Canadian Operations, International Association of Fire Fighters]

Thank you very much, Mr. Chairman.

Once again, I appreciate the opportunity to be here today on behalf of the 20,000 professional firefighters we represent across Canada.

The national compensation benefit for the families of fallen firefighters and other public safety officers such as police is long overdue in Canada. It's a matter of equity. It's a matter of dignity for the family and it's a matter of ensuring that never again does the family of a fallen firefighter have to face financial hardship. Yes, it has happened, and it will happen again unless there is a national standard in place, a minimum amount of compensation covering all Canadian firefighters.

What currently exists is a patchwork of provisions. A small handful of these provide a meaningful benefit but the vast majority do not. What the family will receive depends upon where they live. It depends upon what province they're from or what city they live in. Should the dignity of a fallen firefighter's family depend upon which city or province they live in? I believe that an overwhelming majority of Canadians would want the federal government to establish a national benefit, and I urge you to recommend that the next budget include the funding necessary for the federal government to establish a national public safety officer compensation benefit here in Canada.

We propose that this benefit would be in the form of a one-time payment to the surviving family in the amount of $300,000. I ask you in your deliberations to recognize the essence of motion number 153, which stated that the federal government should establish a national compensation benefit for fallen firefighters. Motion 153 was adopted in the House of Commons in October 2005 by a vote of 161 to 112. We believe that was a clear indication that the majority of MPs, representing the view of the majority of Canadian citizens, believe that the government should establish this benefit.

With regard to funding for national hazardous materials and chemical, biological, radiological, and nuclear response training, five years have now passed since 9/11 and billions of dollars have been allocated toward national security here in Canada, but still not enough front-line first responders have received the training they need to respond safely and effectively to these kinds of emergencies. In 2005 the Auditor General identified problems in design aspects and in the pace of delivery of the federal government's CBRN training initiatives for the first responders. We note there have been improvements since then, but we assert that more needs to be done, and it has to be done immediately. Last year we surveyed 170 of our local affiliates to find out how many felt they had the training to respond safely and effectively to CBRN incidents. To our alarm, we found that only 19% of our local affiliates had any members trained to respond to a CBRN incident in their city. A full 75% had little or in fact no training at all.

A shocking number of Canada's first responders don't even have basic hazardous materials training. Just four days ago, fire chiefs in northern British Columbia told the meeting that fire departments throughout their region, and I quote, “were under-equipped and not prepared” and have “no protection of any kind” against hazardous materials emergencies. We propose that for $500,000 annually the federal government could solve this problem in all parts of Canada by funding the IAFF hazardous materials training for first responders program and our emergency response to terrorism operation programs.

Our programs could train 1,600 first responders every year to a recognized level of CBRN response. Our programs are not just for firefighters. They're also for police officers, paramedics, utility workers, and part-time firefighters, for example.

We can arrange a demonstration of our program for the federal government for something in the range of $8,000, but this should not be about money. It's about ensuring that all Canadians are protected against the aftermath of a CBRN incident.

I note that the public safety minister in a recent letter copied to our affiliate in Victoria, B.C., has indicated he wants to meet with the IAFF to discuss our programs, and we look forward to those discussions. In the meantime, I would urge this committee to recommend that this important national security item be reflected in the next budget.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you, sir.

We move on with the Canadian Home Builders' Association, David Wassmansdorf. Please proceed, sir.

[David Wassmansdorf, Immediate Past President, Canadian Home Builders' Association]

Good afternoon, Mr. Chair. Thank you for the opportunity to speak to the committee.

The Canadian Home Builders' Association represents the Canadian residential housing industry of builders, developers, trade contractors, and the like. I'm a home builder and land developer based in Burlington, Ontario, and with me today is Richard Lind, a renovator from Bridgewater, Nova Scotia.

We hope that you've had the opportunity to read our submission. I must say that it does touch on a broad range of topics. In our introduction we note that government mandated costs, regulatory burden, and skilled labour shortages are amongst our greatest challenges. In the context of those challenges we'd like to concentrate our remarks today on four key areas: the indexation of the GST rebate for new home buyers, skilled labour shortages, infrastructure investment, and the underground economy.

Turning first to the GST indexation, I must point out that as an industry we are pleased about the reduction of the GST from 7% to 6%, and we look forward to a further cut. Certainly this is a step in the right direction. But in 1991, when the GST was introduced, the government made a commitment that the GST rebate would be indexed, and this has not occurred. Over time, since 1991, prices have risen significantly and the rebates need to keep pace with those price increases. More and more home buyers are unable to receive the rebate.

In page 10 of our brief, we have a chart that gives you an indication of the significance of the problem. It's not just in major markets, although, of course, that's where the biggest jumps are occurring. As an example, in Vancouver in 1991, only 24% of the houses being purchased were priced at above $350,000. Today, in 2006, 97.6% of the houses were priced higher than $350,000. As a reminder for the committee, the GST rebate was a sliding scale between $350,000 and $400,000, so the effective tax over that $100,000 would eventually hit 7%. Just as another example, in Ottawa--taking this municipality--in 1991, 6.1% of all homes purchased were greater than $350,000; today 47.1% are greater than $350,000.

I should note, though, that it's not only new home buyers who are affected by this, because of course resale or used homes will keep pace with new home prices. So whether people are buying new or used, they are affected by this.

With respect to skilled labour shortages, all Canadians now understand the serious nature of the problem in all sectors of our economy. Of course, our industry is no exception, and we've made representations to this committee in the past in this regard. It's time to move past research and discussion and take real action.

Our industry has developed a human resource development action plan, and in this plan it calls for the federal government to play a key leadership role and to take forward action across the country to address the development and delivery of training in the residential trades through Canada's existing education and training system. This is all about capacity building. It's time to get on with doing the work.

Of course, related to this is the need to address immigration issues as a way of helping to address skilled labour shortages in the short term. Specific actions there would include changing the language and the range of employment requirements to remove barriers to ensure that skilled residential construction trades are included in the list of temporary foreign worker programs and to resolve the issue of undocumented workers without recourse to deportation.

[Richard Lind, First Vice-President, Canadian Home Builders' Association]

Moving quickly on to the infrastructure and underground economy, we're very appreciative of the indication the government has towards commitments in the infrastructure and we would want to see that the money is invested in the priority areas of clean air, clean water, clean land, and efficient public transportation; also that this money is added to, not a substitute for, a clawback from existing provincial-municipal projects; and that indeed, as the government has indicated, there will be mechanisms in place to ensure transparency and accountability.

In regard to the underground economy, that of course is flourishing very nicely. One instrument the government has had in place in trying to address this is the contract payment reporting system, which by its own admission is not achieving the results it was looking for. It was seeking to identify the areas in which the underground cash economy was operating so as to give a focus on the mechanisms for addressing that through various charges and so forth in the legal system. It's not working that way. What it's doing is putting an additional burden on those people who are already trying to meet their obligations with regard to tax payments. Also, instead of creating a level playing field, it has steepened the angle between the legitimate economy and the underground economy.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you very much, gentlemen, for your presentation.

We'll continue with Intuit Canada, Yves Millette, president and CEO. You have five minutes, sir.

[Yves Millette, President & CEO, Intuit Canada]

Thank you, Mr. Chairman and honourable members.

Intuit Canada appreciates the opportunity to present to the finance committee and to contribute to the current public debate led by the committee on what Canada needs to do in order to have a meaningful place in a very competitive world.

Intuit Canada, which is based in Edmonton and Calgary, serves approximately half of the small businesses in Canada, playing a significant role in our country's small-business agenda by reducing the paper burden through our accounting payroll and tax solutions. Our tax preparation software, such as QuickTax and ImpôtRapide, is used by millions of Canadians, supporting the Canada Revenue Agency in its objectives.

There are a number of issues you are looking at in your pre-budget consultations that are of interest to us. As you can imagine, ensuring that Canadians have the right skills to be competitive is something that is quite important to us as a technology company.

Intuit Canada has been consistently recognized as one of Canada's top employers. This is something we are proud of and work hard to maintain, given the challenge of recruiting, developing, and retaining knowledge workers in today's economy, especially in the west.

We are much more than a branch office of a multinational. We employ Canadians who are developing software solutions for Canadians, from nuts to bolts. Our Canadian innovation centre also works extensively on developing new products and technologies. We are in constant need of highly skilled workers.

We have been working with the Minister of Western Economic Diversification and the Software Human Resource Council to play our part in addressing the skills deficit. The skills deficit is an issue we are already solving with great outcomes for the public sector and taxpayers.

However, it is the fourth question in the outline for these consultations where I believe Intuit Canada can make its greatest contribution to public policy: What action should the federal government take so that it can afford measures needed to enable Canadians and businesses to prosper in the future?

Today, millions of Canadians use our solutions to prepare and file taxes and manage their businesses.

We have worked hard to become a partner of the Government of Canada, particularly with the CRA and those departments supporting small business. For example, our understanding is that the CRA's objectives are to increase the number of electronically filed returns and ensure universal access. Here's what we've done to deliver on that.

Our innovative products and services have enabled the CRA to be on track for its goal of having 70% of all returns filed electronically by 2010. In fact, 55% of all electronic returns submitted to the CRA were created using one of our products. It means that half of our 300 employees had a hand in almost nine million tax returns.

We've encouraged universal access by giving QuickTax and ImpôtRapide away to those who cannot afford it. It's free to anyone with an income of less than $25,000. Last year 170,000 Canadians took advantage of that offer.

We're pleased that the 2005 tax year was the first time that electronically filed returns exceeded paper returns. More than 12 million electronic returns were received by the CRA this year.

These results, which have strengthened service to Canadians while achieving significant government savings and improving business productivity, could not happen without private-public partnerships among our organizations. But we feel much more can be achieved by strengthening the line of sight between government and its partners. Private industry knows how to make an impact when they know the outcomes. If the 360 Canadians my company employs can have such an impact, think about the potential if we encourage more effective partnerships by clearly articulating line of sight and specific outcomes.

There is a need to encourage new and creative ways to combine the skills and knowledge of government and the technology sector to execute public policy objectives. The current government, and indeed the Clerk of the Privy Council, Kevin Lynch, have made much of the need for better delivery by the federal government.

So, for us, rather than specific tax measures, new incentives or programs, we think we need to raise the bar for public-private partnership outcomes, such as the examples that I've shared here today.

In addressing the four questions that we've laid out for consultations, this is what we think you should consider spending your money on.

We recommend that under a central leadership agency, the government undertake an examination of how a federal department agency can use partnerships with the private sector to further the delivery of federal government programs with a specific focus on outcomes.

We suggest that the scope of the work include a review of agencies and departments to identify best practices and features that characterize effective partnership.

We suggest that we provide practical suggestions as to how to dramatically expand these kinds of arrangements across the entire federal government.

We also propose that this work include both private and public sector executives with practical experience in the development and execution of public-private partnership.

Intuit Canada is ready to assist in this initiative.

Thank you.

I will be pleased to answer your questions.

[The Chair, Conservative, Brian Pallister]

Merci, Monsieur.

We'll continue with the Canadian Institute of Chartered Accountants, Kevin Dancey, president and CEO. Welcome. You have five minutes.

[Kevin Dancey, President and Chief Executive Officer, Canadian Institute of Chartered Accountants]

On behalf of Canada's 71,000 chartered accountants, thank you, Mr. Chairman, for the opportunity to speak to you today.

Our analysis, comments, and recommendations are contained in the written submission, which was provided to you. We wish to highlight certain areas that we consider particularly important. These are debt reduction and reducing our debt-to-GDP ratio faster to strengthen Canada's future, and corporate tax relief to make Canada more competitive and productive.

Let me begin with the first item: strengthening Canada's future.

Despite recent surpluses, the federal debt still remains high at $500 billion. This amounts to approximately $15,500 per Canadian, which is well above the debt level of provincial governments. Lower debt would enable the government to permanently address the problem of tax rates that are uncompetitive with the U.S., our major trading partner, and with the G-7 average.

The recent trend in federal program spending also concerns us. In 2004-05, federal spending reached a record level of about $200 billion, an increase of 15.1%. Continued increases in spending at this level will threaten debt reduction and make tax relief more difficult to achieve.

Aside from a growing economy, the only reason to date that the government has been able to maintain surpluses and reduce taxes is because of low interest rates and declining debt charges. Indeed, had the government kept program spending at the rate of inflation since it began posting surpluses in 1997, we would see very different results today. The surplus for 2004-05 would be almost $45 billion, instead of the current $1.6 billion. This figure adjusts program spending since 1997 to core inflation and interest charges to declining debt. The actual federal debt would be $406 billion, down $93 billion from the 2004-05 level. And finally, the government would be only one year away—instead of seven—from meeting its debt-to-GDP ratio of 25%. With potential savings like these, we could then make Canada a more productive and competitive place in which to live and work.

Therefore we recommend that the government increase the amount to pay down the debt from $3 billion to $5 billion annually. We also recommend that government aim to reduce the debt-to-GDP ratio to 20% by or before the 2013-14 fiscal year.

The second area is creating a more competitive and productive Canada. An uncompetitive tax system is one of the biggest barriers to economic growth. Ireland is an excellent example. It has succeeded by making itself one of the most hospitable countries in the world for trade and commerce, with a corporate tax rate of 12.5%. Its GDP rate per person now ranks higher than Canada's and a full 40% higher than the European average.

What about Canada? While personal tax has remained virtually unchanged over the past decade as a percentage of budgetary revenue, corporate income tax has risen steadily. It is now 1.5% above its 10-year average. Lower corporate taxes would encourage firms to locate in Canada and spur economic activity.

Furthermore, as a recent article in The Economist pointed out, high corporate taxes also hurt individual citizens. When corporate taxes are high, workers shoulder some of the tax burden levied on companies.

It is a fallacy to think that companies bear the burden of the taxes they pay. The burden falls on real people, real citizens. In turn people save less and invest less. This results in a smaller capital stock, less capital per worker, and hence lower wages. This pattern is intensified in a global economy, where capital moves easily from high tax to low tax countries.

The C.D. Howe Institute also supports this. I quote: “Taxes on capital investments have the most powerful effect on Canada's productivity—the ability to produce more with the same resources—compared to all other taxes.”

Therefore, we recommend that the federal government immediately eliminate the corporate surtax and accelerate planned reductions to corporate tax rates. We also recommend that after this is done, the government commit to further reductions in general corporate tax rates to bring them closer to the rate for small business.

One final comment relates to compliance with our tax system and the stress it is under. In part this is due to the failure by trusts and other entities to deliver information such as T3s and T5013s to taxpayers by March 31. Over a thousand firms have recently raised significant concerns over this matter with us. The problem is, many of these slips are not getting to taxpayers until the second or third week of April and are often amended thereafter. This puts a huge burden on the filing of all returns, especially personal returns, which must be filed by April 30. I am not proposing extending the April 30 deadline. However, I am asking CRA and/or the Department of Finance to look at ways to ensure taxpayers get this information by March 31, the date in the existing law.

Mr. Chairman, this concludes our overview comments in support of our written submission. Thank you for the opportunity to speak to you today.

[The Chair, Conservative, Brian Pallister]

Thank you, sir.

We continue with the Canadian Teachers' Federation. Harvey Weiner is here. Welcome again, sir. Five minutes is yours.

[Harvey Weiner, Policy Advisor, Government and External Relations, Canadian Teachers' Federation]

Thank you, Mr. Chairman.

The Canadian Teachers Federation coordinates and facilitates the sharing of ideas, knowledge and skills among its 17 provincial and territorial member organizations, which collectively represent over 215 000 teachers in primary and secondary schools across Canada.

In the brief that we presented, we decided to focus on two priorities outlined by the government, in particular. Those are, first, the promotion of measures to ensure Canadians are healthy and have the proper skills and appropriate incentives to work and save, and secondly, that Canada has the infrastructure required so that every Canadian can aspire to and achieve a high quality of life.

Our view, in particular, is that this budget should focus primarily on children and youth. We see this as the means to break a cycle that has accumulated over decades of non-discretionary expenditures that government has to make in order to redeem, rather than prevent, problems from occurring. I can refer specifically to enormous expenditures in terms of our justice system, our health care system, when measures designed to focus on prevention could have resulted and can still, for future generations, cut tremendous amounts of non-discretionary expenditures. We believe that there should be increased focus on learning initiatives at the level of government. I refer to an OECD study on page six of the English version, in which the OECD indicates that, on average, every year of education that a country adds to its citizenry accomplishments would increase per capita GDP anywhere from 4% to 7%, all other factors remaining equal.

We're particularly looking at the work the National Literacy Secretariat is doing to try to increase literacy levels in Canada. We believe that the secretariat requires additional support. We're looking at the modifications that should be made to the Copyright Act, to ensure more and easier access for students and teachers to publicly available Internet materials for which creators do not require payment. We're looking for an expanded federal role on particular elements of our population--I'm talking about aboriginal children and youth; I'm talking about immigrant and refugee children and youth. We feel that the current focus, particularly on immigrants and refugees, is on job training and language training. This is fine for adults, but there are many, many family-related issues. I think the government has indicated that family is a priority, and certainly in dealing with family issues there is much work that can be done that is not only individually applicable to the families themselves but to the collective responsibility that our country has to ensure that services are made available.

We believe that the publicly funded and regulated child care system that was embryonic in terms of development over a period of years is something that should be restored. There are multiple studies, in Europe in particular, that indicate the importance of this in terms of the learning process and in preventing problems that require heavier expenditures in the future.

Those are the areas, Chair, that we cover in our brief.

I must also express on behalf of our organization some concern about the timing of the announcement that came from the Department of Finance about the disposition of the $13 billion accumulated surplus. Regardless of the merits of that particular decision, it would seem to me that in the consultation process, which is ongoing and will be continuing for a period of months, it would have been important and interesting for government to at least listen to the stakeholders and the views they have on how that surplus should be dispensed.

I'll stop there. I would be more than happy to answer any questions that committee members may have on any aspect of our brief.