Finance Committee on Sept. 25th, 2006

[The Chair, Conservative, Brian Pallister]

Thank you, sir.

The Canadian Construction Association representative is Michael Atkinson. Welcome, sir. You have five minutes.

[Michael Atkinson, President, Canadian Construction Association]

Thank you, Mr. Chairman.

The Canadian Construction Association welcomes this opportunity to present its views and recommendations. CCA is the national voice of the non-residential construction industry, representing some 20,000 individual member firms located in every region of Canada.

I guess the simplest way to demarcate the Canadian Construction Association from my colleagues from the Canadian Homebuilders' Association is perhaps simply to say that while housing starts are music to their ears, it's building permits that make our world.

Mr. Chairman, our submission and comments here today directly respond to the committee's request for specific measures to ensure a skilled and healthy workforce, a competitive economy, and state-of-the-art infrastructure--all within a prudent fiscal environment. The details are in our written brief, so I will simply highlight a few of the recommendations therein. They are grouped primarily under four main areas, and indeed most are building on announcements that were made in the previous budget. In five minutes before this committee we tend to be critical and come forward with what might be termed negative criticism. In many cases we would applaud the government for its last budget, but I don't want to take all my five minutes just to speak about what you've done, but would prefer to speak about where we think you can go further.

First of all, with respect to infrastructure investment, while the federal government has committed to impressive investments in Canada's key physical infrastructure, we are concerned that the investment timeframe is too long and will result in additional costs and further deteriorating infrastructure. We recommend that the ramping-up period, the phase-in period, for three programs in particular be accelerated by at least two to three years, so that by 2008-09 the new deal for communities will be in full swing along with the new highway and border infrastructure fund and the municipal rural infrastructure fund. We also urge the federal government to establish a minimum threshold for continuing investment in these programs, and that certainly will be part of the current discussions ongoing with the provincial and territorial governments on the fiscal imbalance where infrastructure is a key part of those discussions.

The second category is meeting Canada's human resource needs. We are facing unprecedented demand in our industry but at the same time a dwindling workforce, primarily due to an aging and retiring workforce. Our preference is to grow our workforce within Canada. We do that by promoting construction as a career of choice to youth, under-represented groups such as women and first nations peoples, and removing barriers to labour mobility so that unemployed workers can get to where the work is. We also do this by strengthening proven training systems in our industry, such as the apprenticeship system. We were very pleased with the measures announced in the last federal budget that recognize the importance of the apprenticeship training system in our industry and others, but we must go further. The current measures are restricted to red seal trades. This should be expanded as quickly as possible to all construction trades.

There are barriers to apprenticeship training built into our current employment insurance system. Removing the two-week waiting period and allowing apprentices while at school to supplement their income by working in high unemployment areas such as Alberta without risk of losing their EI eligibility would be great improvements to addressing a labour shortage and ensuring that EI does not operate as a barrier to apprenticeship. Look at measures to assist EI recipients in relocating on a temporary basis to seek employment in high demand regions of the country. Alternatively, look at tax incentives for prospective employers. We had mobility provisions in the EI some time ago. Unfortunately, those provisions only dealt with permanent relocation of EI recipients. In our industry we need a mobile workforce that can move from province to province to meet our demands, and in many cases those workers do return to their home province.

The third grouping is the need for strategic tax reform. There are a number of specific measures in the brief, and I'd like to highlight some quickly.

With respect to the small-business deduction, great strides were taken in increasing the threshold in reducing the rate, but that is perhaps one of the most underrated and underutilized tax measures, levers, that we have to increase technology integration and productivity, for who knows better where to invest in their company, in their business, to achieve greater productivity and competitiveness than the entrepreneurs themselves. And this measure when it was introduced was introduced to ensure and to provide an incentive for business owners to reinvest in their firms.

Finally, take a look at employer-provided vehicles. It is a terrible inequity that is occurring when we have the Tax Court of Canada finding for taxpayers with respect to the use of employer-provided vehicles, and CRA and Finance Canada turning a blind eye.

There are also measures in there on environmental incentives for reducing diesel emissions that we would like you to look at.

Thank you for the opportunity to express our views.

[The Chair, Conservative, Brian Pallister]

Thank you very much, sir.

Sally Brown is here from the Heart and Stroke Foundation of Canada. Welcome. You have five minutes.

[Sally Brown, Chief Executive Officer, Heart and Stroke Foundation of Canada]

Thank you, Mr. Chairman. Good afternoon.

The Heart and Stroke Foundation of Canada is one of Canada's leading health charities, and we're pleased to be celebrating our fiftieth anniversary this year. Over those fifty years we have invested about a billion dollars in research, raised from donors twenty bucks at a time.

Thanks for inviting us to speak to you today to address some of the questions you've put to us. I want to thank you as well for a number of recent initiatives that came out of this committee, I believe. Investments in a strategy for chronic disease and healthy living couldn't have been more timely, and there were tax incentive measures in the last federal budget for children and youth involved in organized sports, and the purchase of public transit passes. In addition, there was the capital gains elimination on gifts of listed securities to charities. So we do appreciate that progress has been made.

The good news is that mortality and hospitalization rates due to cardiovascular disease have been dropping for a number of years. You have a graph in your notes. The bad news is the burden is still enormous. Heart disease and stroke represent the leading cause of death, the leading cause of hospitalizations, the leading disease-based cost driver in the economy, and the leading cause of drug prescriptions. It has become the leading cause of death world-wide. It's a huge burden on the health system, driving costs upwards, and we need to focus on prevention.

More bad news is that obesity, a major risk factor for heart disease, has increased over the past 25 years across all age groups. Our children are not only not immune; they are proving to be the most susceptible. We must ask ourselves, if obesity rates are projected to increase, will 60 become the new 70, and 30 the new 50? Rising obesity rates could have the effect of undoing much of our progress in tobacco reduction.

The increasing rate of type 2 diabetes is truly shocking. We are at risk of turning back the clock in our fight against cardiovascular disease. We're coming to you to say that we need to use the lessons learned from the tobacco control to fight this epidemic. Education is important, but it's far from sufficient. To truly tackle the obesity epidemic, a wide variety of public policy interventions are needed, including federal tax incentives and program spending measures. So I want to speak to the first question you have put to us.

The HSFC recommends that the federal government continue to utilize tax incentives to promote physical activity and healthy living. You should increase the tax credit for children and youth participating in organized sports from $500 to $1,000. You should extend the organized sports tax credit to adults. You should provide tax credits to all Canadians for participation in non-organized sports, and you should remove the GST from products that promote physical activity, such as bicycles and skates.

We also need the government to remove a disincentive that has been created by a recent federal government program. As I mentioned, health charities invest $150 million a year in health research. The federal government now pays 24 cents on the dollar to universities for every dollar that CIHR spends on health research, for the indirect costs of research, such as heating and lighting in our universities.

The federal government needs to remove the disincentive this has established against health charity-funded research--which the universities are now beginning to say they don't wish--or ask the health charities to pay it. The result will be that though we've been the leading funder of health research in this country for many years, we will have to take money from our life-saving research to fund the heating and lighting in universities. This means that the government will be competing with charities and communities that are trying to support themselves. It will hinder Canadians who are trying to lighten the load on the federal government, in terms of health research funding, by funding it themselves, and it will lead to double-taxing Canadians.

The HSFC therefore recommends that the federal government look at this program in terms of its disincentive.

You also asked us about infrastructure. HSFC recommends that the federal government allocate at least seven percent of transportation-related infrastructure toward the development of community infrastructure that promotes the use of active modes of transportation, and includes social infrastructure that facilitates physical activity, such as parks and community recreation centres, as an eligible expense under the gas tax program.

Finally, in addition to physical infrastructure, this government needs to better support data infrastructure. Health surveillance data is appallingly lacking in Canada. We cannot support health research, program development, health practice, and program evaluation with the level of health surveillance we have in this country. It's a huge issue.

Thank you very much.

[The Chair, Conservative, Brian Pallister]

Thank you very much, Madam Brown.

Thank you all for your presentations.

We'll move to questions now, and we'll begin with Mr. McKay. You have seven minutes, sir.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair; thank you, presenters.

I wanted to engage Mr. Weiner and Mr. Dancey in a bit of a conversation here. Mr. Dancey, you're a cut the taxes and reduce the debt kind of guy, and Mr. Weiner, in your proposal you say:

Furthermore, we challenge proponents of tax and debt reduction to demonstrate, even in strictly economic terms, that their proposals would produce over the long term a rate of return that would even remotely approach what would be gained by investing in programs geared to prevention.

The argument is put forward in the body of your paper to the effect that investments in education will in fact increase the GDP by 4% to 7% per capita.

So what's your answer to Mr. Weiner's challenge, Mr. Dancey?

[Kevin Dancey]

I would answer that in a couple of ways. One is that federal spending is about $200 billion right now. So the way I come at the issue is saying that's a large amount of money, and in terms of looking at your spending going forward keep it within that framework and make sure it does not grow by more than the rate of inflation adjusted for population growth.

All kinds of businesses, all families, have to live within their means, and the government is no different. In terms of using the surplus to the extent we can to pay down the debt and get corporate tax rates down, that just will allow us to be more productive going forward. We won't have to spend as much of our money in terms of paying debt in terms of interest payments going forward. And in terms of getting corporate rates down, that should, hopefully, generate a lot of activity, a lot of economic activity, which creates wealth, and through that wealth creation will allow for--

[John McKay, Liberal, Scarborough—Guildwood, ON]

I don't want you to repeat your entire speech all over again.

[Kevin Dancey]

--what could pay for a lot of these programs.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Let me get to the point here. You're happy then with the level of education in this country; you're satisfied with the work that you're getting, etc.

Mr. Weiner, let me give you some opportunity--

[Kevin Dancey]

No, I'm not saying that. I'm saying within the means, you can decide these priorities.

[John McKay, Liberal, Scarborough—Guildwood, ON]

You can't do it both ways.

Mr. Weiner, let's hear it.

[Harvey Weiner]

The first comment I would make, and unfortunately I don't have the data--and I'm going back to Ms. Brown's point--is that we should be researching how much of the $200 billion we're spending is on redemptive measures. How much are we spending on our prison system? How much are we spending on broken people who need fixing, in terms of all sorts of issues, social dysfunction, health care as opposed to health prevention? If we're going to break that particular cycle, it seems to me that we have to invest in prevention.

That OECD study I referred to is there to be looked at. There's also a study by Cleveland and Krashinsky, two Canadian economists, that was done about 10 to 15 years ago, in which they've indicated that over a generation we would be talking about billions of dollars of savings. Certainly our level of education is good in comparison with education internationally, but it could be even better.

Our debt-to-GDP ratio has come down and it continues to come down. We've even been complimented by the OECD in terms of the extent to which that ratio has come down. When we're talking about a $13 billion surplus and the amount of good that could be done by investing at least a part of that surplus in some of these programs and services, and not even giving an opportunity to the various organizations that are in fact appearing before this committee to at least discuss that particular issue by having a pre-emptive statement made by the finance minister saying this is the way it's going, it's certainly not the route to follow.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I take it, Mr. Weiner, that you're not overly thrilled with the GST cut, which takes about $5 billion out of government revenues on an annual basis. But you're not thrilled because you think it's a misapplication of funds.

I take it, Mr. Dancey, however, you wouldn't be thrilled with the GST cut only because you think it's a wasted tax cut, that in fact a much smarter tax cut would be either corporate or CCA rates, or something of that nature.

Is that a fair statement for both of you?

[Kevin Dancey]

In terms of the issue of where I would like the tax cuts, my preference would be on the corporate side, to reduce corporate taxes and capital taxes to make a more productive country.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So of your panoply of tax cuts, your GST one would be the last one you'd do.

Mr. Weiner, what's your reaction to that?

[Harvey Weiner]

Look, it's a chicken and the egg argument, and obviously we differ 100% in terms of the approach. We have some very, very serious problems that are endemic to our society, and the only way we're going to break that cycle is by starting with children and youth and working on the prevention aspect. That requires investment. It's going to pay dividends in the long term by reducing substantially our non-discretionary expenditures.

If you look at the prison system alone, it takes somewhere between $60,000 and $80,000 a year to incarcerate a person. How does that compare with an average salary that somebody's earning in Canada?

[John McKay, Liberal, Scarborough—Guildwood, ON]

But you need to make your argument based upon the actual increase in the GDP. It makes everybody happy when the GDP increases. Then Mr. Dancey can get more revenue and the government's happy all the way around.

One final question to the Canadian Construction Association, and that's with respect to your yearly basic exemption. I happen to think this is actually a good idea, that in fact rather than doing a rate reduction, where every cent costs $100 million, you raise the yearly basic exemption. What's your reaction? If your choice is between one cent or two cents or three cents off versus upping the threshold, what would your choice be?

[Michael Atkinson]

Well, if that's my only choice, I'd like to see it also with the elimination of the employer multiple, which, for some reason, people believe came over with the ark. A while ago employers and employees were sharing the cost of that program. I'd like to see that first.

I'd also like to see the YBE, because it's fair to employees, particularly the employees in our industry who are working for more than one employer, and also the refund of employer over-contributions, which this committee, I understand, if not the House of Commons sitting committee on HR, have also recommended, along with the YBE.

I think a number of those go together, but the YBE makes a lot of sense. We basically have that for our CPP. So it does make a lot of sense, but we'd like to see other reforms as well, in that area.

[The Chair, Conservative, Brian Pallister]

Thank you, Mr. McKay.

We go next to Mr. Carrier.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

Thank you, Mr. Chairman. My first question is for Mr. Lee.

I have a great deal of sympathy for firefighters across this country, given the nature of their work and their dedication. However, my sympathy is smaller for the budget allowance that you are recommending that the government should give to firefighters, and I know from my research and my own experience that every association of firefighters negotiates with its respective municipality to come up with collective agreements, and many of them often provide very good benefits. Municipalities, of course, come under provincial jurisdiction. So it is not clear to me what role the federal government could play here.

[Jim Lee]

Well, you're quite right, the firefighters' associations do negotiate their own collective agreements and try to negotiate benefits for firefighters who pass away in the line of duty, but as I said in my presentation, it's a very patchwork benefit across Canada. Some have been able to negotiate two times their salary, which is normal and which isn't all that much money.

We think it's time that the federal government did something very similar to what's been going on in the U.S. since 1976--that the federal government recognize first responders when they pay the ultimate sacrifice and die in the line of duty. And they can't hide behind jurisdiction every time we come forward on this. It's time that they moved forward and recognized those who pay the ultimate sacrifice and leave behind a widow and children.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

My second question is for Mr. Dancey, who represents the chartered accountants.

In your presentation, you talked a great deal about reducing the public debt through its revenues. You also talked about improving revenue sources. However, you did not get into the whole issue of revenues in Canada as a whole, which you surely must have heard about. Right now, there is a lot of talk about the problem of federal surplus.

Do you not think that the first thing to do would be to resolve the fiscal imbalance before making any decisions about how to reduce the debt?

[Kevin Dancey]

That's a good question. I think in our brief we did point out that the level of federal debt is actually in excess of the level of provincial debt, and that's why we still think there has to be a keen focus on paying down the federal debt. The federal debt, per person, is in the neighbourhood of about $15,500 per Canadian, but the aggregate level of provincial debt is around the level of about $10,000 per Canadian. So the level of the actual federal debt is still very high and needs to be a key focus.

[Robert Carrier, Bloc, Alfred-Pellan, QC]

My next question is for Mr. Millette. In your presentation, you talked a lot about tax collection and mentioned that you were specialist in that area. When I look at your recommendations, it seems to me that you are looking for opportunities to help the government with his work, in other words, business opportunities. Most taxpayers already find it difficult enough to deal with the complexity of their tax return.

Based on your experience, could you make a recommendation on how to improve the tax collection systems that apply to all taxpayers?