Finance Committee on Sept. 26th, 2006

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you.

[The Chair, Conservative, Brian Pallister]

Mr. Paquette, you have five minutes.

[Pierre Paquette, Bloc, Joliette, QC]

Thank you, Mr. Chairman.

Firstly, I wish to thank all of our witnesses for their presentations. Many issues have been raised. Unfortunately, as my colleague said, we have little time.

My first question is for Mr. Lafrenière. In your presentation, which I found very interesting, you talked about the fiscal imbalance, which may have come as something of a surprise to my Liberal friends. They must be wondering why an association of mutual insurance companies would take a position on this issue.

Upon reading your presentation, I see that you have drawn a parallel between how mutual insurance companies return funds to their clients when they record a surplus, and how the federal government, when it has surpluses, should also return funds to the provinces concerned.

Would you please elaborate on this for the benefit of my Liberal and Conservative friends.

[Normand Lafrenière]

I believe that you have understood our submission very well. We fully respect the one-person, one-vote principle, along with all other Canadians who believe that this country should be governed according to this same principle.

Our goal is to turn a profit in the short term, not in the long term. Companies seeking to make a profit in the long term are non-profit companies. Therefore, the same applies to the federal government.

What the federal government must grasp is that taxes should not be levied for the sheer pleasure of it. Funds are raised for a specific objective, that is to provide a service. Our association's members tell us that this is what is needed to keep a company running. This is where we draw a comparison with the federal government.

The federal government seems to be posting a surplus year after year, at the same time that provinces and municipalities are lacking money to fully carry out the obligations set out for them in the Canadian Constitution. This position is not a biased one; we simply want the economy to work well. In fact, this lies at the heart of your questions: what can we do to make sure that the Canadian economy performs well?

In our opinion, one of the things that can be done would be to reduce duplication and put the money where it belongs. Our hope is to have municipalities and provinces raise their funds directly from their constituents and be directly accountable only to their constituents. The federal government would only be accountable for the actions it takes, as set out in the Canadian Constitution.

[Pierre Paquette, Bloc, Joliette, QC]

Within their respective jurisdictions.

[Normand Lafrenière]

Exactly.

[Pierre Paquette, Bloc, Joliette, QC]

In fact, yesterday there was an announcement of a $14-billion surplus. This is a recurring problem.

You also raised the issue of the number of additional agents needed at Revenue Canada, and drew a link between this and the issue of tax avoidance in tax havens. In fact, there have been recent reports on the huge tax amounts that certain Canadians can avoid paying by benefiting from these tax havens.

Do you truly believe that hiring additional agents will reduce tax evasion, or shouldn't legislative measures be taken to fill in the gaps?

[Normand Lafrenière]

That is a good question to which I do not have the answer. I assume that Revenue Canada employees are highly qualified and that it would be beneficial to have more agents working on this type of problem. We also confront the same problem in the world of insurance. We know that Canadian companies are forced to create offshore companies in order to receive the same tax treatment as foreign companies operating in Canada. Mutual insurance companies that do not have an offshore company are at a fiscal disadvantage, compared to their competitors.

[Pierre Paquette, Bloc, Joliette, QC]

My last question for you is on your submission. You call for the creation of a contingency fund, one that would be somewhat similar to what the previous federal government used to hide its surpluses. But what you are calling for is a true and genuine contingency fund.

How much would the fund contain? Are we talking about 10% of general revenues?

[Normand Lafrenière]

No, it would be approximately 2 to 3% of sales.

[Pierre Paquette, Bloc, Joliette, QC]

It would be approximately 2 to 3%.

[Normand Lafrenière]

Yes. We are talking about a contingency fund reserved for either natural or man-made catastrophes. We simply want to be better prepared to deal with such situations. Having such a reserve would prevent our companies from having to create offshore companies in order to benefit from the same fiscal status as our competitors.

[Pierre Paquette, Bloc, Joliette, QC]

Thank you.

My next question is for Mr. Lyall, from the Association of Labour Sponsored Investment Funds. I am obviously very sensitive to your cause because I myself helped found the Development Fund for the CSN, la Confédération des syndicats nationaux. You are saying that workers' investment funds should allow individual investors to increase maximum investments to the same level as RRSP contribution limits. I find this to be entirely reasonable. However, as you said at the beginning of your presentation, government has tended to reduce benefits to workers' funds in recent years. Such is the case, at least, for Quebec provincial workers and federal workers.

Do you believe that the current economic situation gives us hope that the federal government will hear your demands? What makes you believe that the trend—which is currently one of restricting fund managers from collecting and increasing savings from their members—can be reversed?

[Les Lyall]

Thank you for the question. I think probably the last thing this committee wants to hear is that we're asking for an increase in expenditures related to an increase in the ticket size. By way of an explanation for some of the committee, the ticket size is the maximum contribution that an individual investor can make to the program in any one given year.

We need to find a basis of comparison, and I'll come to your question directly in a moment, but the fact of the matter is that the federal government tax credit on this program is 15%. When we compare it to other industries and the support that is given to other industries--and I'll pick the oil and gas industry as an example, where the federal government through taxation provides a 44% tax relief on flow-through shares--I think it's important that the industry be supported in equal measure to that industry and that the support be given to it.

What we're trying to accomplish is for the average investors to be able to increase their investment in the program. Right now, they're capped at $5,000 a year, and we think that amount is inefficient. It increases our costs. It doesn't allow a level of participation in keeping with the pace of the RRSP contributions over the years.

[The Chair, Conservative, Brian Pallister]

Thanks, Mr. Lyall.

Merci, monsieur.

The next questioner will be Mr. Del Mastro, for seven minutes, sir.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair.

Mr. Gauthier, I want to come back to a couple of issues you raised. One in particular that really troubles me is the inequity in the collection of GST, where actual licensed dealers are required to charge GST but it is not applied on private sales. This is creating a little bit of an insidious industry in Canada, isn't it? It's a bit of a black market for car sales.

[Richard C. Gauthier]

Absolutely, sir. You have a very good read of the situation. In fact, we believe it is one of the primary reasons why you have that whole curbsider effect, where people are purporting to be licensed auto dealers but in fact they are clandestine private sales, really. Of course, this is not only a disadvantage to the government, in the fact that it's not getting its fair share of the GST revenues, but it is disadvantageous to legitimate businesses who are collecting those taxes and remitting them. It also opens up the floodgates with regard to consumer protection. People are purchasing vehicles that are not warrantied, that have not been properly certified, and so on.

We believe this is more about eliminating that industry and moving in a fashion that would level the playing field.

[Dean Del Mastro, Conservative, Peterborough, ON]

And to protect consumers.

Thank you.

The other thing I was going to talk to you about was with respect to the CRA and audits. In the spring we were conducting a review of the CRA, and they indicated that their audits are occurring about twice as often and they're lasting about twice as long. They've gone from about six to eleven days, and they're auditing about twice as often, especially around the area of GST. Are your members experiencing this type of frequency, and so forth, in their businesses?

[Richard C. Gauthier]

Absolutely, sir. As part of the process that we utilized in order to be able to develop our white paper, which we tabled earlier, we reached out to all of our constituents across the country. We held a number of forums, focus groups, round table meetings--and that culminated with a national dealer survey. One of the things we found on this particular issue was that dealers were being audited on a more frequent basis, two to three times a year. I guess the frustration in part lay with the fact that, on a number of occasions, audits are started but not completed. The auditors get called away. They had asked the business owners and their staff to produce a variety of documentation, and so on, and then that documentation was literally left, in a number of instances that were reported to us, on a table somewhere for months and the auditor never returned. So the material was just filed away again.

I would think that corroborates some of the feedback we've been getting.

[Dean Del Mastro, Conservative, Peterborough, ON]

It sounds a little bit like either inconsistency or harassment, one or the other.

[Richard C. Gauthier]

I wouldn't go that far, sir, but it certainly is inconvenient and troublesome.

[Dean Del Mastro, Conservative, Peterborough, ON]

Very good.

Ms. Edwards, I appreciated your presentation. It sounds like Ducks Unlimited is coming about combating urban sprawl and really attacking what I see as poor developmental planning. Is that a fair assessment?

[Cynthia Edwards]

We haven't focused very much on the specific issue of urban sprawl, but some of the instruments that we've been using for decades to conserve natural areas, such as the use of conservation easements, which actually provide financial benefit to the landowner instead of just a pure regulation, could be used to help mitigate some of the urban sprawl issues. Although, as I said, we haven't focused on that area--we work a lot more in the rural landscapes--some of those same tools could certainly be used.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you.

Mr. Reycraft, I have a couple of questions.

First of all, Mr. McCallum asked a question about the new spirit of cooperation that was fostered toward the end of the last government. I'd be remiss if I didn't point out that the social transfer cuts that occurred in the mid-1990s actually led to the decline of a lot of the infrastructure in our municipalities as the cuts were passed down to municipalities.

I want to ask a question specifically about the COMRIF program and whether you think that's a fair program or something we should be moving towards, towards perhaps more long-term, stable funding as opposed to lottery-type programs.

[Doug Reycraft]

I'll resist the urge to get into a discussion on the first point you made.

With respect to COMRIF--