Finance Committee on Oct. 16th, 2006

[Chief Daniel Brant]

A study released last year by the Department of Indian Affairs showed the level of participation of aboriginal businesses, and the number is very low compared with the participation of small business in Canada. So the need there is enormous; it is operating at perhaps 5% of what it could be.

The growth potential within the aboriginal economic development area is huge. There needs to be, as I mentioned, more access to capital, more support for entrepreneurial training, and more support for the development of development institutions, including the 55. They currently loan $70 million a year to aboriginal businesses and are tapped out constantly.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

I appreciate that.

To Mr. Van Iterson, one of your recommendations is to implement CEPA more effectively. You said there's increasing exposure to toxic substances in our air and water. Of course, someone with a new little one, and all of us as parents, would have a real concern about that.

Can you just expand on that and give us some idea of what's actually happening there? And what would it take to reverse that, in your opinion?

[The Chair, Conservative, Brian Pallister]

You have about 40 seconds, Mr. Van Iterson.

[Andrew Van Iterson]

It's a complicated issue, as I'm sure you're aware. A lot of different sicknesses are rising, and although it's very complicated to isolate different factors, there are strong linkages made between asthma rates and schools that are closer to highways. There's pretty strong evidence that smog in our cities is increasing asthma for our children.

I understand that the government is looking to strengthen CEPA and to potentially phase out some of the worst toxins that have been assessed by the government. We fully encourage that. We're looking forward to seeing the worst toxins being phased out.

Obviously there are practical limitations. We can't just eliminate all of them tomorrow. We're suggesting using a “toxics charge” as a means of phasing out some of the ones that can't be eliminated tomorrow. We'd put a charge on different toxics, based on how bad they are. The money generated could be recycled back into generating alternatives, through industry, that could be used to serve the same purposes but at less damage to society.

[Diane Ablonczy, Conservative, Calgary Nose Hill, AB]

Thank you.

[The Chair, Conservative, Brian Pallister]

We continue now with Madam Wasylycia-Leis, seven minutes.

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

Thank you, Mr. Chairperson.

Thank you very much for being here.

I'm sorry I missed most of your presentations. It's hard for us to be in two places at once.

I want to start with Ken Delaney.

When we're dealing with this competitiveness agenda, I think we have to give some serious thought to what kinds of supports we give to our labour force. I'm sorry I missed all the facts you gave, but I understand it is cheaper to set up a business in Canada than in the United States. Our corporate tax rate is actually lower in Canada than in the United States. We continue to give fairly big breaks to corporations and very little investment to workers. To top it all off, we just had a series of cutbacks that I think really hit adult workers hard, especially in the areas of literacy and training. Yet we've heard throughout these hearings from an overwhelming number of business people who say that all this country needs to do is get rid of the debt, give more tax breaks to the business community, cut back on vital programs, and we'll set the conditions for a brighter future. We need more witnesses to talk about what that will leave us with and what we need to do to invest in workers.

I know it's a big question, but I'd like you to comment on any aspect of that for the report we have to write.

[Ken Delaney]

Sure. It is a big question.

We don't think that across-the-board corporate tax cuts make sense, because as you point out, although corporate tax rates vary, the total cost of doing business in Canada--according to the KPMG study--is lower than other G-7 nations. We're not necessarily opposed to targeted corporate tax cuts if they're tied to performance.

One of the things that disturbs us as representatives of the employees of many of these companies is that we haven't seen the kind of investing in training, capital equipment, research and development, or in innovation that we would like. I think what we're primarily interested in is a set of public policy initiatives that will shape that behaviour. We think it's probably best implemented on a sectoral basis. For example, in the steel industry, there's a fledgling group called the Canadian Steel Partnership Council, which is made up of representatives from academia, labour, and steel. They're coming together to try to identify specific public policy requests, whether it's trade, or accelerated capital cost allowance for business to help them invest, better training, maybe tax benefits for training, or improvements to employment insurance that will allow people to collect the benefits while they're being trained.

The idea is to come up with a partnership approach to allow Canadian businesses to compete internationally in a way that enables them to provide good jobs here at home.

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

Thank you. I appreciate that.

Unfortunately, we've had a number of organizations from the corporate side that believe there should be straight across-the-board cuts to corporate taxes, without any criteria applied or any kind of proof that the money is being used to actually increase productivity and competitiveness. I think your point is an important one for this committee.

Let me ask Barry Blake a question. I think the recent cuts are an ominous signal that this government may cut deeper in culture and heritage at the very time that we need investment. I think that's been ACTRA's position over the last number of years. I think it would help us to know--and maybe you already did this--what level of increase you think we need to recommend in the next budget for CTF, to bring it up to the 2006.

[Barry Blake]

Thank you.

Basically, the CTF has been in place for 10 years. It was created at the level of $100 million, and it has stayed at that level for 10 years. Just doing the math on dollar value over that 10 years, we calculate we're down to about $80.3 million. So to at least bring it back to that level, we just establish and maintain what was done 10 years ago. Plus, we're looking for stable funding. We're looking for a commitment from the government over five years so the producers can at least know how much money they're going to have.

The spinoff effect from this $100 million plus the approximately $140 million that comes from private sector is a factor of anywhere between six to one and eight to one. If the $100 million is maintained, it has a six- or eight-times multiplier effect on it. We're looking for that.

We're also looking not just for five years. We would recommend that this be an “A” item, a permanent fund to encourage Canadian production. I'm not trying to be flippant about $100 million, but it's not a huge investment for something that pays back economically as well as culturally.

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

No, I think you've made a very reasonable proposal, because in fact when you consider the spinoff effects for any community when we invest in the CTF you can't even begin to measure the benefits to our economy.

My last question--I know my time is running out--will be to Andrew Van Iterson. We believe in strategic income tax cuts or corporate tax cuts but also strategic spending cuts, and I think what we saw in the last little while wasn't at all strategic. I think in fact you recommend a phasing out of tax expenditures to the oil and gas sectors when they're rolling in money, bringing in huge profits.

Could you expand a bit on what kinds of tax expenditure cuts we should look at and what kinds of savings we could see?

[The Chair, Conservative, Brian Pallister]

We'll move now to Mr. McKay. You have five minutes, sir.

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

Thank you, Chair.

Mr. Van Iterson, you seem to be a popular guy this morning. You're proposing rolling back the ACCA from 100% to 30% to be comparable to other oil extraction methods, and on the face of it I can't see the basis for disputing that. It does seem to be a good argument.

On the other hand, this committee travelled to the oil sands development in Fort McMurray a couple of weeks ago, and what was pretty obvious was the massive capital that has to be deployed in order to be able to extract that resource. It's also arguable that it is in a constant search for capital and there are difficulties raising that kind of capital. It's also arguable that they haven't made a profit, at least the western oil sands folks. I don't think they're going to make a profit until the year 2010.

So given all of that--I take your point that it should be just comparable--what impact would your proposed rollback of this 100% writeoff have on the ability to generate capital in order to be able to keep those kinds of projects going?

[Andrew Van Iterson]

Our best impression, to be honest today, is it won't change much at all. It's really just lining the pockets of those businesses. It may have played a substantial role in getting them started, but our understanding now is that it's not playing much of a role at all in helping them invest. It's purely a subsidy to--

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

If they're not making any profit at all, how could it be a subsidy, because it would only apply to a writeoff against income?

[Andrew Van Iterson]

It's a subsidy that goes to the entire oil company, right? Oil companies are making record profits.

We're also looking at resources that, as I mentioned, my children and our children's children would like to have access to. Why are we subsidizing businesses so we can have this blowout sale of limited resources when fifty years from now they'll all be gone, and they'll be worth a lot more but we won't be able to sell them any more for much higher prices? It makes no sense to subsidize a rapid depletion of limited resources.

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

I don't know that at $60 or $70 a barrel they're blowout sales.

To be a little more precise, is it your argument that the ACCA should not be transferable to other corporations or other profitable entities within a corporation? I'm not sure what you're saying is actually true. I just want to be clear.

[Andrew Van Iterson]

The Department of Finance estimated that for every billion dollars that was invested, it cost the Government of Canada between $5 million and $40 million, and this would suggest that the cost of expenditures is in the range of $43 million to $350 million per year.

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

That's on the premise that these corporations are in fact making money.

[Andrew Van Iterson]

This is from the finance department.

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

I just want to clarify. I'm not arguing with you; I just want to clarify. I do have limited time, so I'm going to ask Mr. Blake a question.

With respect to your recommendation number 8, you ask that artists be exempt from income tax with respect to income derived from copyright. So would that apply to artistic groups like the Barenaked Ladies and Blue Rodeo, and Margaret Atwood and people of that nature? Is that who you're proposing?

[Barry Blake]

My personal preference would be the Irish model where artists don't pay taxes, because their contribution is—

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

So regardless of how wealthy—

[Barry Blake]

—deemed to be....

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

—an artist became, they wouldn't pay taxes?