Thank you very much, Mr. Chair.
Thank you, Mr. Chair, for this opportunity to appear before you today.
I'm here as CEO of the Canadian Real Estate Association, which represents 86,000 realtors in Canada who contribute to the economy and the life in their communities, large and small, throughout our country.
Mr. Chair, each committee member has received a copy of our pre-budget recommendation. I hope the committee will support our recommendations on the federal housing policy.
Mr. Chairman, you asked us to address the theme of Canada's place in a competitive world. You asked us, and I quote, “What specific federal tax and/or program spending measures should be implemented in the upcoming budget to ensure that our businesses are competitive?”
To answer your question, we propose an income tax amendment that we have researched, developed, and advocated for several years now. That is the deferral of capital gains tax when an investment property is sold and the proceeds of the sale are reinvested in another property within one year.
The latest results from the World Economic Forum indicate that Canada's global economic stature is slowly eroding. On the World Economic Forum index that measures global competitiveness, Canada fell from thirteenth to sixteenth place over the last year. Among the reasons for the slide are Canada's high taxes and a banking system that does not encourage the free flow of investments to a variety of assets. The small investors are particularly disadvantaged. Canada is not leveraging its wealth to maintain its capital advantage.
Our proposal responds to those issues. Reinvestment in income property is an effective means to leverage some of this wealth, with a view to providing the quality environments required to sustain economic prosperity. Virtually the only criticism of the rollover concept has focused on the potential losses to the treasury for deferred tax revenues. But please note, this is not a deferral and not foregone revenue.
As the population ages and the number of productive taxpayers inevitably drops, anything that adds to the volume of tax revenue in the future must be considered prudent. Mainly, though, the cost argument overlooks the economic and social benefits generated by investment activity. These benefits aren't always easy to quantify, but let's be clear: today investors are sitting on their investments because of the tax consequences of selling. They are not selling. As a result, the government is not getting capital gains tax revenue.
Our commercial members provide us with examples of properties that could greatly enhance the neighbourhood. We simply live in them. They don’t change hands and are never improved upon. They could be part of the solution rather than promoting stagnation and deterioration.
The sale of investment properties triggers economic spinoffs. Small investors typically undertake renovations when they invest. To expand the volume of investment is to expand the volume of renovations and other purchases. Our proposal also helps to underpin the pace of labour mobility. This is particularly important in the light of economic activity in western Canada.
Canadians are increasingly migrating to where jobs exist. They should be able to migrate their assets with them. Households can move their furniture and belongings, including their stocks and bonds, but not their real estate investments without substantial tax consequences.
The minister has spoken about a pro-growth strategy. He has talked about liberating the forces of investment as a key to economic competitiveness. Our proposal is a natural component of such a strategy. It has the potential to help revitalize our communities and contribute to wider economic prosperity.
With me today is Dr. James McKellar, a professor and director of the program in real estate property at the Schulich School of Business at York University. Dr. McKellar has worked with us on this issue for a number of years. We are now ready to work with the government to help design an appropriate rollover of capital gains tax for investors.
The second recommendation is to increase the RRSP withdrawal limits under the national homebuyers plan. These limits were set back in 1992, and should be adjusted every five years to account for inflation. We're asking the committee to recommend that a maximum loan amount be raised from $20,000 to $25,000 to account for inflation.
The third recommendation we would like to highlight is the continuation of federal funding for the residential rehabilitation assistance program, or RRAP. The current federal funding ends in March 2007. We're asking this committee to recommend a further three-year extension of RRAP funding to 2010.
Thank you, Mr. Chair, for considering our comments. James McKellar and I would both be glad to answer any questions you may have today.