Finance Committee on Oct. 19th, 2006

[The Chair, Conservative, Brian Pallister]

You have a minute remaining, if you wish to use it.

[Amy Taylor]

That's okay.

[The Chair, Conservative, Brian Pallister]

Thank you very much.

We'll continue now with the Writers Guild of Canada, Sughith Varughese.

[Sugith Varughese, Councillor, Writers Guild of Canada]

Thank you.

The Writers Guild of Canada welcomes this opportunity to appear before the Standing Committee on Finance in the pre-budget consultations.

The WGC is the national association representing more than 1,800 professional screenwriters working in English language film, television, radio, and digital production in Canada. The WGC's primary job is to negotiate and enforce collective agreements with engager organizations like the CFTPA, the National Film Board of Canada, and the CBC. I come to you today as a working screenwriter who's been elected by our members to our board.

Screenwriters are the primary creators of Canadian film and television productions. They are the voices that ensure our national identity is expressed and preserved in those media. WGC members are the creators of uniquely Canadian stories, such as the hit TV series Corner Gas, and feature films like Bon Cop, Bad Cop.

With previous government support, the Canadian film and television industry flourished. Small companies like Atlantis Films Limited have grown to become world-class public corporations like Alliance Atlantis Broadcasting.

Canada has spawned a generation of internationally renowned writers, directors, and performances. Names like Paul Haggis, Denys Arcand, and Kiefer Sutherland resonate with audiences around the world. But our indigenous production sector needs further government investment in order to stay competitive in a global marketplace.

The Canadian film and television industry employs over 119,000 highly skilled individuals working in a $3 billion industry. The film and TV sector, growing at an average annual rate of 5% from 1998 to 2004, outpaced the overall economy by 1.5 percentage points. The film and television production industry outpaced the overall economy in job creation with an average growth rate of 2.6% to the overall economy's annual job growth rate of 2.1%. All of this is done by leveraging government investment, primarily through the Canadian television fund, Telefilm Canada, and the Canadian film or video production tax credit, in partnership with the private sector, which provides financing through licence fees and equity investment. The industry is sustained by sales throughout the world and on various platforms.

After years of steady growth in all sectors of the industry, we are facing new challenges. At a time when government investment has been eroded by inflation and private sector financing has been diverted to cheaper American programming, it is much cheaper to purchase pre-existing American shows and piggyback on U.S. network promotion of those programs than it is to create and promote original Canadian programs. Additionally, export sales for Canadian audiovisual works have weakened since other countries have recognized the importance of creating their own programs--they aren't as interested in buying ours. All of this leads to less private sector investment and, ultimately, less homegrown drama.

Our industrial sector is also in trouble, primarily due to the higher Canadian dollar compared to the U.S. dollar. It simply isn't cost-efficient to shoot big-budget productions in Canada any more. There are more savings to be had in eastern Europe and several U.S. states that have aggressively implemented incentives to keep production at home. This drop in foreign production has taught us a valuable lesson. The only type of production that Canadian screenwriters can rely on in this industry is Canadian content, created for Canadians by Canadians.

But audiovisual productions are expensive to produce, and our small market is further divided into French and English audiences. Unlike the U.S., we cannot recoup the costs of making competitive productions in our own market. We need to partner with the Canadian government. It is important to note that this is not a unique situation. Most countries support indigenous programming through tax credits and other investment initiatives.

With government investment, the Canadian film and television industry, led by writers, can face the current challenges, develop innovative solutions, and produce high-quality, uniquely Canadian programming that we all can be proud of and that attracts international sales.

Here's what we need in order to have a viable indigenous industry: one, increased long-term funding for the Canadian television fund--the CTF, Telefilm's feature film fund, and the Canadian new media fund; two, increased long-term funding for the CBC; and three, a rate increase to the Canadian film and video production tax credit from 25% to 30% and an increase of the cap from 15% of production costs to 18%. This tax credit is an essential element of production financing and the development of a strong, stable production industry.

The WGC urges the finance committee to recommend that our government follow through on its stated support for our creators by implementing our three measures. The investments we are recommending will help to ensure the continued development of a strong and competitive production industry that can weather uncertain times and ultimately succeed at home and abroad.

Economically, the investment will be rewarded through job creation, private sector investment, and export sales. Culturally, the rewards will be even greater. Audiences, both here and abroad, will profit from our talent pools and the cutting-edge programming they create.

Thank you very much.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

From Quinte United Immigrant Services, Mr. Orlando Ferro.

[Orlando Ferro, Executive Director, Quinte United Immigrant Services]

Mr. Chairman, I would like to thank the Standing Committee on Finance for providing me with the opportunity to express our concerns and expectations regarding the 2007 federal budget.

As the federal government is aware, the importance of immigration is vital for national economic and social development. Several industrial nations compete to attract the best and most educated immigrants. Social programs are vital for planning, implementing, and executing strategic goals set for the purpose of attracting and retaining immigrants.

The non-profit, community-based sector plays a very important role in this process. Through the voluntary sector initiative accord and codes of good practice on policy dialogue and funding, we have established a partnership with Canada in working toward those goals.

For the first time in many years, and thanks to the last federal government budget, the sector has been properly funded. I would like to acknowledge that. We would like to see the recommendations on the last budget remain for the next one.

We also have some concerns. I would like to present just a few of those concerns in the short time I have, and I would welcome any questions you have during the panelling section.

On September 25, the finance minister and the Treasury Board president announced $1 billion in federal program cuts to be implemented over two years. Although the announced elimination of funding does not directly affect our current funding through Citizenship and Immigration Canada, it will affect services currently being accessed by immigrants. Of course, due to time restrictions, I will just mention a few.

The Canadian volunteerism initiative is one of them. The Canadian volunteerism initiative, or CVI, is a national program to encourage Canadians to volunteer, to improve the capacity of organizations to involve volunteers, and to enhance the experiences of volunteering. Through the CVI, the Department of Canadian Heritage provides funding to volunteer initiatives at local, regional, and national levels. The $9.74 million cut resulted in the elimination of supports to the Canadian volunteerism initiative. Funds that supported national and local volunteer initiatives, volunteer outreaches, and innovative research will no longer be available.

How will the cuts affect communities? Volunteers are critical to our activities. Without volunteers the sector would be hard-pressed to deliver many of its essential programs and services to the community. Despite the extent of volunteer involvement in Canada and its importance to organizations and communities across the country, the federal government has deemed the CVI a non-core program and eliminated its funding.

Status of Women Canada is a federal government agency that promotes gender equality and the full participation of women in economic, social, and cultural...as well as in the political life of the country. The agency works in three areas: improving women's economic autonomy and well-being, eliminating systemic violence against women and children, and advancing women's human rights. The women's program has provided funding to women's organizations and equality-seeking groups since 1973. It was established in recognition of systemic discrimination and the need for systemic advocacy in advancing women's rights. With the $5 million reduction reflecting a 38.5% cut to SWC's operating budget and the elimination of women's equality from SCW's goals, the efforts to advance the rights of women in Canada will be deeply affected. Many national women's organizations previously funded through the women's program will either lose their funding or have to profoundly shift their mandates. Early indication suggests that the loss of women's program funding will put the survival of many women's organizations in jeopardy. This will affect not only Canadian women but also the most vulnerable immigrant women.

The court challenges program, CCP, funds court cases that challenge laws that may violate human rights. It was established in 1978 to provide funding for individuals and groups to advance language rights following the introduction of the Canadian Charter of Rights and Freedoms in 1983. The program was expanded to include equality rights test cases. The rationale behind the program lies in the fact that access to justice requires significant financial resources that are beyond the research of most individuals and groups, particularly those most marginalized. Without financial supports to test the constitutionality of questionable laws, constitutional rights are only protected for the wealthy who have the resources to access the courts.

The CPP has supported several important challenges. Some examples relate to the Chinese head tax and exclusion act redress, employment, disability...and many more challenges affecting the most vulnerable in our society.

This program has also enabled many community-based agencies to undertake court challenges regarding laws and polices that negatively affect the racialized communities, immigrants and refugees, and other disadvantaged groups in Canada. By contributing to the cost of important test cases—

[The Acting Chair, Liberal, Massimo Pacetti]

Could you conclude?

[Orlando Ferro]

That's what I meant to do. Basically, I would just like to see that in the next budget some of those cuts are reviewed.

Also, I would like to acknowledge that for the first time in many years we have been properly funded through CIC, and we would like to recommend that this level of funding continue.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

Mr. Gaffield, from the Social Sciences and Humanities Research Council of Canada,

You have five minutes, please.

[Dr. Chad Gaffield, President, Social Sciences and Humanities Research Council of Canada]

Mr. Chair, thank you very much for this opportunity to appear before this important committee to talk to you about two key factors for the future of Canada; the advancement of knowledge in the humanities and the development of the talent necessary for the advancement of the Canadian economy and society in the twenty-first century.

I am here today as the new president of the Social Sciences and Humanities Research Council. The SSHRC is the federal government agency that invests in research and training in fields that range from law to linguistics, history to marketing, and education to economics. In other words, we are Canada's research agency that focuses on people. We invest in world-class research about how human beings—individuals, communities, and societies—interact with each other and with the natural world we all share.

The knowledge generated by our researchers is a crucial part of the answer to the question you have asked us to address: how can Canada prosper in the new competitive world? Our answer to this question is twofold: first, by increasing our capacity to generate the knowledge we need to address our challenges as a society; and second, by further developing the talent required for the labour force of the knowledge economy.

The research funded by the SSHRC helps better understand individuals and groups, develop policies based on conclusive data and improve the way society operates.

Allow me to give you a few examples.

SSHRC-funded researchers at the University of Toronto are looking at the social dynamics of innovation, explaining why certain towns and cities attract creative and innovative workers. Our researchers at the University of British Columbia are developing ways to authenticate digital records, allowing inventors to establish patents for their ideas and products. Our researchers at the University of Winnipeg are working with inner-city residents to revitalize historic neighbourhoods. Our researchers at HEC Montréal are creating tools for forensic accounting, protecting investors and employees against white-collar crime.

In supporting research, the SSHRC also invests in people, the talent we increasingly need both in and outside the country. In recent years, most of the jobs created in Canada have been for people with postsecondary diplomas. Our students become corporate CEOs, lawyers, educators, community leaders and policy development officers.

Evidence shows that the knowledge, capacity, and experience our students gain from working in world-class research environments help fuel Canada's economic growth and success as a society.

In the statement you have before you, we explain that increased investment in the research environment is needed, particularly to support the work of the thousands of new researchers in the social sciences and humanities. We need to keep them here in Canada. We need to give them the means to do world-class research and to attract and train graduate students for a changing labour market. Standing still means losing ground internationally.

With an additional investment of $35 million this year, we can begin responding to the increased demand for knowledge and talent. We will enhance support for the new generation of researchers, enrich the training environment for our students, and maximize the impact of knowledge for society.

Mr. Chair, the equation is straightforward: by building knowledge about people and developing talent, Canada will indeed be able to assert its place as a leader in the competitive world of the 21st century.

Indeed, Mr. Chair, you may not be surprised to know that I think about our present challenge from an historical perspective. I think that in a world in which the challenge of simply co-existing seems daunting, we now need more than ever to gain better understandings of how individuals and groups can best share this planet.

Thank you.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Gaffield.

From the Computers for Success Canada, Mr. May.

[John May, Chair, Computers for Success Canada]

I'm the volunteer chair for Computers for Success Canada. All our board members are volunteers. We coordinate the computers for schools program. My first point is, don't be misled by our name, Computers for Schools; we now provide 20% of the computers we produce--110,000 units last year--to various NPOs and all manner of charities, which in turn provide training, literacy, and computer literacy to help people get off the street, and so on.

We have a huge recycling program. We have our own huge training program, and we're the model of choice in over 35 developing nations for the transfer of knowledge dealing with computer literacy, training in computers, how to educate with the computer, and so on.

We've been recognized as the leading computer refurbisher and recycler in the world. Bill Gates testified to that at the World Leadership Forum conference a year ago and ensured it was in his press release.

We are by far the largest provider of IT waste disposal services to the federal government, which means electronic computer waste, with surpluses in excess of 70,000 computers every year. We leverage four dollars for every dollar received from the government. Last year we got about $6 million and we leveraged another $25 million with that $6 million.

We're the only program in the world that obtains free operating licences from Microsoft, last year to a value of about $12 million, roughly $80 million in the aggregate. Transportation services are provided to us free, aggregating somewhere in the area of $40 million so far, about $3 million last year. We have a large number of private sector partnerships, both regional and national, including Alliance, SaskTel, MTS, Bell, Telus, TelecomPioneers, the Canadian Imperial Bank of Commerce, RBC Financial Group, and so on.

Last year our budget was about $6 million, $2 million of which came from HRSDC to provide us with training money for various people, including youth at risk, and we provided over 200,000 hours of training last year alone. The rest of the $4 million goes to manage the program. Notwithstanding that our funding over the last three or four years has declined from about $7.3 million to $6.1 million and we've taken a further 25% reduction this year, we've grown the program by 52%.

When we started, the computer-to-student ratio in Canada was twenty to one; now it's five to one. In the Atlantic provinces, two-thirds to 80% of every computer in every classroom comes from us. Across the country the average is one in four.

We service aboriginal communities. In the Northwest Territories, 80% of our production goes to aboriginal communities, and in Saskatchewan more than 25% of it goes there. Five of our provinces have refurbishing offices and shops in aboriginal communities, where we provide additional training.

Various consultants retained by the government have said not only have we leveraged $4 for every $1 we received from the government, but on a cost-benefit ratio the number is more like 10.75 to 1. They've also told Industry Canada that if it were to take on its recycling program and disposition program alone, that would cost it in excess of $10 million. We do it for $4 million and we put 110,000 computers back into the community every year.

We've responsibly disposed of over 60 million pounds of IT waste and we have diverted another 63 million pounds through reassignment and refurbishment, putting those computers back into the community.

We are now in various institutions operated by CORCAN, including Headingley Correctional Institution and the prisons in Prince Albert. CORCAN wants to expand our services into every institution in the country.

We service rural communities disproportionately. Based on its definition of rural living, Statistics Canada will tell you that about 20% of the population lives in rural areas. Across the country, 40% of our production goes to rural areas on average. In some areas of the country it's 60% to 80%.

We have hundreds of volunteers working for us every year, and last year we had at least 170,000 hours of volunteer time.

There are three issues, the third one being to ask, is the job done? I would suggest to you, no. We've got 800,000 computers out there, but everybody recognizes the need to renew IT assets from time to time on a cyclical basis, and that need is no less keenly felt in the communities in which we distribute.

Are we in a provincial area of responsibility, in education and the environment? We may be, but it's the government that provides training, it's the government that deals with international situations, and at the very least, the government has the responsibility to responsibly dispose of the 70,000 computers it surpluses each year.

We're asking only that our funding be restored to previous levels and that we be put on a better than monthly basis.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. May.

From the Mining Association of Canada, Mr. Stothart.

[Paul Stothart, Vice-President, Economic Affairs, Mining Association of Canada]

Thank you, Mr. Chair.

I'm the vice-president of economic affairs with the Mining Association of Canada. MAC members account for most of Canada's production of silver, gold, nickel, zinc, diamonds, and other base and precious metals.

Let me say a quick word about our industry. As you may know, Canada is a global mining superpower ranking among the leading producers of many minerals. The industry employs 388,000 Canadians and contributes $42 billion in Canadian GDP. The industry paid $1.6 billion in federal corporate income tax in 2004, as well as large sums in royalties. An estimated 2,500 companies also benefit from the mining industry each year by providing engineering, environmental, transportation, financial, and other expertise. Internationally, TSX-listed companies have 4,000 mining projects in play in foreign countries; an estimated 1,000 Canadian exploration companies are active in other countries; and our industry has around $50 billion in direct investment abroad.

Times are good within the Canadian mining industry. Driven by demand from China and other growing markets and technologies, mineral prices have increased in recent years, as have exploration expenditures, profits, royalties, and taxes. However, while times are buoyant, we do not believe this means the industry or government should develop a sense of complacency. There are several important challenges on the horizon, including the need to improve the federal project review process and the need to address human resource issues.

Of all the challenges, however, one ranks high above the others in both the threat it poses to the industry's long-term prosperity and the ability of the federal government to contribute to a solution. Our submission focuses on this one issue—the crisis in Canadian levels of mineral reserves.

Over the past quarter century, Canadian levels of proven and probable reserves and key minerals have declined by 50% to 80%. Silver reserves, for example, have declined from 34 million tonnes in 1980 to 7 million tonnes today. Canadian smelters and refineries rely upon a stable supply of quality inputs in order to operate. In 2004, for the first time ever, Canada actually imported more raw concentrate than it exported. If domestic reserves are not replenished, this is unlikely to be a sustainable economic model over the longer term.

There are two commitments the federal government should make to address this crisis. First, the federal government's annual investment in basic geoscience, particularly in mapping by the Geological Survey of Canada, has declined by 50% since 1988. The result is that some Canadian regions are largely unmapped or poorly mapped. Nunavut, for example, is attracting significant global resource interests but is some 73% unmapped. At the current level of investment, it will not be fully mapped for another 80 years. It is important to emphasize that investment in modern and accurate geological mapping is a core public infrastructure responsibility for government. It is essentially the price of admission for governments that wish to entice smart and effective private sector exploration. It is estimated that every dollar invested in basic mapping triggers $5 in exploration spending, which could translate to the discovery of new resources worth $125. In response to this decline, MAC has advanced the CGMS strategy, as developed through cooperation at the federal, provincial, and territorial levels. We believe the federal government should offer its wholehearted commitment to this strategy, which promises to become a key driver of national growth and prosperity.

Second, we believe the federal government should adjust the definitions of the exploration and development categories of the Income Tax Act so as to provide greater incentive for exploration in proximity to existing mines. The present system discourages exploration in exactly those areas in which prospectivity is greatest. It is much more expensive to explore at depth than at surface. If the federal government wishes to address the declining reserves crisis, then it should provide the appropriate incentive to explore in these deeper, more expensive, yet more promising areas.

To conclude, in his September 28 address at Queen's University, Minister Flaherty declared that liberating the forces of investment would be among the government's top economic priorities. We could not agree more with this priority. The two requests outlined in this submission are directly linked to liberating the forces of investment. These federal government actions will contribute to the sustained investment of billions of dollars in exploration and to related project development, engineering, financing, and other activities. We will be providing our formal pre-budget submission to Minister Flaherty and committee members over the next week or so, and it will focus on these two issues.

Thank you.

[The Chair, Conservative, Brian Pallister]

Thank you very much, sir.

Thank you all for your presentations. We'll move to questions now and begin with five-minute rounds.

Mr. McKay.

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

Thank you all for your submissions.

My first question goes to the Investment Counsel Association. Your first recommendation has to do with, effectively, more stock exchanges being listed as eligible for RRSP investment. The last Liberal government changed the foreign investment rule, increasing eligibility. Has there been a measurable impact in the composition mix of people's investments at this point?

[Thomas Johnston]

The Canadian investment industry generally is fairly conservative. It's very consultant-driven. What we're seeing to date is that most of the expansion into foreign asset classes with the removal of the 30% foreign content limit is on the fixed income side, but we're also seeing, at the same time--and again, it's triggered by the demographic blip of Canadians getting older and the pension crisis--a move to more higher alpha products. It's probably a little bit beyond the submission here, but without question the restriction in terms of the 36 stocks identified in regulation 3201 of the Income Tax Act is a bar, a block, an impediment on Canadians in their attempts to optimize their investments to save for retirement.

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

If, say, you doubled the number of stock exchanges, would that merely mean the alpha investments, the bond equivalent to a Canadian savings bond, that money, would migrate out to those stock exchanges?

[Thomas Johnston]

For Canadian RRSPs, it would immediately allow them, and the individual Canadians, to increase the universe of potential investments to other markets where there are potentially higher growth opportunities and to essentially provide for security for them and their families in their retirement years.

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

Thank you very much. I'm sorry to be moving along so quickly, but we have little time.

To the Pembina Institute, your proposal to reduce the 100% to a 25% capital cost allowance is probably dead in the water, given that the Prime Minister is from Alberta. That said, give me your argument as to why a very capital-intensive entity such as the oil sands can continue to expect to attract the capital it needs, if in fact this 100% write-off is not available to it.

[Amy Taylor]

The most important factor driving the oil sands development is the price of oil. So this is a facilitating incentive, but it's not a determining incentive. It's our opinion that even without this incentive in place, oil sands will be successful in attracting capital investment. Oil sands projects needed the global price of oil to be above about $25 U.S. per barrel. We're seeing prices well above that now, so this is a profitable industry that no longer needs this incentive.

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

I agree with you. I thought they needed about $30, but we'll take your number, $25. They're at about $60 now. In theory, they have a good profit going here: $30 to $35. But I'm given to understand that none of these investments, particularly the one we saw, the western oil sands investment, will actually turn a profit until the year 2010, and that's even with the 100% write-off. So what's your argument there?

[Amy Taylor]

In fact, just over 60 projects are taking place right now in the oil sands, and about half of those have reached payout. That means they are either currently paying a 25% royalty as opposed to the 1%, or it means they have paid, at some time, the 25% royalty. As soon as that happens, they're paying income tax, because the royalty regime requires them to recover their cost plus a return on investment. In the case of accelerated capital cost allowance, they just have to recover their cost. So if they're already paying that higher royalty, that means they're turning a profit; that means they're paying income tax. So we actually would see a benefit in terms of revenue gain from reducing that.

[The Chair, Conservative, Brian Pallister]

Mr. St-Cyr, you have five minutes.

[Thierry St-Cyr, Bloc, Jeanne-Le Ber, QC]

Thank you very much, Mr. Chair.

I'm speaking to Ms. Taylor.

I must say I liked your presentation and brief, which is very well done. You clearly know what you're talking about, and you can rely on my support and that of the Bloc québécois in this matter.

Can the same accelerated depreciation rate apply to wind or hydroelectric power development work? If not, what rate does apply to it?