Finance Committee on Oct. 25th, 2006

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chairman. I have to ask my questions in English, and I apologize for that.

I am going to begin with Mr. Morency. My questions are going to be fairly specific, if that's okay, because I only have seven minutes.

In your report, Mr. Morency, you indicated that we should have a different tax system or status for American investors. My concern has always been that we don't have enough Canadian people investing in Canadian companies. Could you comment on that, and what is the real advantage to us in making it easier for Americans to invest here?

[Yves Morency]

First, for this type of U.S. corporation that invests in venture capital, it's not the corporations but individuals who are taxed, investors, so that those investors are considered virtually as partnerships.

There are benefits, including better access to the U.S. market, from both capitalization and commercialization standpoints. There's also a transfer of expertise between U.S. and Canadian businesses, particularly with regard to venture capital.

Bear in mind that, in the U.S., they've reached the fourth and even fifth generation of venture capital investors, whereas, in Canada, although we do a lot of that—and we indeed do a lot—we're just starting out in venture capital. Businesses are quite recent.

All that promotes a better transfer between the two.

[Mike Wallace, Conservative, Burlington, ON]

Thank you.

Now, to either my friend from CÉGEP or from the Canadian Colleges, I don't have a college in my town; I'm from Burlington, Ontario. We have Mohawk College on one side and we have Sheridan College on the other. They both like to claim Burlington as theirs. But I thought perhaps either one of you, or both, could answer this. In your presentation, I thought you said you wanted funding to go back to the 1994-95 level. I may have missed that through the translation. Is that accurate?

[Serge Brasset]

Actually, there are two things. In our report, the report of the Association of Canadian Community Colleges, we talk about 1992-93, but the Fédération des cégeps talks about 1994-95. That's why I said 1992-93 and 1994-95.

[Mike Wallace, Conservative, Burlington, ON]

On page huit, it has zero from the Government of Canada, so there is 0% for CÉGEPs. Do you want us to go back to continuing to give you zero? I don't understand.

[Serge Brasset]

No. We're talking about the federal transfers to post-secondary education.

[Mike Wallace, Conservative, Burlington, ON]

It went to post-secondary education, but it still was not floating down to colleges, by the looks of this chart.

[Serge Brasset]

That means, I think, that we don't get direct money from the federal government. We don't have direct grants.

[Mike Wallace, Conservative, Burlington, ON]

Okay. That's my question then. Do you want direct funding, or would you prefer that it still go to the provinces and that they redirect it?

[Serge Brasset]

We want money whichever way it comes.

[Voices]

Oh, oh!

[Mike Wallace, Conservative, Burlington, ON]

Are you confident that if we give it to the provinces it will end up in your coffers?

[Serge Brasset]

If it goes to a post-secondary transfer, targeted to post-secondary education, then we're confident it will come to us.

Do you want to add to that?

[Gaétan Boucher]

Perhaps I can provide some additional information, Mr. Wallace.

In Quebec, there's an old tradition whereby money that is transferred for postsecondary education is not used to build roads or buildings; it's actually used for colleges and universities.

Our choice is that money be transferred to the Government of Quebec to be reallocated to our colleges.

[Mike Wallace, Conservative, Burlington, ON]

Okay. Merci.

Do I still have some time? I hope so.

My next question is for the president of McGill. I didn't know that McGill is Canada's best-known university, but I'll take that, as written in this thing.

I had an opportunity recently to meet with some of your colleagues from York, McMaster, and Ryerson. They had a meeting with me for discussions. Their issue, at the end of the day, was obviously funding for research, but they had two other things that were of interest to me, and since you're here, I'm going to ask you. First, they were concerned about the quality of education based on overcrowded classrooms and those kinds of things. Quality was an issue. Could you comment on what McGill's feeling is on quality?

Second, they also had an issue with post-graduate work and their ability to attract, again, quality post-graduates internally, but specifically externally, such as international students who may not be able to get here because of some immigration issue, and why we care about whether they go back or not. If you could comment on that, I'd appreciate it.

[Dr. Heather Munroe-Blum]

Thank you.

First of all, let me say that the London Times supplement, which just came out, ranking universities around the world, has ranked McGill as the only Canadian university in the top 25 for many years consecutively, in fact since the ranking came out.

Second, on the quality of education, we suffer from underfunding, and I want to speak about the federal role in this regard.

One way of addressing the quality of education is through transfers. But I'd submit that the other is to pay the full cost of the research that's funded at the federal level, and that's what indirect costs are. It's a terrible name. It's opaque; it's hard to understand. What does it mean? It means that when the federal government gives a grant, they pay a full dollar for every dollar they spend. Right now, they're not doing that, and until we get to 40¢ on the dollar, we're undermining the quality of education, and we're undermining the provincial operating grant, because universities have to pay for that research somewhere, so they do it on the backs of students, whereas university research should enrich the education of students.

On post-grad and graduate students, there are discriminatory practices with respect to work permits for graduate students in the big cities in Canada. We're in a demographic deficit, not a surplus. We're trying to attract and retain people here. You could fix this and it wouldn't cost a penny, and it would mean that graduate students who come from other countries, where other countries have paid for their undergraduate education--they're not all in the developing world, far from it, and in fact the majority are not--would have a better incentive to stay here. So I think it would be a good thing to do.

We ought to also be more actively recruiting graduate students from around the world.

[The Chair, Conservative, Brian Pallister]

Thank you very much.

Before continuing, I must ask three questions, including two in French, I hope.

I apologize in advance to the translators, but I will give this a try. Okay?

It's a well-known fact that the five big banks frequently use tax havens to increase their return on investment.

That's a problem, according to the Auditor General. It was also a problem for her predecessor, Denis Desautels.

Is the use of tax havens a technique adopted by the Mouvement des caisses Desjardins?

[Yves Morency]

We don't use that kind of tax haven. As for the banks, I can't tell you either whether they use them. Fundamentally, we must ask ourselves the question whether our tax system is competitive. If businesses, organizations—I can't name them and I can't think of any—use these dodges, perhaps we should consider the fundamental reasons why they do so.

In our case, I can guarantee you that we don't use this kind of tax haven.

[The Chair, Conservative, Brian Pallister]

Oui. I can tell you why they resort to them; it's because the rate of tax is so low that it draws money offshore like a magnet. That's an easy one. The question, of course, is whether we develop public policy that encourages or discourages such practices.

I continue then with

my second question, which concerns the Cegeps.

And I declare a bias as

I'm a Quebecker. My family lives north of Gatineau. I have two granddaughters at primary and secondary school. They both speak French

much better than their dad does.

No other province receives funding for grade 12. Am I correct in saying this, that no other province receives funding up to grade 12? Now that Ontario has eliminated grade 13, Quebec is the only province where we go to that middle level of CÉGEP. Oui?

[Serge Brasset]

That depends on what you mean by “funding for grade 12”. The system in Quebec is different. We have six years of primary school.

[The Chair, Conservative, Brian Pallister]

It's separate.

[Serge Brasset]

Yes, it's separate. Everything's different.

We have five years of secondary school, two mandatory years of Cegep, then university. It's a completely different system, perhaps more similar to the European system, the LMD, the licence, master's and doctorate, which consists of three years of university.

The difference is that four years of university are subsidized in the rest of the country, whereas, in Quebec, we subsidize three, plus two years of Cegep, which cost roughly the equivalent of a year of university.

It ends up being the same amount.

[The Chair, Conservative, Brian Pallister]

Okay.

So the rationale for the federal government increasing funding to CÉGEPs would be that they save on the other end, because the student has one year of additional education in advance of going to university; therefore—

[Serge Brasset]

It ends up being sixteen years anyway; it's just a different system.

[The Chair, Conservative, Brian Pallister]

Okay.