Finance Committee on Oct. 26th, 2006

[Dr. Janet Rossant]

I think one has to recognize that in the last few years there has been a major reinvestment into health research in Canada that has led to a real growth in health research and health researchers, but what's happening is that it is suddenly plateauing and not continuing to grow. The researchers who have joined and come to this country are here and are applying for grants; we're seeing applications for grants going like this and the research funding going like that. The application pressure is enormous, and enormously strong, really excellent research is not being funded. It will be dire unless we see continued growth in the area. The investment is there and the potential is there, and cutting it off now would really prevent the realization of that investment.

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

Thank you.

I'd like to turn now to the manufacturing sector. We have two representatives here, and I have a double-barrelled question to ask to Mr. Sharma and Mr. Nantais.

The manufacturing sector, as we all know, is in some trouble because of the high dollar, high energy prices, and other factors, and job losses have been occurring. What would be the single most important thing government could do to help the manufacturing sector? Would it, for example, be a more favourable capital consumption allowance versus corporate income tax cuts? What do you think would get the most bang for the buck--not just your industry, but manufacturing in general?

The second question, which is for Mr. Nantais only, is about global warming. If some future government at some point were to get serious about global warming, wouldn't it be appropriate for the auto sector to have compulsory rather than voluntary requirements? I ask partly because that seems to be a corollary or an implication of getting serious, and also because I spent a lot of time in Alberta when I was the natural resources minister, and there was always the knee-jerk reaction out there; if we were saying we were going to get tough on oil sands or oil and gas, the reaction would be, “Oh yeah, you're from Ontario and the auto industry gets off scot-free; you just pick on us.” I think there's a sense of national fairness. That would be another case for compulsory rather than voluntary emissions.

That last question is only for you, Mr. Nantais, but the first one is for Mr. Sharma.

[Atul Sharma]

Simply put, the number one thing that could be done would be changing the capital cost allowance to a two-year cycle. I think that will help all manufacturing, but certainly our sector is a very technology-driven, capital-intensive industry, and anything that could provide some relief there would be of benefit and would help spur some investments.

We've seen some reports recently that there's a lot of liquidity within the industry and companies are essentially holding back on investments to see which way the government's going to go on this. If there is an indication that changes will be made, I expect we'd see some release of the pent-up demand.

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

Thank you.

[Mark Nantais]

In answer to your first question, Mr. McCallum, we would agree that the accelerated capital cost allowance would be very useful, as is the case for any industry or manufacturing sector that is very capital intensive. So we would support that.

Certainly, as it relates to the auto industry, there is nothing in Canada to keep us here any more. There's no Auto Pact, there is no other thing that would require us...and capital is very fluid. We now see people moving to other, lower-cost jurisdictions to build components and to make parts and actually to assemble vehicles. It is very critical that we have as positive a tax environment as we can have here in Canada, for all sectors, because right now we can move anywhere. We are a global industry. We can move anywhere in the world to do what we have to do, and if we don't have these positive signals, then I think it's a problem.

In answer to your second question about global warming, first off, I would be glad to answer the question about fairness. As I mentioned, we're the only industry to step up to a voluntary target of 5.3 million tonnes in 2010, from our products. No other industry has done that. We've also adopted the most stringent national emission standards. Those are the smog-related standards, and they are the most stringent in the world. We're an industry, we believe, quite frankly, that surpasses every other industry in Canada. We have always followed a U.S. regulatory program because we are a very integrated industry. The program for fuel efficiency, for instance, which gets the CO2 as one of the main global warming gases, has always been mandated there, but we did it voluntarily in Canada. And guess what? We've superceded those requirements.

So I would suggest--

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

If you always meet or exceed your voluntary requirements, what's wrong with making it compulsory?

[The Vice-Chair, Liberal, Massimo Pacetti]

Sorry, Mr. McCallum, I have to wrap it up. We're over the seven minutes.

The next member is Mr. Wallace, please, for seven minutes.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

I appreciate everyone coming this afternoon to talk to us. I do appreciate the presentation from Kitchener Waterloo. I understand the accountant is not excited about having to do the work that tax credits provide, but I'll just remind everybody that we did offer $20 billion over the next two years in tax cuts to individuals, which is more than four Liberal budgets put together, so it's still significant.

[An hon. member]

Wrong, wrong.

[Mike Wallace, Conservative, Burlington, ON]

We're getting a little punchy over there.

I do have some questions. I am going to start at the far end, if that's okay.

We have heard about general personal income tax cuts, and that will be discussed at committee. As far as I know, you're the first one I've seen--it may be elsewhere--to raise the upper level from $118,000 to $150,000, and ultimately to $200,000, as the top marginal personal tax rate. How did you settle on $150,000? Do you know what that would cost the federal treasury?

[Linda Korgemets]

Actually I haven't done the math to know what it would cost, and it is very important to understand the decrease in revenue. The $150,000 is a magic bullet number that we look at south of the border in the U.S., and in the U.S. it kicks in around $150,000, or it might even be $168,000. We're just trying to ask if there is any way we could have a number that even somehow parallels the U.S. top tax bracket, even recognizing, then, that we wouldn't be on the same footing, because as you are probably aware, in the U.S. they deduct their mortgage interest. We just want--

[Mike Wallace, Conservative, Burlington, ON]

They also pay capital gains when they sell their homes, do they not?

[Linda Korgemets]

They do, but they can roll that over if they buy another home of equal or more value.

[Mike Wallace, Conservative, Burlington, ON]

Eventually it comes out.

[Linda Korgemets]

Eventually it comes out here too, in your....

[Mike Wallace, Conservative, Burlington, ON]

I appreciate that. I just wanted to be clear. We have a lot of presentations, of course, and in reading your recommendations, that is the first time I've seen the upper--

[Linda Korgemets]

No. It's in the Ontario or the Canadian Chamber of Commerce. We do align ourselves, I'll be quite honest. There is no use reinventing the wheel, and we think the Canadian Chamber and the Ontario Chamber do very good work.

[Mike Wallace, Conservative, Burlington, ON]

I have one other quick question for you.

There has been lots of discussion of infrastructure. You represent a municipality that's growing; the other side of the greenbelt might cause you to grow a little more. Do you think the federal government, in terms of infrastructure dollars, should flow that through the province, or should it be directly to the municipalities?

[Linda Korgemets]

Directly to the municipality? Is that what you were saying?

[Mike Wallace, Conservative, Burlington, ON]

That's my question. Has the chamber taken a position on that yet?

[Linda Korgemets]

No, we have not. I don't have a position myself on that.

[Mike Wallace, Conservative, Burlington, ON]

Okay, that's fair.

For my next question I'm going to go to SickKids, to Ms. Rossant.

I just want to be clear. For indirect costs, we've heard about this 40% mark from university researchers that we're looking for. Could you explain to me whether that actually covers the cost, or is that just a partial cover? What is covered now?

[Janet Rossant]

This is the cost of doing research. It's particularly important for research institutes such as ours in a hospital, where in order to pay salaries, pay researchers, pay for heating and lighting, all the background indirect costs of running a lab.... We have no funds from either federal or provincial agencies other than the indirect costs that come with grants. In addition, our only other source of funding is from private charities, so SickKids Foundation, in our case, pays some of those indirect costs. Forty percent of the external funds we bring in from grants, we have calculated that that will in fact cover.... If you look at our budget for the research institute right now, 40% is what we have to get from other sources.

[Mike Wallace, Conservative, Burlington, ON]

Okay. Are you competing with universities for research dollars, or is that strictly for health care?

[Janet Rossant]

Are we competing for research dollars? As researchers, we compete. In other words, there are researchers within universities, there are researchers within hospitals, and we all compete for research funds through granting agencies in the peer review system, but we're not directly competing with the universities.