Finance Committee on Oct. 26th, 2006

[The Vice-Chair, Liberal, Massimo Pacetti]

Good afternoon.

Thank you to the witnesses for coming by and taking time out of your day.

We're here pursuant to Standing Order 83(1) on the pre-budget consultations for 2006.

We're going to allow you five minutes for your opening comments and opening briefs. We are going to keep you to the five minutes because the MPs are going to want to ask questions.

I am going to go in the order I have here.

From the Greater Kitchener Waterloo Chamber of Commerce, Ms. Korgemets. Go ahead for five minutes, please.

[Linda Korgemets, Senior Management, Tax, PricewaterhouseCoopers LLP, Greater Kitchener Waterloo Chamber of Commerce]

Thank you.

I chair the taxation subcommittee at the chamber of commerce as a volunteer. My day job is being a chartered accountant. I work at PricewaterhouseCoopers.

Sharing the presentation with me today is Art Sinclair, a policy adviser with our chamber.

Actually, a lot of you are from southwestern Ontario, so I don't have to tell you our success story in Waterloo: Research In Motion, DALSA, life insurance companies, Piller's, Schneiders, Brick Brewing. There are all sorts of great things happening out where we live.

We need the government to help us succeed as well, and that's why we're here today. We have great universities out our way. We have the Perimeter Institute for Theoretical Physics. There are many excellent things happening out in Waterloo and Kitchener, mainly because of the people out there and the help we get from the government.

We have recommendations related to the government's fiscal agenda, and we actually have to thank you for a lot of things. We have to thank you that spending didn't increase this past year--the year ending in 2006. Our message to you on that is to hold the course, to keep spending in line with inflation and population growth.

Regarding tax reduction, thank you again. There are no more capital taxes federally. That's great news to business. That really helps. And it helps me do my job, because they're just a pain to compute.

Here are our recommendations for 2007. We need a reduction in personal income taxes. Our top tax rates kick in at $118,000 per annum. We need that threshold raised. We also need the lower tax bracket decreased for individuals. We don't want to see complexity in the system by introducing piecemeal tax credits like those we saw in Budget 2006, things like a bus pass credit, an employment tax credit, a child fitness tax credit, and other such tax credits. We want broad-based tax relief, not things that make the system complex.

Lower the corporate tax rate by one point starting next year. Introduce more favourable tax depreciation regimes by increasing tax depreciation in the year of acquisition. This will encourage our businesses to invest in capital, something that's definitely needed. Also, change the way research and development tax credits are taxed. Currently, they are taxed. We'd like to see them not subject to federal taxation. Ontario doesn't tax them. Also, we'd like to see the tax credits refundable for all companies, to give them further cash to invest in innovative research and development.

On debt repayment, you've done a great job. We're all happy about the $13 billion, but where did that come from? We probably paid too much tax last year, hence the tax reduction request. We're very encouraged by the fact that the excess went towards debt. We want the debt to keep going down. We encourage the government to get to a guideline of a debt-to-GDP ratio of 25% by 2012.

Every year I come here and ask for the employment insurance surplus to break even on a more regular basis. We often ask for rates to come down. Rates have been coming down beautifully. I think what we'd really like to see for our members in Kitchener Waterloo is that the employer rate decrease from 140% of the employee rate down to 100%--a matching contribution, but no higher.

Now, I would like to turn the mike over to Art Sinclair, who's the policy analyst, because you don't want to listen to me any more. He will talk about strategic investments.

You have to be really quick. We don't have a lot of time.

[Art Sinclair, Policy Analyst, Greater Kitchener Waterloo Chamber of Commerce]

Thank you very much, Linda.

[The Vice-Chair, Liberal, Massimo Pacetti]

Mr. Sinclair, just to let you know, you've got a minute and twenty seconds.

[Art Sinclair]

I've got a minute and twenty seconds? I'll speak fast.

[The Vice-Chair, Liberal, Massimo Pacetti]

And you're the policy analyst?

[Art Sinclair]

I'm a policy adviser, yes.

[The Vice-Chair, Liberal, Massimo Pacetti]

Okay.

[Art Sinclair]

I will briefly outline some proposals that your members have identified as crucial initiatives for continued growth, prosperity, and job creation in the Waterloo region. We have provided a series of recommendations in our brief related to the elimination of employment barriers for internationally trained professionals and tradespeople.

A paradoxical situation is occurring where employers require more skilled and educated people to fill their vacancies, while at the same time qualified newcomers to Canada are unable to find work in their areas of training. We have proposed the inclusion of credential pre-assessment as part of the immigration process. It would provide new professionals with realistic expectations, allowing them to make more informed decisions on available opportunities and required upgrading.

Investment in the transit system remains a priority for the Waterloo region. We propose that as fiscal circumstances permit, an additional $1 billion be provided annually through the strategic infrastructure fund to further support public transit investment in Canada. On a local level, we seek a further financial commitment, subject to the outcome of ongoing technical studies on environmental assessment, to the region of Waterloo's transportation strategy that includes the rapid transit system.

Business in the Waterloo region is becoming increasingly dependent upon export markets. Current annual exports exceed $12 billion, with approximately $10.7 billion destined for the United States. The just-in-time delivery system utilized by many manufacturers requires an effective and efficient border system, particularly at Windsor and Detroit. Increasing trade volumes and an aging infrastructure place heavy pressures on the current system. It is now estimated that if no new improvements are made to border crossing capabilities in the Detroit River area by 2030, a total of 70,000 Canadian jobs will be lost.

We therefore propose that the federal government, in cooperation with the municipal and provincial levels of government, lead and expedite an environmental assessment process to build a new Windsor-Detroit border crossing before 2011.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Sinclair.

The next presenter is Mr. Nantais from the Canadian Vehicle Manufacturers' Association.

[Mark Nantais, President, Canadian Vehicle Manufacturers' Association]

Thank you very much, Mr. Chairman and members of the committee.

I'm here on behalf of DaimlerChrysler, Ford, General Motors, and International Truck and Engine Corporation, which are member companies.

Let me begin by simply saying that in today's ultra-competitive environment, the auto industry is undergoing very significant global restructuring that impacts both regional capacity and investment decisions. It offers new opportunities, but also real threats to the future of our industry.

These threats have been realized in Canada with the recent closing of three assembly plants and several major parts operations. However, at the same time, and in just two years, our industry has benefited from partnerships with the federal and provincial governments, with a reinvestment of about $7 billion, of which $5.2 billion has been through CVMA member companies.

In today's global context, however, vehicle manufacturers must continually fight for new investment in order to remain competitive. A friendly regulatory and tax environment is critical to continue to attract investment and remain the engine of Canada's economy. In this short presentation I will not get into some of the other major issues we've addressed in our more detailed presentation. But I really want to focus on an issue that has received a great deal of publicity of late, and that's the recently introduced Clean Air Act and the role of Canada's auto industry in the environment.

As an industry, we are committed to environmental improvements in the design and development of vehicles and improvements made to their manufacturing processes and facilities. In 2005 we were the only industry sector to step up to the plate and actually sign a voluntary agreement to reduce greenhouse gas emissions from our products to the tune of 5.3 million tonnes by 2010.

Canadian and U.S. emission standards are integrated and provide for the manufacture and sale of common vehicles in Canada and the U.S., which has the most stringent light-duty vehicle emission standards in the world. We can use the economies of scale from the integrated market to provide maximum benefit to consumers at least cost. Any attempt to regulate Canadian vehicles on a unique basis would limit product offerings, increase prices, and delay the introduction of new environmentally friendly technologies.

We believe a better approach for government is to support the leadership of the auto industry by actually assisting the consumer with the adoption of environmentally friendly--but more costly, I might add--advanced technologies and alternate fuels.

The most effective way to clean up Canada's on-road vehicle fleet is to remove the older, higher-polluting, less fuel-efficient vehicles from our roads and replace them with these more environmentally friendly vehicles. Just to give you an example, a 1987 vehicle has 37 times more emissions than a current-day vehicle, and there are over one million of them on Canadian roads.

The magnitude and rate at which these advanced technology vehicles can enter the market really depend on the affordability of these technologies. Assisting the consumer would go a long way in helping to remove the older, higher-polluting vehicles and getting these more fuel-efficient vehicles on the road.

As such, we recommend the introduction of consumer incentives for the purchase of advanced technology vehicles. We believe that new federal incentive programs should be applicable to a broad range of technologies, be based on the level of environmental benefit offered by that technology, and be a direct credit to the consumer.

In addition to advanced technologies, alternative fuels can play a key role in reducing vehicle emissions. We have introduced a wide range of cleaner-running alternative fuelled vehicles. The cost of these could be offset through incentives that would help not just the consumer...but if there's no fuel in the infrastructure to support these technologies--E-85 or other alternate fuels--we simply won't achieve our environmental goals. We recommend the implementation of measures to support the use of alternate fuels and encourage the development of the necessary infrastructure that goes along with them.

We've also focused on a set of recommendations on both the environment and new investment. A lot of those recommendations are in the more detailed document. There is also information in the other accompanying documents that you might find very useful on the economic importance of our industry, the investments that have been made, and where we are going from an environmental standpoint that will ultimately help Canada to achieve its environmental goals.

That concludes my presentation. I'll be glad to answer any questions.

[The Vice-Chair, Liberal, Massimo Pacetti]

Great. Thank you, Mr. Nantais.

From the Hospital for Sick Children, we have Ms. Janet Rossant.

[Dr. Janet Rossant, Chief of Research, Hospital for Sick Children]

I'm Dr. Janet Rossant, the chief of research at the Hospital for Sick Children here in Toronto. I'm going to talk to you today about the importance of health research.

Research is integral to the health care mission at the Hospital for Sick Children. Our vision is: healthier children, a better world. This vision speaks to the vital role that children play in Canada's future and the importance that has to be placed on their health. Investment in the health of children is an investment in a future generation of healthy, productive Canadians.

At all stages, research informs and improves the health of our children and the delivery of care. While improved health for Canadians is the outcome we seek, we also recognize that health research is one of the key drivers of today's knowledge-based economy. By supporting innovation, health outcomes for Canadians improve, the health care system becomes stronger and more efficient, our economy is bolstered through commercialization in biotech, and our skilled workers are encouraged to stay in Canada, contributing to our nation's prosperity.

SickKids, as we call the Hospital for Sick Children, wants to acknowledge the importance of federal investments made in support of health research in recent years. These investments have brought benefits to the children we serve across Canada and around the world. SickKids receives research funding from many different sources, including voluntary health agencies and partnerships with industry. But the federal government is our largest single source of external research funding, promoting the basic research we undertake.

We have a proven record of turning research funding into research discoveries that improve the understanding and treatment of children's diseases. Recent discoveries enabled by federal funding include a major finding that childhood and adult brain tumours originate from cancer stem cells. This is going to change the way we treat cancer in the future, and we expect it to suggest new targets for drug therapy.

We've identified possible new genetic mechanisms behind congenital heart defects. We've just completed the first population-based study in Canada looking at the impact of asthma in children. We've also developed novel interventions to help learning-disabled children within the educational system. So we have conducted a wide range of research. It's the funding tools in the federal government—CIHR, CFI, and Canada research chairs—that have enabled the rapid advancement of health research at SickKids and at research institutes across Canada.

We're facing new health challenges in Canada today: an epidemic of obesity in children, the devastating impacts mental health issues in children and other vulnerable populations, the effect of environmental factors such as air quality on asthma in children and adults, and the growing impact of chronic diseases. Only continued investment in health research will help us deal with these impending crises.

So the Hospital for Sick Children, along with Research Canada and other supporters of the health research endeavour, have a number of recommendations to make. We believe that CIHR is delivering on its promise to address these fundamental health issues. We recommend that the government increase the base budget of CIHR; that the increase be set at $350 million phased in over the next three years; and that the government consider disbursement in envelopes targeting strategic health issues, from which CIHR would administer funds addressing problems such as obesity and mental health.

Investment in CFI, the Canada Foundation for Innovation, has provided vital research infrastructure to hospitals, universities, and research entities across Canada. Reinvestment in CFI is going to ensure the continued development of this infrastructure, which is vital to the development of a strong economy in Canada's future prosperity.

The indirect cost programs provide the support within the institutions for the research that's carried on. Operating grants need to move towards the real indirect cost rate, which is about 40%. This funding should flow directly to the institution where the costs are incurred, not passed through higher structures such as universities.

At SickKids, we want to ensure that children's health is a national priority. Investment in children is an investment in the future. We recommend that a children's health advisory council be established that could fund specific children's health initiatives, including research. This would improve the health prospects of all Canadian children.

Thank you.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Ms. Rossant.

From the Greater Toronto Airports Authority, Mr. Kaldeway.

[John Kaldeway, President and Chief Executive Officer, Greater Toronto Airports Authority]

Good afternoon. I'm John Kaldeway. Thank you for the opportunity to appear here this afternoon.

As you are most certainly aware, Toronto Pearson is an economic asset of unparalleled importance to southern Ontario, and indeed to all of Canada. As a critical component of the nation's transportation infrastructure, our airport connects Canada with the world and generates thousands of jobs and billions in annual economic output, wages and taxes.

However, there are three core issues impacting our competitiveness that I would like to address to this committee today. The first is infrastructure. The first challenge we face is to ensure that Canada's airports are equipped to compete with the world's best, by making sure the right infrastructure is in place. Today the GTAA is nearing the completion of a decade-long $4.4 billion infrastructure redevelopment project, which has seen the replacement of obsolete and derelict facilities in order to handle the current and future demand for air transportation services.

Prior to the transfer to the GTAA, the federal government was operating with a large national debt, and funds for airport infrastructure simply did not exist. The GTAA's development program was privately funded, through the issuance of debt securities; it received no government funding. The project will be completed on time and on budget.

The airport is now well equipped to meet future demands with a world-class facility that is modern, safe, and secure. With our new facilities we are now in a position to continue to play a crucial role as Canada's premier gateway, which would not have been possible with the facilities we inherited in 1996.

The second issue is air policy. With the right infrastructure now in place, the core issue impacting our competitiveness is the policy framework governing Canada's air policy. It is critical that the government's international air policy, as well as individual bilateral air service agreements with other countries, not impede the industry's ability to compete. A less restrictive market would allow Canada's entire airport system to grow and to flourish.

We recognize that the federal government is moving towards a more open and liberalized policy. I must say we're particularly pleased with yesterday's announcement of Transport Canada's consultation process to liberalize Canada's international air policy. The GTAA encourages the government to continue this approach and to abandon the former practice of negotiating agreements containing restrictions that hinder airports and air carriers from meeting the needs of the competitive market.

The third and most important factor that impacts the ability of an airport to compete globally is fiscal competitiveness. Much has been made of the cost of operating and redeveloping Pearson. Everyone agrees that the airport was in need of redevelopment. We have put into action a responsible plan to do that and to contain costs, maximize revenues, and develop new sources of non-aeronautical revenues to ease the pressure on the landing fees of air carriers.

One such source of non-aeronautical revenue I'd like to specifically mention is something called “arrivals duty free”. Such arrivals are not possible today in Canada. It's only possible—through the rules of the Canadian government—to have departures duty free, which creates a competitive disadvantage for Canadian airports and reduces the potential revenues that could be generated from international arriving passengers.

More than 45 jurisdictions or countries in the world have implemented an arrivals duty free program, and this has eroded the Canadian departures duty free program. Arrivals duty free would generate various economic benefits, including jobs, wages, tax dollars, and so forth. Our estimate is that these sales could generate as much as $338 million a year of additional revenue for Canadian business. In order to succeed as a global gateway, these types of initiatives that drive competitiveness have to be in place.

The third one, which I'm sure you've heard before is fundamental to us, is the issue of airport rent. As you've already heard from some of our industry partners, airport rent negates the competitiveness of not only Canadian airports but also the air transportation industry as a whole. The Greater Toronto Airports Authority has paid more than $1 billion in rent to the federal government since 1996. In 2005 the landing fees at Pearson, which you hear so much about, could have been 34% lower if there had been no airport rent.

We have given you a proposal in previous papers. It has been presented to the Department of Transport as well as to the Department of Finance, and it would make a major difference on the airport rent issue. It is a key financial policy change that we continue to ask for; it is critical to us. We've invested $4.5 billion basically in building a new airport on top of an existing one while keeping one running, but we need assistance to get the inequities out of the way. This solution could also apply to all other airports in Canada and provide some benefits to all of them.

Thank you very much.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

From the Greater Toronto Hotel Association, we have Mr. Seiling.

[Rod Seiling, President, Greater Toronto Hotel Association]

Thank you. I'm also representing the Ontario Tourism Commission. Thank you for the opportunity to appear here today.

Tourism's GDP is equal to that of agriculture, forestry, fishing, and hunting in Canada. Total GDP attributable to tourism is 11.8%. From a policy perspective, it is both underappreciated and undervalued for what it contributes to the economy. Tourism represents 615,000 direct jobs and $57.5 billion in spending. Governments take one-third of all revenues, with the federal government in 2004 receiving almost 50% of the $17.5 billion the industry generated.

Tourism is a growth industry worldwide. Governments have recognized the inherent value of tourism to their respective economies, and they are investing in it. Investing in tourism provides immediate economic returns that allow the government to fund their priorities, such as health care, public safety, education, and infrastructure.

Unfortunately, Canada is losing market share in this growth market. Arrivals to Canada have dropped from twelfth place to seventh, while receipts have fallen to twelfth place from tenth worldwide. Our U.S. market, Canada's largest foreign market, is in free fall in terms of visitation. While international visits are increasing, they cannot make up this deficit, and the country's travel deficit is over $4 billion and increasing. Tourism is an economic generator, and it's time the government recognized this fact and treated it as such, both from a policy perspective and in resources.

The federal government has literally starved the Canadian Tourism Commission, the CTC. The CTC is unable to fulfill its mandate, which is the following: harness Canada's collective voice to grow export revenues, sustain a vibrant and profitable tourism industry, and market Canada as a desirable tourist destination.

The CTC's budget has gone from $98.66 million in 2001 to $75.83 million in 2007, with another $3 million cut coming. Taking into account inflation, the CTC's budget is about $50 million less than when it was established in 1995.

Cuts to the CTC translate into less tax revenue for the government. Since 2003, government cutbacks to the CTC have seen a reduction in Canada's share of the U.S. leisure travel market. If Canada had maintained the 30.5% leisure market share it had in 2002, it would have achieved the following: $3.1 billion in additional revenues, $453.2 million in additional federal tax revenues, and 6,380 jobs saved.

Canada is losing the awareness consideration battle. Canada and its partners spend less than 5% of their total advertising spending in the U.S. market. Mauritius, that little island in the Indian Ocean, has a larger share of voice in that market than does Canada.

As for competition, federal funding for competing tourism agencies is increasing. Australia has earmarked $121 million, while the U.K. contributes $118 million to its marketing agency.

What are the opportunities for Canada? Canada needs funding to become a national priority. The time is now. Canada's competitors are investing heavily in their traditional markets, and they are trying to steal away share in the new and emerging markets. Research has shown that for every $1 million invested in tourism marketing, the following benefits accrue: tourism demand goes up 20 times, 300 to 600 new jobs are created, and new tax revenues go up eight times.

The federal government needs to increase its funding to the CTC. It is good business, and the ROI, which has been shown to be immediate, will more than make up for the initial outlay. I'm not going to walk through the tables showing what $25 million, $50 million, and $75 million increases will do; it's there in front of you.

The Government of Canada is responsible for the Canada brand. Canada's image is at stake. Image and reputation are intertwined with investment and foreign policy and so on. The government can demonstrate that it understands the size and scope of the tourism industry. Continued failure to give it its due will guarantee that fewer visitors will choose Canada, more jobs will be lost, and the government will have fewer dollars to spend on priorities.

With respect to infrastructure, there has been no real improvement to Ontario border-crossing capacity in more than 70 years, resulting in increasing border-crossing delays and problems, notwithstanding that, for example, at the Windsor-Detroit crossing, car traffic is at 1972 levels and truck traffic at 1998 levels. Causes include the effects of 9/11, exchange rates, and increased security. Similar problems have occurred at the Niagara crossings, again caused primarily by the mix of cars and trucks.

This is more than a tourism issue. Manufacturers and large retailers that operate fleets of tens of thousands of trucks depend on efficient transportation systems to maintain just-in-time inventory systems, as do small businesses. For example, more than $65 million worth of goods crosses the Peace Bridge at Niagara every day. Douglas Duncan, president and CEO of FedEx Freight, predicts that by 2025 there will be twice as many cars and trucks as there are today on the road, and the U.S. Department of Transportation projects that freight tonnage will increase by 70% by 2020.

Expedited construction of new border crossings is necessary for the economic security of Canada and the United States. This can most easily be achieved by the separation of passenger and commercial traffic.

The Canadian Chamber of Commerce has estimated the existing delays at the Windsor-Detroit border are already costing the Canadian and U.S. economies $15.5 billion annually, with additional hidden costs in lost jobs and incomes.

We must also raise the issue of the proposed cancellation of the GST visitor rebate program. This proposal, if enacted, will put Canadian jobs, economic growth, and government tax revenues at risk, but also immediately increase Canada's tourism prices by 6%, a factor competitors are already raising with our customers at a time when Canada's tourism industry is already suffering from a soft market. Tourism is an export industry. Under GST regulations, export products are not subject to this tax. World-wide, every country that has a VAT system provides a visitor rebate program.

The government has mistakenly used incomplete information on which to make this proposal, saying there is only a 3% take-up rate and that it will save $78.8 million annually. This take-up rate is likely closer to 11%, which is similar to other countries' visitor rebate programs. The take-up rate for conventions and tour groups is close to 100%. These important sectors of industry will be devastated.

Thank you.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Seiling.

You went way over. I was trying to get your attention. We have to get moving. Members will be asking questions.

From the Canadian Plastics Industry Association, Mr. Sharma.

[Atul Sharma, Chief Economist and Executive Director, Ontario, Canadian Plastics Industry Association]

Thank you for the opportunity to present today. Basically, I will talk today a bit about the erosion of the manufacturing base. The handout--which was circulated, I believe--contains a lot of statistics about the industry itself, which I won't go through. But certainly, during the Q and A, I'd be happy to answer questions on that and focus in on the recommendations.

Historically, the Canadian plastics industry has grown at about twice the rate of general manufacturing. Over the past few years it has weathered the storms of change in the economy, the literal storms caused by the hurricanes in the past couple of years, and we're not really here today to ask for a handout to assist the industry, but for the establishment of a business climate to ensure that the plastics industry continues to prosper.

The question you may ask yourself is, well, why now, if it has done so well in the past? The answer is that the industry is currently facing, to continue with the storm analogy, a perfect storm of challenges: the high Canadian dollar; competition from low-cost jurisdictions; skilled labour shortages; weakening U.S. demand; soaring energy and commodity costs. Practical and immediate steps are needed from the federal government, and there are things that can be done very easily and very cost effectively.

The first main recommendation we would propose is the establishment of a vision for manufacturing within Canada. The Canadian government must take a lead to show that manufacturing continues to be an important part of the Canadian economy. This is very important for the plastics industry because it is, according to StatsCan, the largest manufacturing employer in Canada, with nearly 95,000 employees across the country.

The vision must include a commitment to developing industries that can provide value-added production to our natural resources. Again, for the plastics industry, as you know, plastics is based on a resin produced primarily from natural gas. Canada is a large producer of natural gas. Why not process some of that natural gas within Canada and develop the resins so that we have a security of energy supply and a feedstock supply for the industry? We can do all of this and still meet our NAFTA requirements.

The other recommendation we would make is with regard to the capital cost allowance for a two-year writeoff for investments in new manufacturing capital expenditures. This will help kick-start an innovation and productivity boom in Canada. And frankly, with the high Canadian dollar, it allows companies to take advantage of that situation with their purchases of capital equipment from the U.S.

We would also like to see improvements in the SR and ED tax credits. As you've heard from previous speakers as well, we would like to see more companies take advantage of them. Specifically, make the credits refundable, exclude them from the calculation of the tax base, provide an allowance for international collaborative research and development, and extend the tax credit to cover costs for patenting, prototyping, product testing, and other types of pre-commercial commercialization activity.

We would urge the government to maintain the commitment to reduce the federal corporate tax rate to 19% by 2010, but to also further reduce the rate by two percentage points by 2012. As well, we would like the government to look at a competitive regulatory regime to allow our companies to become much more efficient in their dealings with the federal government.

Lastly, we'd like to see the government continue to improve access to skilled labour through the funding of the Canadian Plastics Sector Council. CPIA is a partner with CPSC, and we have been working with them to take the message to students in high schools and in universities. As you can imagine, plastics isn't always the first industry of choice, but it's a very important one, and once we show students what's involved and the high technology that's involved within the industry, there seems to be a lot of excitement about it. We want to continue that and ensure that we have a future labour force within Canada.

In conclusion, we'd like to see the focus on a positive business climate in Canada, where value-added manufacturing can flourish and continue to contribute to the Canadian prosperity.

I'd be happy to take questions at the end of our session.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Sharma.

The House of Commons industry committee is preparing a report on the manufacturing situation in Canada. I'm just wondering, were you asked to testify?

[Atul Sharma]

Yes, we made a presentation in June.

[The Vice-Chair, Liberal, Massimo Pacetti]

Okay, thank you.

From the Directors Guild of Canada, Ms. Brand.

[Pamela Brand, National Executive Director and Chief Executive Officer, Directors Guild of Canada]

Good afternoon, Mr. Chair and members of the committee.

We thank you for giving us the opportunity to appear before you today.

I'm Pamela Brand, the executive director for the Directors Guild of Canada.

I will beg your indulgence, because I'm fighting a very bad sore throat. I'll try not to get too hoarse.

You've probably read in the written submission we made in September that the Directors Guild represents almost 4,000 creative and logistical personnel in the film and television industry across Canada. We also have more than forty years of experience in contributing to film and television policy in Canada. It's not me who has being doing that for forty years; it's the guild.

I would like to take these few moments to highlight one of the key messages from our written brief, and that is that the film and television sector contributes significantly to Canada's competitiveness, economic prosperity, technological development, cultural strength, and social cohesiveness. Providing stable, long-term support for Canada's audiovisual sector helps fulfil multiple national objectives. It is an efficient and effective use of public resources, and it is also sound public policy.

Due to the economic realities of film and television production in Canada and around the world, building and maintaining a viable film and television production sector in Canada has required an integrated set of policy instruments, including financing and tax measures. The Directors Guild brief recommends that the upcoming budget ensure that the existing support structures for film and television production are maintained. In particular, the entire audiovisual industry would be very pleased to see this committee recommend stable A-based funding for the Canadian Television Fund, at least at its current level of $100 million per year.

Along with Telefilm Canada, the CTF is a critical program in supporting Canadian production, because its contributions leverage significant additional production funding. For example, the $100 million federal contribution to the Canadian Television Fund joined with contributions from the cable and satellite industries that triggered total production worth $841 million in the 2004-05 year.

A permanent A-based funding allocation for the fund would bring much greater stability to the industry. It would allow the production community and the Canadian Television Fund to better plan and make commitments to Canadian productions, and it will give further funding sources confidence that projects and partnerships will be viable over the long term.

In the recent past, this committee's pre-budget report has recommended stable, longer-term funding for the Canadian Television Fund and Telefilm Canada; a funding increase for the CBC, Canada's public broadcaster; and an increase in the rate of the Canadian production tax credit. The Directors Guild hopes this finance committee will once again recommend that these important measures to support our indigenous film and television industry will be made for this upcoming budget.

We also hope that the committee will recommend renewed funding of the Canadian Coalition for Cultural Diversity as it continues its work towards the global ratification and implementation of the UNESCO convention on the protection and promotion of cultural diversity in cultural expression. Canada has been a leader in the creation of this important international agreement. With the unanimous support of Canada's Parliament, it was the first country to ratify it.

We appreciate this opportunity to appear before you. We are pleased to answer questions.

Thank you.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Ms. Brand.

Okay, members, we're doing well, so we're going to do a first round of seven minutes.

We're going to start with Mr. McCallum and then Mr. Wallace and then Mrs. Wasylycia-Leis.

Mr. McCallum.

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

Thank you, Mr. Chair.

Thank you to all of you for your presentations.

I'd like to start with two very quick comments and then ask some questions.

First of all, Mr. Seiling, I totally agree with you about the wrong-headedness of getting rid of this visitors' GST rebate. Indeed, we pushed for hearings to be held on that subject. We're going to have two hours, I believe, of hearings on that issue in a month or so, so we'll come back to that.

I'd also like to congratulate the Greater Kitchener Waterloo Chamber of Commerce, not only for your point that reductions in income tax are superior to consumption taxes and your proposal to get the lowest income tax rate down to 15%, where it was in 2005 before it was raised--we agree with that--but also in particular because you're speaking out about this myriad of piecemeal tax credits. I agree that it not only complicates the tax system but is also almost a kind of social engineering, government knows best attitude when you give special money for soccer players but not for dancers. We agree with you totally in the primacy of broad-based tax relief.

Turning now to questions, to the SickKids hospital, I'll say that I totally agree with you about the importance of health research. We've been hearing a number of people across the country on this issue, and I've heard it said that the situation in health research is urgent, if not desperate, in the sense that funding that has been given in the past to health researchers is coming to an end soon because the government has not yet stepped up to the plate. And many of the people who have come to this country from the U.S. and elsewhere will be forced to return unless new money is forthcoming, so we'll have a brain drain instead of the brain gain that had been induced by past research.

That's what we've heard. Has that been your experience too?