Finance Committee on Dec. 4th, 2007

[The Vice-Chair, Liberal, Massimo Pacetti]

Good morning.

This is our first panel here in Calgary, so I want to welcome the panellists. Most of you have experience in making presentations, so we're going to go with a five-minute period to allow you to present your briefs and then we're going to go to the members.

Some of the members, as you can tell, are not present. We had some problems yesterday in terms of some members not coming in because of a budget bill being debated in the House. It's supposed to come out of the House today, so some of the members had to stay behind because of that.

All of your testimony is going to be on the record, so if members want to go back and review it, they can. Other members can also review it. There's a research staff here, so everything you say will and can be held against you in committee work!

We're going to start with the people I have here. Pursuant to Standing Order 83(1) on pre-budget consultations, I'm going to start with the Calgary Chamber of Voluntary Organizations, Ms. van Kooy, for five minutes.

Thank you.

[Katherine van Kooy, President and Chief Executive Officer, Calgary Chamber of Voluntary Organizations]

Thank you. I'd like to thank the chair and the committee for this opportunity to provide input regarding the government's budget priorities.

My name is Katherine van Kooy. I'm the president and CEO of the Calgary Chamber of Voluntary Organizations, otherwise known as the CCVO.

A registered charity, CCVO's purpose is to strengthen the voluntary sector. We support and are supported by more than 330 diverse non-profit member organizations, ranging from small grassroots groups to large umbrella organizations that operate in areas such as human services, arts, recreation. We also work on behalf of the broader non-profit sector in Canada and across Canada through our partnerships with organizations such as the national charity Imagine Canada and the Federation of Voluntary Sector Networks.

I'm here today in a policy leadership capacity as decisions and priorities regarding the federal budget will have a large impact on what non-profits are able to achieve in their communities.

Canada is blessed with a very large and vibrant charitable non-profit sector that contributes to our communities in areas such as health, education, sports and recreation, environment, arts and culture, and services for individuals such as seniors, children, and immigrants. These organizations play an essential role in building and maintaining healthy communities.

The core recommendation, which was outlined in our submission, is the need for a national charities strategy to provide a more comprehensive approach to ensure that Canada's charities continue to be able to meet the needs of their communities.

In our pre-budget submission, we identified four key components of the strategy: reforms to the administration of grants and contributions; sustainable funding for the collection of mission-critical sector data; further encouragement for increased private donations through adjusting the federal charitable tax credit to a single rate of 29% for all charitable donations to the maximum allowable income level; and an exploration of alternative methods for debt financing for non-profits that go beyond the current tax measures to encourage donations.

Given the time constraints, I'll speak briefly to the need for a strategy and then focus my comments on the first two components.

A national charities strategy would be a more comprehensive approach to strengthening the non-profit/voluntary sector for the benefit of all Canadians, and there are precedents in terms of other actions the government has taken for this national approach, including the science and technology strategy, which was announced previously.

Such a strategy would recognize the priority that is given by Canadians to the work of charities and non-profit organizations in their communities, as reflected by their level of financial and personal volunteer support. More than 22 million Canadians donate to charities and close to 12 million Canadians volunteer two billion hours of time to community-based organizations.

The first component of the strategy is for the government to sustain its commitment to implementing the recommendations of the blue ribbon panel on grants and contributions. That panel found that the administration of federal grants and contribution programs, which are how most charities and non-profits receive federal government funding, impose significant burdens on the organizations that partner with government through these programs, taking scarce resources away from delivering community-based services.

I chair a committee of Imagine Canada members that's monitoring the implementation of the panel's recommendations. We applaud the government for accepting the recommendations made by the panel and recognize the work that's being done by Treasury Board and the lead departments in implementing these recommendations.

However, the major changes required to streamline and coordinate processes across government require sustained political and administrative commitments. These changes within government will enable charities and non-profit organizations to operate more efficiently, making the best use of government investments as well as donor contributions.

The second component of the national charities strategies that I'll speak to today is the need for sustainable funding to collect essential data about and for the charitable and non-profit sector.

The Canada survey on giving, volunteering and participating, and related satellite accounts compiled by Statistics Canada are among the few sources of data about the non-profit and voluntary sector. This data provides a consistent national information base, which is essential to understanding the sector. It's the only reliable source of information about Canadians' commitments of time and money to charities and non-profit organizations. This information is used extensively by individual organizations. It's a valuable source of information for governments and organizations working to strengthen the capacity of charities and non-profits to serve their communities.

As the government changes the way it supports charities, such as through enhanced tax measures, these data sources would provide vital information and a planning tool for government as well.

The Government of Canada has traditionally recognized the importance of reliable data to support the economic activity of various sectors of our economy. Collection of information about this sector is relatively recent. However, it's essential for a sector that contributed more than $25.4 billion to the GDP in 2001. Non-profits themselves are not in a position to collect this information, but they do need it, and so do the people who make decisions regarding non-profits.

It's often assumed that community-based organizations that fill essential roles throughout Canada will always be there to support individuals in overall economic activity. Unfortunately, many organizations are struggling to perform their roles and they face significant barriers to maximizing their contributions.

In the federal government's upcoming budget, we ask that the non-profit sectors' essential social and economic role be recognized and supported by a comprehensive government strategy aimed at strengthening this sector.

Thank you for the opportunity to speak to our submission. I welcome any questions.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Ms. van Kooy.

From the Calgary Zoological Society, we have Mr. Lanthier. You have five minutes.

[Dr. Clément Lanthier, President and Chief Executive Officer, Calgary Zoological Society]

Good morning. I want to start by thanking you for this opportunity to speak to you and by welcoming you to Calgary.

The first temptation, when looking at the Canadian tax system, is to debate how the government should collect taxes or how much every individual or business should contribute to the system. I believe it is more important to discuss and understand the fundamental reasons that justify our tax system. In other words, why does government collect taxes?

Regardless of the jurisdiction, most Canadians will probably admit that health care, education, infrastructure, the environment, security, sovereignty, justice, and heritage and culture constitute the essential domains for which government should collect taxes. The challenge for political leaders, I believe, is to support these domains by meeting financial obligations for current and past commitments while recognizing and investing in national strategic opportunities for Canada's future.

In my view, Arctic Canada is definitely one of the latter. It is a strategic opportunity, and the federal government has a responsibility to enhance the north.

Baba Dioum, a Senegalese conservationist, said, “In the end, we will conserve only what we love. We love only what we understand. We will understand only what we are taught.” In this context, if we want Canadians to care about the north, it is imperative to connect them to the Arctic. In tax terms, Canadian taxpayers will understand and support federal government initiatives in the Arctic.

Our proposed Polar Interpretive Centre of Canada initiative is the perfect instrument to connect Canadians to the Arctic. It is an opportunity as well to erase northern stereotypes and to discover the new north.

To achieve its goal, the Polar Interpretive Centre of Canada is planning to use a variety of methods, such as adaptive and interactive educational programs, for different audiences from coast to coast to coast. We are also planning to provide direct, firsthand, and virtual experiences with Arctic charismatic megavertebrates, such as polar bears and seals.

We want to establish distance learning opportunities. We want to disseminate bio-science research findings to national and international audiences. We want to initiate meaningful conservation programs and to support community economic development in the Arctic.

Located at the Calgary Zoo, the Polar Interpretive Centre of Canada will benefit from the zoo's existing expertise, infrastructure, networks, and world-renowned education and conservation programs. The Polar Interpretive Centre will also directly connect with millions of on-site and virtual visitors annually.

Don't get me wrong; this is not a traditional zoo project. Our initiative is as close to being a traditional zoo as the Cirque du Soleil is to being a traditional circus. The Polar Interpretive Centre of Canada will be a platform connecting Canadians to the Arctic—its wildlife, its people, and its challenges. The Polar Interpretive Centre of Canada will be a platform stimulating Arctic awareness. This platform will be a perfect venue for Canadians to learn to conserve, love, and understand the Arctic. This platform can be the perfect instrument to communicate federal Arctic initiatives to Canadians.

We sit before you today to tell you that we have secured or are in negotiations for almost 70% of the funding for the project. We still need to raise another 5% from the private sector. We need federal funding support of 25% of the cost. We request $35 million.

The federal tax system is in place to address national and strategic issues facing Canada. The Arctic is without a doubt critical to Canada's future. Sovereignty, national resources, climate change, species at risk, and heritage and culture are just a few of the issues facing the north. Only with the federal government's support will the Polar Interpretive Centre of Canada connect Canadians to the Arctic.

Thank you. Merci.

[The Vice-Chair, Liberal, Massimo Pacetti]

Merci.

From the Canadian Association of Petroleum Producers, we have Mr. Alvarez.

[Pierre Alvarez, President, Canadian Association of Petroleum Producers]

Welcome back to Calgary, Mr. Chairman. It is nice not to have to appear before you six times this year. I look forward to one budget or two. Six certainly stretched our limits the last time we saw you.

Mr. Chairman, we live in interesting times. Some may dispute whether this is a blessing or a curse, but there is no denying that the business environment for the oil and gas activity in this country has captured public attention as one of the most reported news stories of the year: high oil prices, low natural gas prices, a high dollar, low netbacks, high profits, low drilling, high costs, low labour availability, higher royalties, and lower corporate taxes.

Canada's oil and gas producers have seen it all in the past 12 months. While each of these on its own is nothing new, it is the combination of them that has led to a very turbulent year.

Volatility is part and parcel of exploration and development. It is inherent in the nature of the commodities business. The industry has gone through cycles in the past, it is going through ups and downs now, and it will continue to cycle into the future. What is new is the volatile policy environment.

Capital is mobile, maybe more so now than ever before in the oil and gas industry. It moves where it can find the best return on investment. This is no surprise to anyone, especially as we see live examples of what's happening today interprovincially and internationally.

These movements have been and will be affected by surprises. In the last 12 months, the oil and gas sector has gone through several policy surprises, including the tax changes for income trusts, the cancellation of the accelerated capital cost allowance for oil sands while it is being extended to other parts of the economy, the proposed limitation on foreign interest deductibility, and of course, most recently, the results of the Alberta royalty review.

With this as a backdrop, in our written submission this summer we recommended that the federal government continue its broad-based tax reductions, refrain from punitive sector target measures, and consult with industry to avoid surprises before announcing new initiatives.

There are a few other recommendations in our written submission, but I won't go into them today.

However, the panel asked recently what the impact of the high dollar is on the different industries. We get asked this a lot. The effect on the oil and gas industry is not unique among Canada's exporting industries. With oil and gas prices based in U.S. dollars, a higher exchange rate means fewer Canadian dollars back to Canadian producers. As with all other exporting industries, the higher our dollar goes, the lower the price we see in Canadian dollars.

What this means is that when oil is trading at $88 U.S. a barrel with our dollar at parity, it's the same to Canadian producers as when oil was at $57 U.S. with a 65-cent dollar. Almost all of the uptick in oil prices has been eaten up by the rising exchange rate. The case with natural gas is even worse, with the double hit from the lower natural gas prices in North America and the higher exchange rate.

The cumulative impact of all these factors has put Canada at the bottom of competitiveness rankings for oil and gas investments internationally. While in the past this was somewhat mitigated by Canada's high ranking for government stability and its environmental policy certainty, the past year has caused many to question that stability.

I don't want to give you an overly negative impression. I am here to tell you that Canada can have a strong, vibrant upstream oil and gas industry, one that invests more money into the Canadian economy than any other from coast to coast and that now accounts for 14% of Canada's exports and is responsible for 80% of our trade surplus with the United States. We employ half a million Canadians across the country. We contribute to the value of pensions and RRSPs as one quarter of the share value traded on the Toronto Stock Exchange, and over $27 billion of industry revenue will find its way into government coffers in the form of royalties and taxes.

CAPP also clearly recognizes the efforts and expenditures taken by the government to address two key constraints facing most Canadian industries, including our own: those of infrastructure and human resources. Public infrastructure and people are two of the vital foundations needed for economic growth that are often overlooked until they are lacking. CAPP wants to express our appreciation for the growth in federal expenditures in infrastructure, such as Highway 63 to Fort McMurray, and in human resources in areas such as apprenticeship training and immigration. It is recognized and appreciated, and most importantly, it needs to continue and even accelerate.

Above all, what I am here to ask this panel is to continue its focus on broad-based tax reduction measures and to treat the oil and gas industry just like any other Canadian industry, fairly and equitably, whether in terms of a policy response to the high dollar or to trade concerns, or of a climate change policy, to name just a few.

Mr. Chairman, thank you for our opportunity to appear. I look forward to any questions you may have.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

From the Canadian Sport Centre of Calgary, we have Mr. Henwood.

[Dale Henwood, President, Canadian Sport Centre Calgary]

Good morning, welcome to Calgary, and thank you, Mr. Chairman, and members of the committee.

I'll be briefly elaborating on a presentation I submitted in August, a submission that I'm assuming you have received and reviewed. I also alert you that my colleagues in Halifax and Montreal will be delivering a similar message.

This is my first time before the committee, but since I believe so passionately about sport, its role in Canada, and its role in making Canada even better, I decided to bring this perspective forward. Secondly, we were totally forgotten about in Budget 2007 last year, so I felt it necessary to have this conversation today. Thank you for this opportunity.

Briefly, the Canadian Sport Centre is an RCAAA organization, part of a network of sports centres across this country. Every day we work with Canadian athletes and coaches who are preparing to represent Canada at the highest international level. We also connect with athletes from across Alberta, with the other centres from across the country connecting with young, developing, emerging athletes and coaches from every region of Canada: athletes from Calgary, from St. Catharines, from Burlington, from Sherbrooke, from Montreal, from Victoria, from Halifax—as I say, from coast to coast.

I'm firmly convinced of the many values and benefits that accrue to a country when sport is encouraged and supported. First of all, I believe sport inspires excellence, excellence in both doing our best and being our best. That's why I think we need to have a collective focus on allowing our athletes to be excellent. It shows the world that we can compete and be the best.

But perhaps more important than the medal itself is what the medal does. I think we are all inspired by and enjoy watching and being associated with people who are among the best in their chosen field. The pursuit of excellence in itself is a very worthy goal, but it does take a long-term commitment and lots of support over a long period of time. I think Canadians want our athletes to do well and perform well, and they want to see them on the international podium.

As I said, it's what the medal does. I think the medal creates heroes and role models for Canadians, especially for our youth. I think the medal changes people. It changes our attitudes; new behaviours are formed. And people of all ages are inspired and stimulated to get involved, and not necessarily just in sport. I'd like to think our country is unified when the flag flies and O Canada is heard at international events. Our mental health is improved when we celebrate Canadian achievement. I think competing and winning internationally shows Canada that we are a player on the world stage.

Also, I believe involvement in sport develops many other skills that are transferable to the workplace and make us a much more productive society. I think if you were to recall times when Canadians were smiling all at the same time, I contend that most of those examples would be sport related. Whether they're the double gold medals from the 2002 Olympics, whether they're speed skaters like Catriona LeMay Doan or Marc Gagnon, I think those are examples that would have the country inspired at any given moment.

I think there is a need for new investment in sport as it is a public good. It's not a direct benefit to a select few that we're talking about. I think it's an indirect benefit for all Canadians. The outcome is that the taxpayer investment contributes to a public good—a better place to live, a better community, a more active and healthy population, especially in our youth.

Specifically on the sports side, on the winter side we're doing very well. Our performances over the last several Olympic Games have been very good. We're currently second in the world on the winter side. Though it's a fragile position, I think we'll do better in 2010 in both the Olympics and the Paralympics side.

My concern today is on the summer side; it's a totally different story. We're trending in the wrong direction. From a medal standpoint, we've gone from 22 to 14 to 12—obviously not the right direction. It makes no sense to me that we have two different types of athletes in this country, winter and summer, depending on the season in which they choose to compete for Canada.

On the summer side, we're the lowest of the G-8 countries, and we're in the bottom 25% of the G-20 countries when it comes to investment in sport.

For my last comments, I'd like to say that in my August 15 submission I also suggested some investment in infrastructure at Canada Olympic Park. I'd like to just thank the committee and the government for their support. That's been achieved, and we appreciate it very much.

What I ask today is that the committee draft a recommendation to the Minister of Finance. The substance of that recommendation is that the Government of Canada invest $30 million annually—that's basically one dollar per Canadian per year—to implement Canada's summer sport program called the Road to Excellence.

Thank you again, and I look forward to speaking with the committee and entertaining any questions you may have.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Henwood.

From the Red River College of Applied Arts Science and Technology, we have Mr. Zabudsky.

[Jeff Zabudsky, President and Chief Executive Officer, Red River College of Applied Arts Science and Technology]

Thank you very much, Mr. Chair and committee members. Welcome. It's good to see you.

I am here from Winnipeg, where Red River is based, and it's my great pleasure to be here to present about what's going on in colleges, mine in particular.

My presentation will focus on three areas. Innovation is number one and where the primary focus will be, number two is institutional renewal, and number three is student access.

On the innovation side over the last few years, colleges and technical institutes have been embarking on a greater degree of applied research and are working closely with industry. We've always had strong partnerships with industry to do training, but what has emerged over the last few years in both colleges and technical institutes is a greater degree of partnership with industry to do things like applied research, innovation, and, ultimately, commercialization. This is something that we all know is important to the Canadian economy—diversifying, innovating—and we believe that colleges have been underutilized in the realm of research. Our approach is very applied, hands-on, and very pragmatic.

For that reason, we think there are some things that can be done in the tax system that can help to inspire more industry and college partnerships. The focus here today is on the SR and ED program, which is the scientific research and experimental development program. We would like to see the program sustained, first of all, but also expanded. There are opportunities to grow this program. It's already been hugely successful, but more can be done. We would like to ensure that industry contributions within such programs—those provided by CFI, which is the Canada Foundation for Innovation—are explicitly eligible for SR and ED treatment. There is some confusion as to whether the industry contribution that comes as part of a CFI-funded research initiative is eligible for SR and ED treatment.

Number three, we'd like to see the SR and ED potential for a top-up incentive for companies who work in partnership with colleges. We have a tremendous resource here of colleges—150 colleges across Canada in 500 different communities. We think we can further leverage research and innovation activity, and that can be done through a top-up incentive for companies that work closely with colleges.

We would also like to see the opportunity for individuals who emerge from our colleges and technical institutes, who have had that very applied, hands-on, pragmatic training, to start their own businesses, and there may be opportunities to work with colleges to do things such as tax holidays for young entrepreneurs who have their college diploma and want to start their own businesses. Given the strong linkages between industry and community colleges in Canada, we want to continue to support and enhance college involvement in applied research. Page 204 of the 2007 budget cites a project that relates to my institution, and we'd like to see that continued and expanded. That's cited in the briefing document you have.

Finally, on SR and ED, we'd like to see SR and ED expanded to include relevant commercialization activities and work outside of Canada that will ultimately benefit the Canadian economy. We recognize that a lot of the partnerships we're involved in are global, and we believe projects that are global in nature should still be eligible for SR and ED treatment.

I wanted to talk briefly about institutional renewal. Many of our colleges across Canada were built in the 1960s or before, and often to a great extent with federal funds. The infrastructure is in decline in many institutions, and we see an opportunity to reinvest. A couple of ways the tax system might assist us is that the Excise Tax Act could be changed to allow a 100% GST rebate for public post-secondary institutions. There already is a proportion rebated back, but we see the opportunity for a full rebate back that can then be returned to institutions for such things as institutional capital renewal.

This is something we've said many times, but we continue to believe that the separation of post-secondary funding from the Canada social transfer and the creation of a dedicated post-secondary education transfer fund is important for us. Currently education falls into the CST—it's not separated—and there are competing challenges, for instance, related to health, that often take precedence. We'd like to see that as a separate transfer to the provinces on behalf of post-secondary institutions.

Finally, a quick reference to student access, which is increasingly important for us. We see the opportunity to revamp the Canada student loan program to expand the current needs-based grant allocation from one year to two years for students from low-income families and underrepresented groups. We don't have nearly the participation in post-secondary education, either at the university or college level, that we need for the innovation that we need in society, and an opportunity to move from one year to two years would be important there.

Introducing a needs-based allocation process geared to assisting middle-income families.... Currently the cut-off is such that even middle-income families can't afford to send their young people off to post-secondary. We would like to see some changes around the student loan program and then a renewal of the Canada millennium scholarship program, or, by another name, introducing a similar program that will continue to meet the needs of students on a needs-based grant. It's been a successful program, and we would like to see it, or a similar program, continued.

That's my presentation, Mr. Chair. Thank you very much for the opportunity.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

Now we'll go to the question and answer period.

We're going to allow each member five minutes. Perhaps the witnesses could keep in mind that the five minutes include the questions and the answers. If you can keep your answers brief, it would be a little better so that we can enhance the debate.

Mr. Dykstra or Mr. Richardson.

[Rick Dykstra, Conservative, St. Catharines, ON]

Mr. Richardson is going to take this round.

[The Vice-Chair, Liberal, Massimo Pacetti]

Mr. Richardson, for five minutes.

Welcome, Mr. Richardson, by the way--or are you supposed to be welcoming us? I'm not sure.

[Lee Richardson, Conservative, Calgary Centre, AB]

Thank you, Mr. Chairman.

I'm going to be quick because we have a lot of questions and not much time.

Maybe I'll run down the line and thank you for appearing.

I wanted to ask about donations and some of the changes that have been made recently, particularly on the ones that seemed to be well received in Calgary. I wanted to hear from the receiving end--the volunteer organizations--on the elimination of capital gains and the donation of publicly listed securities. Have you sensed a change there? Is it something that has been helpful to your organization?

[Katherine van Kooy]

It has been helpful, but the impact of that is quite varied. I think the primary beneficiaries of that kind of change are very large organizations: universities; hospitals; foundations, potentially; and large organizations. There are certainly many organizations that have benefited, but the bulk of smaller organizations are not going to be the primary recipients of those kinds of donations.

[Lee Richardson, Conservative, Calgary Centre, AB]

I wish I had more time to ask you for suggestions on how we might develop programs like that to get further down to the organizations at the lower level.

[Katherine van Kooy]

That's one of the reasons we're recommending that what would be really useful is to take a more comprehensive approach to looking at what the government can do in terms of supporting the sector, not necessarily directly through financial injections, but through the various mechanisms that might benefit a broader range of organizations.

[Lee Richardson, Conservative, Calgary Centre, AB]

Thank you.

Mr. Lanthier, I'm obviously very aware of the project, and I think it's a fantastic project. I very much wish you well.

Could you let the committee know, and refresh my memory, in terms of the current funding? Of the total funding, you're asking for about 25% from the federal government, but you have cash in the bank from the province and the city. Is that my understanding?

[Dr. Clément Lanthier]

We received $30 million from the city and $35 million from the province. We already have $11.4 million from the private sector. We are in serious discussions with two companies to get $15 million. We are asking the federal government to match the province's contribution of $35 million.

Yes, the money is secured, except for the $15 million. That is still in discussion with the private sector because this is conditional and exclusively for the Polar Interpretive Centre of Canada. Without the support from the federal government we will not be able to build that component so we will not get that private sector contribution.

[Lee Richardson, Conservative, Calgary Centre, AB]

What about previous contributions? I understand the city has always been a long-term contributor to the society. What about the province?

[Dr. Clément Lanthier]

The province gave us $35 million, and it's in trust in our name.

[Lee Richardson, Conservative, Calgary Centre, AB]

Have you ever received money from the federal government?

[Dr. Clément Lanthier]

Yes. I think in early 2000 there was a project called Destination Africa. There was a contribution at that time. I think the project was supported by the federal government.

Now we're asking for one-fourth of the total project. The contribution from the private sector is catching the 25%. That was not originally there at this level with previous projects.

[Lee Richardson, Conservative, Calgary Centre, AB]

Thank you.

Mr. Alvarez, I was taken with some comments you made on a recent visit to Ottawa about the price of oil and about profits in Alberta to the industry. I think there's a lot of misinformation out there. As someone who should know, I was surprised by the cost of recovering oil and also by the amount of conventional oil—the oil that brings $90 a barrel—as opposed to some of the unconventional oil we produce in the province.

I'm really looking at the spread. For the edification of the committee and hopefully others, can you give me in a nutshell what it costs to get a barrel of oil out of the ground these days?

[Pierre Alvarez]

It depends on which barrel.