Finance Committee on Dec. 4th, 2007

[Mike McNaney]

I'm going to look over my shoulder at my accounting folks we have here....

It's approximately 10% to 12%.

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

Have you set a target as to what would be the maximum you would think of, or is this a situation that could continually evolve? If employees end up owning 90% of the company, would the board of directors have an issue with that?

[Mike McNaney]

I don't think we'd ever quite get to that level, but if we did, there would be issues we'd have to look at. But in terms of being in control of your own destiny, having 90% of the employees own the shares would be a fairly useful thing.

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

I'm not saying it's necessarily a bad thing. I just wondered if there was a sort of projection that you had.

[Mike McNaney]

At this point there is not.

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

Thanks.

Don, your organization actually sent in four applications in 2006-07 and received $2.7 million in funding--significant support, obviously, from the federal government, in the work you do.

I wondered if you could talk a little bit about the moneys that you have received directly from the federal government and the results you have been able to produce because of that.

[Don Giesbrecht]

Sure.

One thing we do, obviously, is to provide services to our membership and directly back into the affiliates that make up the federation as well as the centres and family child care homes, etc., that make up those memberships. I can give two very brief examples.

One resource we were able to put out just this June was a learning kit on early literacy. It was a very user-friendly kit that was very easy for families to use, very easy for parents to look at and see where their child was in terms of their progress and development in literacy, for example. So that was one. Another one was a resource kit on the benefits of physical education for young children. A very interactive CD-ROM was developed, and that went into the hands of, again, family child care homes, child care centres, etc., to promote best practices and put research into common, everyday language that people could use.

Those are two very brief examples.

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

I appreciate the two, especially the second. It obviously complements and dovetails very well with the physical activities tax credit that we've introduced. I appreciate that.

I don't want to leave out the Social Planning Council of Winnipeg. I want to give them an opportunity to comment on the six applications they have forwarded through to the federal government, over half-million dollars in funding.

I don't know how much time you might have, Sid, and I certainly don't want to cut you off, but I'd love to know how that federal government partnership with your organization has been able to allow a lot of work to be done.

[Dr. Sid Frankel]

I'm not even familiar with all of them, but I can comment briefly on the couple I am familiar with.

A couple of them do have to do with housing and do have to do with the crucial issue of establishing a community housing plan for Winnipeg. Another one has to do with putting a system into place to understand the flow of homeless people in and out of shelters. We think these are important for the Winnipeg community, and we think they're going to allow some good things to develop in the future. Of course, those good things will likely require more money from some source.

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

Yes, all good things generally do.

Thanks very much. I appreciate it.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you, Mr. Dykstra.

We'll go to Monsieur St-Cyr.

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

Thank you. I ran out of time earlier and I would like to continue my discussion with Mr. Don Giesbrecht. I would like to go back to child care services. Could you tell us more about the reality surrounding the Universal Child Care Benefit. When the government introduced this taxable benefit of $100 a month, we were told that it would give parents a choice between staying at home to care for their children or sending them to a child care centre.

In my riding, a taxable amount of $100 a month can, at best, provide for 10 days of care in a $7 per day subsidized public day care centre. If we are talking about a private day care, this will buy three days of care. Consequently, I can't really see how this will help provide day care services for a child. Is there any place in Canada where it is possible to buy a month worth of child care services with $100?

[Don Giesbrecht]

No, the universal child care benefit is a great family income supplement, but it's not a replacement for sound policy that encompasses all aspects of early childhood education.

Absolutely, in Quebec, as you already referenced, the cost of care is $7 a day, but it rises to as high as about $85 a day in downtown Toronto, to about $20 or $18.80 a day in Manitoba, and to, let's say, $30, $40, and $50 a day here in Calgary.

So it's great as an income supplement, but it should not be confused with child care.

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

Good. In my opinion, this initiative does not really give more choice to parents, if there are no subsidized child care spaces available.

I will go on by addressing Mr. McNaney about West Jet. I am a former engineer. I have worked for Motorola and I have also benefited greatly from a similar employee program there. I felt it was very good and I encourage big corporations to do the same thing. However, I have some reservations about your proposal, specifically the part under which the employer's contribution would eventually be considered as a capital gain.

In my opinion, when you pay employees, whether in the form of a salary or with shares, it is a taxable benefit and it should be taxed as such. I agree with you: the fact employees are immediately taxed can limit their disposable income but at the same time, being able to buy shares at half price, for all practical purposes, is a benefit. If I buy two shares and I pay only for one, it means that I have paid half price for them.

It would be somewhat surprising for the government to agree to subsidize or fund this benefit by treating it as a capital gain—taxable at half its value if my memory serves me well—when a lot of people who work for non-publicly held companies would not have access to such a plan.

What do you respond to that?

[Mike McNaney]

In terms of the capital gains approach, what we did was look at the Income Tax Act in its totality in terms of how we deal with options. The options provisions are available to publicly traded and privately held companies--large, small, or medium, it doesn't make any difference. So what we tried to do was look at the rationale behind why the Income Tax Act treats options in the way it does. You don't get the benefit immediately; you have to wait a period of time. You're investing in or getting cash from your company, and there's some level of risk involved. Therefore, it's not treated exactly as a capital gain, but you end up paying, ostensibly, the same amount of tax on the option as you would if it were treated as a capital gain. That's the approach we took.

If this committee or the government of the day concludes that the deferral of the tax is a reasonable thing and does not wish to examine how the tax is treated from a capital gains perspective, we would certainly have no problem with that. From our perspective, the most important thing is to allow the average employee a greater portion of his or her disposable income to actually participate in these things.

I do want to stress that this is not a program for WestJet. We are doing quite well right now, with 85% of the people participating and contributing 13%. The whole idea behind this comes from our executive chairman, Clive Beddoe, and the variety of companies he has developed. He has put these into every one of his companies, this notion of profit share. And we think that if you're actually going to lift the entire Canadian economy, if you want to drive productivity, you have to get down to this level of specificity.

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

I fully understand the merits of such a plan and I am not against looking into, for example, the possibility of tax deferral for a number of things.

Your comparison with options is interesting, but I think the options are the issue. I do not think that options should be treated as capital gain. Since they are part of the total compensation package, they should be taxed the same as the normal salary and other income gained by an individual. If anything is to be done, it is surely on the option side.

Perhaps tax deferral should be allowed. I think it would be more reasonable and would cost next to nothing to the government.

[The Vice-Chair, Liberal, Massimo Pacetti]

I have just two quick questions, Mr. Giesbrecht. In one or two of your recommendations, you're asking again for increasing awareness and for some type of national framework. But haven't all these studies already been done? Don't we already know what we want to do? Or do we have to continue studying this issue?

[Don Giesbrecht]

I don't believe we do know what we want to do. I think, as we mentioned in our presentation, there's a lot of passion about this issue, but there's also a lot of misunderstanding about this issue. We don't have a lot of accurate data that reflects the modern Canadian family today. I don't believe we as a country have developed policy around modern Canadian families that reflects their lives.

So in fact I think there is quite a bit of work to be done there.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

Mr. Forbes, just out of curiosity, how does the Manitoba Museum want to lobby for Canada science centres? Not that it's a bad thing; it's just....

[Blake Forbes]

We have a science centre within our facility. The Manitoba Museum encompasses a science centre, a planetarium, and a museum. As a result, we are a member of the Canadian Association of Science Centres, and we participate in their programs.

[The Vice-Chair, Liberal, Massimo Pacetti]

Is the science portion of the museum eligible for the museum assistance program?

[Blake Forbes]

To my knowledge, no, I don't believe so.

[The Vice-Chair, Liberal, Massimo Pacetti]

And there is nothing for science centres, correct?

[Blake Forbes]

There is no program recognized by the government.

[The Vice-Chair, Liberal, Massimo Pacetti]

That's why you're saying to establish a new federal program.