Finance Committee on Dec. 7th, 2007

[The Chair, Conservative, Rob Merrifield]

Thank you very much for your presentation.

We'll now move to Lorraine Hébert from Mouvement pour les arts et les lettres. The floor is yours.

[Lorraine Hébert, Executive Director, Regroupement québécois de la danse, Mouvement pour les arts et les lettres]

Thank you very much, Mr. Chairman, for inviting us.

My name is Lorraine Hébert and I represent the Regroupement québécois de la danse. This morning, I am speaking on behalf of the Mouvement pour les arts et les lettres, which represents eight national and thirteen regional organizations, and this includes over 15,000 artists and workers in the cultural sector of Quebec.

In the fall of 2006, we asked for exactly the same thing we are asking for this year. Indeed, we asked specifically that the annual budget of the Canada Council for the Arts be increased to $300 million. To which you might say that last year, that is, in July 2007, Minister Bev Oda announced $30 million in ongoing funding for fiscal 2008-2009. We therefore felt that last year, our message was heard.

The reason we are before you again today is to ask you to continue to make the Department of Finance and the Department of Canadian Heritage aware that artists need public funding to respect and support standards of excellence, to consolidate existing organizations, and to help develop new artists in every field of endeavour. Today, the arts sector is being squeezed, and young artists cannot break through, and don't have the means to do so.

We are dealing with a problem of generational in equity, and with the fact that funding is not spread fairly throughout Canada. We are facing a very though challenge from our international competitors, despite the fact that we have extraordinary artists everywhere in Canada.

We have an institution, the Canada Council for the Arts, which was created over 50 years ago and which, year after year, funds Canadian artists in a transparent manner. Since 2006, the Council estimates that with a budget of less than some $300 million, it will not be able to meet the demand, which has been growing since 1998. The Council will not be able to help our large institutions consolidate, and it will not be able to help young artists break through in every area of artistic endeavour in Canada.

I will end my presentation here. Thank you.

[The Chair, Conservative, Rob Merrifield]

We want to thank you very much.

We have now Nathalie Rech. I will ask you to introduce your organization. The floor is yours for five minutes.

[Nathalie Rech, Coordinator, Réseau SOLIDARITÉ Itinérance du Québec]

Good morning. My name is Nathalie Rech and I am the Coordinator for Réseau SOLIDARITÉ Itinérance du Québec. This is the third time we have appeared before the Standing Committee on Finance. I would therefore like to thank the members of Parliament and the staff of the Standing Committee on Finance for having given us an opportunity to speak to you about homelessness.

The Réseau SOLIDARITÉ Itinérance du Québec represents 200 organizations in Quebec. These organizations work on a daily basis with people who are homeless and people who are at risk of becoming homeless in a dozen regions in Quebec. Our mandate is highly political, whether that be at the federal or provincial level. I would like to point out that our role is truly that of an advocate for the homeless and we carry out that role by drawing on expertise that exists in all the regions.

I wanted to begin my remarks by reading you a few lines, in English. This is an extract from the preliminary recommendations made by the United Nations Special Rapporteur for Housing, who came to Canada on an observation mission less than two months ago:

Everywhere that I visited in Canada, I met people who are homeless and living in adequate and insecure housing conditions. On this mission I heard of hundreds of people who have died, as a direct result of Canada’s nation-wide housing crisis. In its most recent periodic review of Canada’s compliance with the International Covenant on Economic, Social and Cultural Rights, the United Nations used strong language to label housing and homelessness and inadequate housing as a “national emergency”. Everything that I witnessed on this mission confirms the deep and devastating impact of this national crisis on the lives of women, youth, children and men. Canada has ratified numerous international human rights instruments that not only recognize the right to housing, but also create an obligation on the Government to take steps for the progressive realization of these human rights with the maximum of its available resources.

I think that gives a good picture of the situation. Our work is being done at a time when there is an enormous budget surplus. We are talking about a $13.8 billion surplus for this fiscal year and a cumulative $100,000 billion for the past ten years.

We have three recommendations. The first is that the federal government extend investments in the fight against homelessness. There is currently a program called the Homelessness Partnership Initiative which ends in March 2009. An extension of the federal government's investments means a commitment of at least five years by the federal government.

The second recommendation is that the government establish a national housing program. Canada has no longer been investing in new social housing units for more than 13 years. We feel that it is absolutely necessary to be ahead of the homelessness issue. This implies not simply working with people who live on the streets but also building housing for low income individuals. If we increase the social housing stock we will prevent many people from ending up on the streets of Canada and freezing to death.

The third recommendation is that the government undertake extensive review of the tax system so that all sectors of the population are treated fairly. The current tax system puts the poorest Canadians at a disadvantage.

I would like to go back to be the federal homelessness program.

How much time do I have left?

[The Chair, Conservative, Rob Merrifield]

You have one minute left.

[Nathalie Rech]

The federal program that was established in 1999 was recently replaced by a new program. In fact, the Standing Committee on Finance recommended last year that federal investment in this program be extended. There is therefore a new program and, as I stated earlier, this program will end in March 2009.

We feel that it is inconsistent to profess to want to achieve long term results by helping people get off the streets and at the same time to provide funding on a yearly basis only. These are people who are experiencing very difficult circumstances and an enormous lack of structure. They sometimes need to be followed for several years. In Quebec alone those needs represent $50 million a year.

I will conclude by saying that we are advocating that global policies on homelessness be adopted. The focus should not only be on people on the streets, but also on prevention, for example, housing, which we feel falls under federal jurisdiction. Poverty and the taxation system are also issues. The federal transfers to the provinces are insufficient and the provinces tell us constantly that they do not have the means to increase the income of those living in poverty. Therefore something must be done in that area.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We have the Tax Executives Institute, Munir Suleman.

The floor is yours for five minutes.

[Munir Suleman, Vice-President, Canadian Affairs, Tax Executives Institute, Inc.]

Thank you, Mr. Chairman.

Good morning to all. My name is Munir Suleman. I am the senior vice-president, Scotiabank, but I'm here today on behalf of Tax Executives Institute in my capacity as TEI's vice-president for Canadian affairs.

TEI is the pre-eminent association of business tax professionals. We have 7,000 members who work for 3,200 of the largest companies in Canada, the United States, Europe, and Asia. Our Canadian members contend daily with the provisions of the Income and Excise Tax Act, and with chapters in Montreal, Toronto, Calgary, and Vancouver, make up approximately 10% of TEI's membership. Although my comments today reflect the views of the institute as a whole, those views are guided by TEI's Canadian members and other members whose firms have significant operations in the U.S. and in Canada.

TEI has several recommendations for the committee's consideration for tax policy and administrative changes that will foster economic growth and job creation.

The budget package introduced November 21 built upon the trend of incrementally reducing the corporate income tax rate and eliminating burdensome tax rates such as the federal capital tax and corporate surtax. TEI agrees with Minister Flaherty's corporate tax reduction proposal to strengthen the Canadian economy and promote job creation. We urge the government to stay the course or even accelerate proposed corporate income tax reductions. By 2012 Canada's corporate income tax rate will be the lowest among major industrialized nations. The standing committee should ensure that other countries do not leapfrog the Canadian timetable.

The federal government has undertaken initiatives to encourage provinces to promote Canada's competitiveness and improve the administrative efficiency of the provincial tax systems. We commend the federal government for doing so. We also commend the recent agreement whereby Ontario will conform its corporate income tax base to the federal base, eliminate its capital tax, and the federal government will administer Ontario's corporate income tax system. To maintain the momentum of provincial changes, we urge the standing committee to consider providing additional incentives to the provinces in order to eliminate or accelerate the elimination of capital taxes.

TEI is also supporting harmonization of provincial-federal sales tax systems. Substituting a value-added tax system for the current provincial retail tax systems would eliminate the cascading effect of retail sales taxes on most business inputs and promote a neutral and competitive business environment. In order to be fully effective, harmonization of the federal and provincial sales tax systems would require that financial services and services provided for financial services be treated as zero-rated supplies by the provinces, just as they are treated under the Quebec sales tax regime. To achieve harmonization, TEI would be pleased to consult further with the committee, the Department of Finance, and the provincial governments about crafting a workable system.

Bill C-28, the Budget and Economic Statement Implementation Act, will eliminate withholding tax on all outbound interest payments on arm's-length debt, effective January 1, 2008. In addition, a recently announced protocol to the Canada-U.S. Income Tax Treaty will reduce withholding tax on non-arm's-length interest payments to nil over the next three years. Again, TEI applauds the measures undertaken by the government. Elimination of withholding taxes on interest paid on arm's-length and non-arm's-length debt will ensure that Canadian businesses have access to global capital debt markets at the lowest possible cost. We recommend, however, that the goal be to eliminate all withholding taxes, especially on the payment of dividends to related group companies.

Since 2003, the United States has negotiated a nil withholding tax rate for dividends to group companies with a number of other countries. TEI believes steps should be taken to accord Canadian residents benefits similar to those enjoyed by residents of other U.S. treaty partners, so they can effectively compete for increased capital investments, exports, and jobs.

In line with the government's intention of having the lowest effective tax rate among the G7 group, we urge the committee to recommend to the Department of Finance to consider negotiating the elimination of withholding taxes on dividends to related group companies equal to a most beneficial rate negotiated with other major trading partners.

Bill C-28 incorporates draft provisions to restrict interest deductibility on certain outbound investments for periods after 2011. The bill will make significant revisions to foreign affiliate regimes and functional currency rules. TEI commends the government for acknowledging the excessive breadth of the March 2007 proposal curbing the deductibility of interest for investment in foreign affiliates. Regrettably, Bill C-28 resurrects many features of the March proposal and afforded taxpayers and their advisers very little time to comment on the draft legislation. The significance of these provisions to Canadian business and their far-reaching effects warrant more than the circumscribed three-week consultation period. As important, the current rules governing treatment of interest expense and earnings of foreign affiliates have been the cornerstone of the Canadian system for many years and have been crucial in promoting the global expansion and competitiveness of Canadian companies.

Any proposal to restrict the deduction of interest must be narrowly crafted to target the perceived abuse or unfairness. We urge the committee to recommend that interest deductibility proposals be removed and considered separately, to give taxpayers more time to study its effects and to give the government an opportunity to weigh taxpayer concerns about the proposed rules.

In conclusion, TEI commends the committee for holding pre-budget consultations again this year. On behalf of TEI, we thank you for the opportunity to participate.

I would be pleased to respond to any questions you may have during question period.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much to the presenters.

We now move to the question and answer portion of our meeting.

Mr. Pacetti, would you start, please.

If we make this a seven-minute round, I think we'll get everybody in. I may even get in there.

Go ahead, please.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chairman.

Again, thank you to all of the witnesses. It's important for you to appear. When panels are diverse like this, it helps us to understand things a little bit better and it helps you understand our challenges.

Seven minutes is not enough time to ask questions, but I'm going to try to hit as many of you as I can. I'll try to go in order.

To Mr. Culbert, just quickly, why wouldn't the existing moneys that you need for the vaccination not be available through the advancing agriculture and agrifood program?

[Rick Culbert]

It's possible that they may be; however, the biggest issue is that the vaccine does not benefit the cattlemen, the segment it's going to.

So I'm not sure that it fits totally within their--

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

But you're asking us to fund it through there. If it was such a high priority, you would think that the moneys would be of priority for the program.

[Rick Culbert]

Since our initial request, we've had some feedback that it may not be appropriately funded through there.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Okay, great.

Mr. Barone, I think we could probably spend all day debating this, but when I take a plane from, say, Montreal to Toronto, or from Montreal to Vancouver, I'm not going to go through Chicago. I'm not going to go through any of your competition. So tell me why, in 30 seconds or less, you are actually competing against other airports.

[Sam Barone]

Thank you, Mr. Chairman--

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

No, I used to be the chairman....

Oh, you mean through the chairman. Sorry; reflex.

[Sam Barone]

Can you deduct that from my time allocation, please?

[Voices]

Oh, oh!

[Sam Barone]

Thanks for the question.

With regard to your question, that when you're flying from Montreal to Vancouver you're going through Chicago, that's not a plausible scenario. That would be cabotage over a U.S. gateway, and that is not the market we're looking at.

We're competing globally with the passenger that goes from Rio de Janeiro to Tokyo, or from Los Angeles to Frankfurt, over Montreal. When a foreigner uses our gateways, they become more competitive as opposed to becoming more cost-effective and more cost-competitive--

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Sorry, I don't mean to interrupt you, but I got the answer.

Perhaps the solution, then, should be for international travel, maybe not domestic.

[Sam Barone]

Well, it is a global context, that's correct. However--

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Okay, that's fine. That's good.

I want to ask a quick question also of Hoffmann.

When I envision stockpiling, I envision a warehouse full of drugs that all a sudden have expiry dates. Is that what you mean by stockpiling? Why is it important for Canada to have a warehouse full of antiviral drugs?

[Jim Hall]

That's a great question.

As I mentioned before, the advantage we have in Canada with the influenza pandemic is that we have plenty of time to prepare and plan. The position we're taking with governments is that with that time, an antiviral stockpile is a wise course to take.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Will it have an expiry date, though?

[Jim Hall]

The expiry date is five years, which is the longest expiry date of any product on the market.