Finance Committee on Dec. 7th, 2007

[The Chair, Conservative, Rob Merrifield]

I see we do have enough members here. We have our witnesses, and we're looking forward to their testimony. With that, we want to call the meeting to order.

We thank our witnesses for being here. We're looking forward to a long, informative afternoon. We've had a long week as a committee, and we look forward to what you have to tell us with regard to the consideration of our pre-budget consultation report to the House.

We want to introduce you. We'll introduce you one at time as we yield you the floor. I think that will work out the best.

We want to start with the Canadian Chemical Producers' Association. We have Richard Paton, the president and CEO.

Richard, the floor is yours for five minutes, please.

[Richard Paton, President and Chief Executive Officer, Canadian Chemical Producers' Association]

I am President of the Canadian Chemical Producers' Association.

I would like to start by thanking committee members for inviting us to address them today.

I would also like to note, in opening, that given the continued economic challenges faced by the manufacturing sector today in Canada, CCPA believes that the committee's decision to focus on taxation to improve productivity and ensure prosperity is the right focus.

I would also like to commend the committee for having recognized the recommendation of the industry committee's report on manufacturing. As you know, their study identified three key challenges that Canadian industry faces today: the high Canadian dollar, sustained high energy prices, and intense competition from emerging economies such as China and India.

When we submitted our brief this past August, we identified two key priorities to improve Canada's tax competitiveness: extend by a further five years the new accelerated capital cost allowance for machinery and equipment, and, as a longer term priority, set a schedule to reduce the federal corporate tax rate to 17% and open up a clear Canadian advantage in today's global economy.

Enormous progress has been made federally and provincially towards elimination of capital taxes, and the recent corporate tax reductions announced by Mr. Flaherty went beyond what we expected. The idea of a 25% tax rate overall, in our view, is very attractive, and we hope this key change would help manufacturing provinces such as Ontario and Quebec to meet their competitiveness challenges.

In looking back a little further to the last budget, the government responded to the industry committee report--in fact, it was the number one recommendation of that report--by introducing an accelerated capital cost allowance for the manufacturing of machinery and equipment. Unfortunately, it was limited to two years, so I'm going to focus all my presentation just on this particular issue.

We were very encouraged when the Minister of Finance announced that change. In fact, it was a bit of a surprise because we knew there were a lot of opponents to making that change. When we sat down and met with our members and pointed out that this new measure was there and they could now perhaps make some new investments in machinery, equipment, plants, and productivity or environmental improvements, they basically said to us it was of absolutely no use to them. So we tried to find out a bit more why.

The reality is that large-scale projects typical of our industry and most of the manufacturing sector take at least five years to plan and execute, from initial planning approvals to putting the actual machinery and equipment in place. In some cases, for example, Ontario, it takes a year and a half just to get a certificate of approval for new technology.

So in our discussion with MPs, when we've advocated the extension of the capital cost allowance by a further five years, many members of Parliament have said, “Well, explain to me better why five years is so important to you.” So what I'm going to do today is give you an example of why that's important.

You should have this list in front of you, this one page--“North Sable Extraction Plant”. This is a real-world example of the timelines involved in major manufacturing investment. What you're looking at is the schedule for a plant to be built by Aux Sable in Alberta. This is a real project plan. It's a very simple project in the context of our typical projects, because it's new; it's not a refit of an existing plant. The unit will remove ethane, a key chemical industry feedstock, from the natural gas stream, and then upgrade it into petrochemicals--a very, very important investment to value-added growth in our economy.

When the project was announced in May it was scheduled to start up in mid-2010, but typical of these kinds of projects, it has already been delayed to 2012. In the context of this project, the CCA that was announced in the last budget is totally irrelevant. In other words, they can't say, “I'm going to make a financial decision on this project taking into account the CCA”, because all the expenditures are out beyond the timeframes of the CCA, which are only two years.

If you look at this chart, you see that it takes time for project engineering, and this is after you have approval, which usually takes a year or two. There's a long consultation process with any of these projects. They involve communities, discussions. There are regulatory issues, and then you go to detailed engineering, site preparation, mechanical construction. This is probably the most optimistic schedule you would get in any of these kinds of projects.

For another one, which I've been talking to members about, it took them two years to simply do the labour agreements, because most new refits of plants reduce the number in the workforce or change the jobs. Even labour agreements are affected.

Our recommendation is for the committee to reinforce the recommendation that was made by the industry committee, which was originally for a five-year accelerated capital cost allowance, and to move forward with that recommendation, because it's essential to the growth of our industry.

Thank you, sir.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move on to the Canadian Conference of the Arts. We have Alain Pineau, the national director. The floor is yours.

[Alain Pineau, National Director, Canadian Conference of the Arts]

Good afternoon, Mr. Chair, ladies and gentlemen, committee members. I am National Director of the Canadian Conference of the Arts.

My CCA is different from Mr. Paton's CCA.

The Canadian Conference of the Arts is the oldest and biggest arts and culture organization in Canada. Our members come from all areas of activity and all disciplines in the country, from painting in their studio in Victoria to the St. John's Symphony Orchestra as well as the major unions and associations of employers in our cultural industries.

For more than 20 years, CCA has taken part in the consultations of the federal Minister of Finance and this committee on tax and budgetary measures that might optimize investments in this sector of our creative economy.

Public investment in the Canadian cultural sector is an issue of perennial importance to the CCA and its members. While we think further such investments in creativity are required, we rejoice in the recent announcement by the government for an ongoing increase of $30 million to the budget of the Canada Council for the Arts.

Similarly, we are happy that the government is investing $30 million in building communities through the arts and heritage and, more particularly, that $7 million is supplementing the arts presentation program.

While we also rejoice that the latest budget has reinstated the $5 million for the summer internship program for museums, we note that the long promised and much needed new museum policies and the related increased investments in our heritage are still missing in action.

Of equal importance to us is the issue of adequate funding and support of the internationalization of Canadian artists, creators, and arts professionals. The CCA hopes the standing committee will recognize the value of all programs under the Departments of Canadian Heritage and Foreign Affairs and International Trade, which aim to build Canada's image abroad and develop new markets for our artists and cultural industries.

Along with all our colleagues from the non-profit sector, the CCA hopes you will also use your report to encourage the Minister of Finance and the President of the Treasury Board to expedite the implementation of the recommendations of the blue ribbon panel on grants and contributions. This report contains many constructive recommendations and properly acknowledges that grants and contributions recipients are partners with the federal government in delivering valued services to Canadians.

The recommendations regarding multi-year funding and the development of an accountability framework, commensurate with the size of the grant or contribution and the risk involved, are eminently sensible.

The Canadian economy is currently undergoing a fundamental transformation at it passes from the industrial to the information era, which some call the creative economy.

In the previous model, the Canadian population could count on working for the same employer until retirement age. Today, people change jobs a number of times in their lives, and the number of self-employed workers is rising at an increasing rate.

Similarly, lifelong learning is now the norm as individuals acquire new skills to remain competitive and productive members of the workforce. Yet for all of these changes, the federal government has not moved to retool its programs and services, which are firmly rooted in the industrial employer-employee model.

Benefits such as maternity leave, disability allowances, and employment insurance are denied to self-employed Canadians. This erosion of the universal nature of the social benefit programs is constant and affects more and more Canadians every year, as it has affected artists for a very long time.

The CCA therefore recommends that the federal government commission a task force to examine how self-employed Canadians are currently treated under aging and increasingly obsolete conceptions of the fundamental nature of the Canadian labour force. Such an investigation would also be asked to examine tax policy as it affects the self-employed.

In that regard, the CCA has long recommended that income averaging be reintroduced into the tax system, but the Department of Finance continues to turn a deaf ear. If income averaging is not possible, we must come up with other solutions to a system that is clearly unfair for an increasing number of workers in all areas of activity.

We therefore invite you to encourage the Minister of Finance to include this issue in the mandate of the task force we spoke of earlier.

The place of copyright and residual income is central to success in the creative economy. For the past several years, the CCA has called upon the federal government to grant a limited exemption from federal income tax on copyright and residual income, which is the way it's done in Quebec, among other places. This form of incentive rewards creativity and innovation and bolsters Canadian productivity and competitiveness. The Minister of Finance has not yet accepted this reasoning, which has received the noted support of the Canadian Council of Chief Executives.

Finally, another dimension of the changes within the Canadian labour market is the prospect of the retirement of baby boomers in all sectors of the economy. We have to look into a mentorship program, and I'll get back to that if you're interested.

Thank you for your time.

[The Chair, Conservative, Rob Merrifield]

Thank you.

We'll now move on to the Canadian Council of Grocery Distributors. We have Monique Bilodeau. Thank you for being here.

I understand you have a couple of props. We had this once before, but it was Tim Hortons doughnuts. I'll just remind you, the chair didn't get any at that time, so....

[Voices]

Oh, oh!

[The Chair, Conservative, Rob Merrifield]

Go ahead. The floor is yours for five minutes.

[Monique Bilodeau, Vice-President, Finance and Commodity Taxation, Canadian Council of Grocery Distributors]

Thank you, Mr. Chair. It is a pleasure to have the opportunity to present to your committee.

I am Vice-President, Finance and Commodity Taxation, with the Canadian Council of Grocery Distributors, hereinafter referred to as CCGD. Our members include Loblaws, Sobeys and Metro as well as smaller family-owned businesses such as Coleman's food centres in Newfoundland.

CCGD is bringing forward two recommendations. The first is to exempt all cut fruit from the application of GST to eliminate confusion, and to improve how government works by adopting a new procedure for issuing GST rulings to the grocery industry, but implementing recently concluded pilot projects with the Canada Revenue Agency, hereinafter referred to as the CRA.

The way cut fruit is treated under the GST is confusing. I'm going to illustrate what we mean by that by giving you some actual examples. If you buy cut pineapple from a grocer, there is no tax, whereas if you buy any other fruit, it will be taxed. In addition, if you buy a fruit salad off the shelf, it won't be taxed, whereas, if you buy mixed fresh fruit, it will be taxed.

Cut fruit should be exempt from GST regardless of whether it is combined with another or not. The system is creating unnecessary consumer confusion and requires the grocer to attempt to explain the complications of the tax system to customers. In addition, the application of GST to these products is not consistent with the guidance provided by Canada's Food Guide to Healthy Eating, which recommends Canadians consume seven to 10 servings of fruits and vegetables a day. By taxing these items it causes inconsistencies between government messages, which must be addressed.

CCGD asks that the Finance Committee recommend in its report that GST consistently not be charged on cut fruit regardless of its state of packaging.

There is also a need to improve the process by which the Canada Revenue Agency issues GST rulings for all grocery products. Our members are challenged with interpreting the application of the tax due to a 16-year-old definition which provides guidance on what is a basic grocery and what is not. When industry is not certain how to apply the tax it can seek a ruling from Canada Revenue Agency to determine the correct application. Despite the Agency's best efforts, there can be significant delays in issuing rulings—sometimes stretching to six months.

While our members are waiting for the ruling: if the product is not successful it may be off the shelf by the time the ruling is received and grocers could be placed in the situation of remitting GST for a product it no longer carries; the GST is interpreted inaccurately and the tax is applied in error. As a result Canadians have either paid too much for this product or the grocer faces a significant liability. There is a better way.

CCGD recently completed a pilot earlier this year with CRA that tested the ruling process employed by the Australian Tax Office. This pilot used the grocery industry database, ECCnet, to analyze product composition and presentation to provide GST direction.

We ask the Committee to recommend that CRA roll out and expand the pilot. In addition, we ask the Committee to recommend that CRA guarantee the industry (as per the Australian Government) that the rulings offered, if applied by the industry, will not be subject to future GST assessments. This guarantee would ensure both government and industry are bound by the rulings issued by CRA.

We believe our recommendations to exempt cut fruit from GST will ensure consistency in government policy. We also believe that there is an opportunity to streamline the business of government and to ensure consistent application of GST by adopting the Australian ruling process.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much for that.

We will now move on to the Canadian Egg Marketing Agency. We have Mr. Peter Clarke, the vice-chair.

The floor is yours.

[Peter Clarke, Vice-Chair, Canadian Egg Marketing Agency]

Thank you, Mr. Chairman.

Good afternoon. My name is Peter Clarke. I'm an egg producer from Nova Scotia. With me today in the audience is fellow vice-chair Maurice Richard, an egg producer from the province of Quebec. As vice-chairs of the Canadian Egg Marketing Agency--CEMA--we would like to thank the committee for inviting us to present today.

CEMA administers the production, pricing, marketing, and promotion of eggs in Canada through the uniquely Canadian system of supply management, which matches production to consumer demand. Supply management farmers are able to make meaningful economic and social contributions without relying on taxpayer dollars to stabilize income from the marketplace.

CEMA encourages the committee to carefully consider how government can support successful agricultural models such as supply management. The agriculture industry is uniquely positioned in that it delivers on the necessary public good of food security and food safety, while at the same time serving an economic background of rural Canada.

I will begin by outlining CEMA's three recommendations for the committee.

The first is that the committee support the establishment of an interim compensation program so that the true costs of avian influenza disease are compensated.

The second is that the committee support production insurance programs that allow the inclusion of livestock production and coverage for all perils.

The third is that the committee encourage government-wide support of supply management as a business risk management program.

With regard to avian influenza compensation, farmers are affected by factors not within their control, such as animal diseases like avian influenza. Even though the Eurasian strain has never been found in North America, if a farmer's flock in Canada tests positive for either H5 or H7 strains, the entire flock must be immediately culled. Although farmers support pre-emptive culling, it is important that they do not bear the financial brunt of an action taken for the greater public good. Compensation for flock destruction under the Health of Animals Act regulations recognizes only the replacement costs of animals, not the productivity, and is therefore inadequate for poultry. In addition, it is not clear that the new suite of business risk management programs announced November 17 by the agriculture minister will provide adequate compensation for disease outbreak losses. There is a great deal of confusion and conflicting information regarding various components of the program suite. Until these outstanding matters are resolved, a compensation program specifically for avian influenza is required to ensure producers who act quickly are treated fairly.

We ask the committee to recommend that Budget 2008 include support to secure appropriate short- and long-term compensation programs for animal diseases that impact the public good.

Our second recommendation relates to production insurance. Governments appear to support expanding production insurance to include livestock. We are concerned that the expanded program will only cover animals and not the loss of the products of the animals; in addition, we believe production insurance should cover any production loss beyond the control of the producer and not be restricted to specific perils. Therefore, we ask the committee to recommend that Budget 2008 include support for production insurance programs that will capture all perils in livestock production to allow for ongoing confidence in Canada's agricultural future.

Our third recommendation relates to supply management. Supply management allows farmers to operate independently, without government subsidies for products sold. It is a program that benefits the government as it eliminates a financial demand that might otherwise exist. Supply management is critical to the economic future of rural Canada; without it, there would be a profound impact on the rural economy. In order to preserve the benefits of the supply management model, the government must aggressively defend it at the international trade negotiations and clearly recognize it in domestic policy.

We ask the committee to recommend government-wide support of supply management, recognizing the demands on the federal treasury that might otherwise exist for farm stabilization programs.

In conclusion, we would like to thank the members for carefully considering our comments today. The agriculture sector, including the egg industry, is integral to Canada's economic and taxation model. As the agriculture sector continues to invest in this country, CEMA asks the government to continue to invest in agriculture by ensuring the programs are in place to deliver food security and food safety to Canadian consumers and a strong economic base to the rural community.

Thank you for your time.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move on to the Canadian Medical Association. We have Dr. Robert Ouellet. It's good to have you here.

The floor is yours, sir. You have five minutes.

[Dr. Robert Ouellet, President Elect, Canadian Medical Association]

My name is Robert Ouellet and I am a physician and President of the Canadian Medical Association.

Today I will share with you three recommendations for improving the health of Canadians and productivity of the Canadian economy: first, tax incentives for pre-paid long-term care insurance; second, tax incentives to retain and recruit more doctors and nurses; third, tax incentives to enhance health system productivity and quality improvements.

The first wave of baby-boomers will turn 65 in 2011. By 2031, seniors will comprise one-quarter of the population—double the current proportion of 13%. The challenge is the lack of health service labour force that will be able to care for this aging population.

Long-term care cannot and should not be financed on the same pay-as-you-go basis as medical/hospital insurance. Therefore the CMA urges the committee to consider either tax-pre-paid or tax-deferred options for funding long-term care. These options are examined in full in the package we have supplied you with today.

Second, Canada's physician shortage is a critical issue. However, despite this dire shortage, the Canada Student Loans Program creates barriers to the training of more physicians. Medical students routinely begin their post-graduate training with debts of over $120,000. Although still in training, they must begin paying back their medical school loans as they complete their graduate training. This policy affects both the kind of specialty that physicians-in-training choose, and ultimately where they decide to practice.

We urge this committee to recommend the extension of interest-free status on Canada student loans for all eligible health professional students pursuing post-graduate training.

Third, investment in information technology will lead to better, safer and cheaper patient care. In spite of the recent $400 million transfer to the Canada Health Infoway, Canada still ranks at the bottom of the G8 countries in access to health information technologies.

An Electronic Health Record could provide annual, system-wide savings of $6.1 billion every year and reduce wait times and thereby absenteeism. But the EHR potential can only be realized if physicians' offices across Canada are fully automated. The federal government could invest directly in physician office automation by introducing dedicated tax credits or by accelerating the capital cost allowance related to health information technologies for patients.

Before I conclude, the CMA again urges the committee to address a longstanding tax issue that costs physicians and the health care system over $150 million, or the equivalent of 60 MRI machines a year.

The application of the GST on physicians is a consumption tax on a producer of vital services. Nearly 20 years ago when the GST was put into place, physician office expenses were relatively low, for example: tongue depressors, bandages and small things. There was practically no use of computers or information technology. How many of you used computers 20 years ago? Now Canadian physicians could be using modern diagnostic equipment, which is very effective. And yet physicians must still pay the GST and provincial sales tax.

[Thomas Mulcair, NDP, Outremont, QC]

Mr. Chair, pardon me, I have a question concerning Dr. Ouellet's presentation.

I was looking for the French version of his brief. I read the English version and, if I turn it over, I have the English version. Is there a French version? Someone stapled two English versions together.

They stapled the English version together twice.

[The Chair, Conservative, Rob Merrifield]

Okay.

[Thomas Mulcair, NDP, Outremont, QC]

Do you have a French version?

[The Chair, Conservative, Rob Merrifield]

I think so.

We'll get one to you right away.

Continue.

[Dr. Robert Ouellet]

In radiology—and I know the field very well, being a radiologist—to renew equipment in our clinics that dates back 30 years, we have to pay out $500,000 per machine. If physicians didn't have to pay tax, the savings would make it possible to acquire other equipment such as, for example, a mammogram machine, for the same investment, an increased benefit for our patients. It is time the federal government stopped taxing health care.

We urge the committee to recommend that health services not be taxed.

In conclusion, on behalf of the 67,000 members of the Canadian Medical Association and of our 31 million patients, I appreciate the opportunity of entering into a dialogue with members of the committee and look forward to your questions.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move on to the Cement Association of Canada, with Pierre Boucher.

The floor is yours for five minutes.

[Pierre Boucher, President and Chief Executive Officer, Cement Association of Canada]

Good afternoon, Mr. Chair, committee members.

My name is Pierre Boucher. I am President of the Cement Association of Canada. To save time, I will quickly introduce the cement industry, the challenges we have to face in terms of competitiveness and the main recommendations that appear in our pre-budget brief.

The Cement Association of Canada represents cement producers from coast to coast. Our members include nine cement companies operating 16 cement manufacturing plants in five provinces, with distribution terminals at over 45 locations.

The Canadian cement industry belongs almost entirely to multinationals with operations in more than 75 countries. At the same time, it is vertically integrated in the concrete industry. Our industry makes a direct contribution of $1.6 billion in revenues to the Canadian economy and generates more than 26,000 stable and well-paid direct and indirect jobs.

Canada's cement industry produces 15 million tonnes of cement a year, with 10 million tonnes consumed here in Canada and 5 million tonnes exported to the U.S. markets. As an exporting industry, an efficient and well-maintained border infrastructure, especially in the Great Lakes ports and the St. Lawrence Seaway, is vital to our operations.

Cement is a strategic commodity and a critical component of our nation's infrastructure. Cement underpins the construction industry as the key ingredient in concrete. There's little built without cement. A shortage of cement has a serious impact throughout our economy. The Canadian industry is currently well positioned to provide the necessary national supply.

Maintaining a vigorous and competitive cement industry in Canada is essential for sustained economic growth. Canada must act now to maintain and increase industry competitiveness in order to incite and attract new foreign investments.

The Canadian cement industry is facing persistent and growing threats to its competitiveness like we have never seen before. Cement is a globalized commodity subject to strong competition.

As a manufacturing sector and an exporting industry, the competitiveness of Canada's cement manufacturers is being threatened by a host of factors of the greatest significance: continually and rapidly increasing energy costs, onerous patchwork regulatory regimes, an expensive and time-consuming permitting process, new and increasing competition from emerging economies, and the rapid appreciation of the Canadian dollar.

These threats pose major challenges for Canada's cement industry and, in fact, all industrial sectors. The House of Commons Standing Committee on Industry, Science and Technology correctly pointed this out last year.

I would like to take this opportunity to commend the important action taken by this committee just last week, recommending that the government introduce the tax measures outlined in the industry committee's report on the manufacturing sector.

However, the greatest threat to the competitiveness of Canada's cement industry is still the uncertainty that continues to surround the development of the federal regulatory framework for air emissions. We estimate that global cement production will increase 40% by 2020, and decisions by global cement groups as to where new investment is made are giving rise to strong competition. The regulatory framework is a major obstacle to new and renewed investment in Canada by global cement interests.

The Government of Canada must ensure that tax policy supporting the regulatory framework's objectives is immediately put in place to preserve the competitiveness of Canada's cement industry. The government should ensure that it applies tax policies that support a competitive trade context and see that those policies take into account the investment planning cycle of the economic sectors concerned.

The Cement Association encourages the government to implement and integrate systems of tax measures that promote innovation. There are many options, but specifically the government should consider the accelerated capital cost allowance announced in Budget 2007 and increasing the capital cost allowance rates to speed the implementation of new technologies.

The Cement Association of Canada also recommends that the government accelerate the Budget Plan 2007 commitment to reduce the general corporate tax rate and the marginal effective tax rate on business investment, at least to the OECD average.

I would also like to take note of the new Building Canada plan recently announced by the Government of Canada. This plan is welcome, and it's an unprecedented level of federal investment in Canada's infrastructure. The cement industry strongly encourages the government to ensure a focus on critical border and trade infrastructure in implementing Building Canada. This, then, will require a steady, stable supply of cement, and our industry will be a necessary strategic partner to Building Canada.

In conclusion, I would like to emphasize that we are living in a world that is constantly, and quickly, changing. Although it is impossible to predict future business conditions with any certainty, it is essential, to ensure the success of Canada's industry, that we be able to react quickly and effectively to changes that occur. The Government of Canada plays a central role in the implementation of policies that, as I have said today, can ensure the desired flexibility.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move on to the Quebec Federation of University Students, and we have Jean-Patrick Brady, the president, as a witness.

The floor is yours for five minutes.

[Jean-Patrick Brady, President, Quebec Federation of University Students]

Thank you, Mr. Chair, and thank you committee members for listening to us.

My name is Jean-Patrick Brady. I am President of the Quebec Federation of University Students, which represents more than 120,000 university students in Quebec. We are the largest youth group in the province. We are present across the province, where we defend our members from the standpoint of a humanist education in order to defend accessible, high-quality education.

I will be very brief today on the various postsecondary education issues, at least in Quebec. As you have no doubt noticed in the various presentations of other groups, the problems are relatively similar. As we have been around for a number of years now, I believe it is important to review them. And I will do so in a concise manner.

Our presentation is based on various basic findings regarding postsecondary education.

In general, we wish to discuss, first, the high degree of competitiveness of our tax system, which enables us to remain internationally competitive. However, that may unfortunately have been achieved at the expense of individuals who are paying the price through the tax system. Although we enjoy strong economic growth, there are nevertheless problems in this area. I'm thinking in particular of social disparities and the system's lack of progressiveness.

A little more specifically regarding postsecondary education, we wish to discuss federal transfers for postsecondary education, tax credits for tuition fees and the various savings incentive programs: registered education savings programs, RESPs, the Canada Education Savings Grant, CESG, and learning bonds.

With respect to economic competition and fiscal solidarity, the student federation believes that, although businesses are increasingly interested in coming to Canada because of our system, which is a good thing, we must realize that there are problems with regard to personal tax rates. As a result, the government increasingly tends to take more revenue from the pockets of individuals, and not in a progressive manner. We think it would be important to return to a more progressive system that would enable the less advantaged to gain access to postsecondary education. I'll return to this point a little later. That would also permit better wealth distribution among the rich and the poor.

In postsecondary education, there is a lot of talk about economic growth and various adjustments to the tax system. One of the first things that must be considered is the importance of college education in Quebec and university education in Canada as a whole. For society, it is absolutely vital that the entire population has access to university, not merely its richest members. To that end, we need high-quality education that is accessible.

As regards high-quality education, it is very important for the federation that transfers are restored to levels prior to the cuts in the 1990s. That represents approximately $4.9 billion for Canada as a whole. We feel that federal transfers must return to what they were so that universities can face international competition. We all know that the universities of countries such as China and India are catching up to us and becoming highly competitive in terms of both quality and accessibility. It is therefore important to fund our universities adequately.

Now let's consider tax credits for tuition fees, education and textbooks. It must be understood that tuition fees are not the same from province to province in Canada. In that sense, our request is relatively very simple, that the federal government transfer to provinces with tuition fees below the Canadian average, as is the case in Quebec, financial compensation equal to the difference between the amount of credits paid to the province and the Canadian average. That financial compensation will of course have to be invested in the postsecondary education system.

[The Chair, Conservative, Rob Merrifield]

Very quickly.

[Jean-Patrick Brady]

With respect to the RESP, CESG and other education programs, we simply ask that the systems be abolished because we feel they favour the rich, not the less well off, which mainly runs counter to the purpose of that program.

Thank you very much.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We have, from Magazines Canada, Robert Goyette. The floor is yours for five minutes.

[Robert Goyette, Chairman, Magazines Canada]

Good afternoon.

My name is Robert Goyette and I am Chair of Magazines Canada. Magazines Canada is a national, non-profit association representing Canadian consumer magazines across Canada—about 90% of all Canadian magazines' paid circulation in both official languages.

Member magazines span a wide range of topics including business, news, politics, sports, arts and culture, leisure, lifestyles and the environment, among others. There is additional information about the Canadian magazine industry in our brief so I will not repeat it here.

I would like to take this chance to draw your attention to one critical point. Canada's magazine sector is delivering on federal cultural policy objectives. Successive federal governments have sought to ensure that Canadian cultural materials are available across Canada. Historically this has been a challenge given our enormous geography, relatively small population, two official languages and our proximity to the huge U.S. entertainment industry.

So we are pleased to point out that when Canadians and Quebeckers choose their magazines, 41% of the time, they choose Canadian. This compares favourably with the other cultural sectors—struggling with the same challenges—like Canada's film sector where only 3% to 5% of Canadian screen time is devoted to our films.

We are pleased with the current federal government's ongoing support, specifically two actions. The first is Canada's continued leadership in establishing the UNESCO Convention on the Diversity of Cultural Expressions, an initiative which, in no small measure, had its genesis in the Canada-U.S. dispute over magazines in the 1980s.

The second measure is the Cabinet direction, just over a year ago, to Canada Post, requiring the Crown corporation to remain a supporter of the Publications Assistance Program—that we know by the name PAP—until at least March 2009. However, there are some significant challenges on the horizon and I'd like to focus attention, in the short time I have, on these.

Much of our success in making Canadian magazine content available to Canadians results from a supportive environment for distribution, largely through two measures—Canada Post delivery of subscription magazines and the Publications Assistance Program.

Canada Post's approach to the magazine sector is changing dramatically. Our costs for postal delivery are the fastest growing expenses for publishers, far exceeding inflation. Additionally, Canada Post is actively studying a move to distance-related pricing, a very substantial change from current practice which is likely to make national distribution of magazines more expensive and discriminate against rural subscribers.

Finally, Canada Post wants to withdraw its support of the Publications Assistance Program which would eliminate one-quarter of the budget and lead to an immediate increase in postal costs for the 1,200 Canadian magazines and community newspapers that are eligible.

Fully 70% of subscription magazine sales in Canada—magazines that are delivered by Canada Post—are Canadian. So a marked increase in subscription costs will impact on Canadian titles—more than foreign, which are often distributed at newsstands. These changes could reverse years of success gained from effective cultural policy and lead to a reduction in Canadian content available to readers—not to mention many creative jobs and economic activity in the sector.

Canada Post is a crown corporation for a reason. We believe it contributes substantially to this country's cultural policy objectives, and we are not alone. A 2005 Treasury Board report noted:

With their mixture of public policy and commercial objectives, Crown corporations, such as the Canadian Broadcasting Corporation and Canada Post Corporation, play critical roles promoting the country's identity and connectedness.

Canada Post's withdrawal from PAP would forever change a longstanding distribution partnership and a highly successful subscription-based delivery model that has evolved because of a federal government magazine policy.

Canada Post may no longer be an affordable option. If the industry is required to create other avenues for delivery, it could mean prohibitive distribution costs, especially in rural areas of the country. This will mean that Canadians living outside major urban centres will not have the same access as others to affordable Canadian magazines. It is important that the government and our sector work together in confronting this issue, determining how to support magazine distribution and the future role of Canada Post in this process.

What we're asking today is that the Finance Committee recommend that adequate budgets be maintained for the Publications Assistance Program, the PAP. This can be achieved either through direction to Canada Post that the Crown corporation maintain its support or that this portion of funding be delivered as part of the Department of Canadian Heritage budget.

Before we allow drastic cuts to successful programs, we ought to be looking at how we can do things differently, and at how we can ensure there continues to be a choice of Canadian content available across the country.

A year ago, when the federal Cabinet directed Canada Post to continue to support the PAP at least until Match 2009, it also promised to conduct a review of this area and consult our sector. We are in the process of doing this now and we hope this committee will support these efforts.

The Canadian magazine sector has been highly effective in utilizing public investment to ensure a healthy presence for Canadian opinions, perspectives and information, thanks in part to the PAP and Canada Post.

That's the message I wanted to give you today.