Finance Committee on May 26th, 2008

[Dean Del Mastro, Conservative, Peterborough, ON]

These things are already forcing efficiencies, aren't they?

[Joyce Reynolds]

We've always had very skinny profit margins, and they're decreasing more. They're affecting consumers' disposable income and their ability to eat out. So it's very worrisome for our industry.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move to Monsieur Mulcair for seven minutes.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you, Mr. Chair.

My first question is for Mr. Weir, from United Steelworkers.

Mr. Weir, among the amendments that the NDP will be tabling, our party will suggest that as of March 21, 2007, the $54.1 billion should be considered as a Consolidated Revenue Fund debt to be credited to the Employment Insurance Financing Board.

Do you agree with the proposal?

[Erin Weir]

Yes, absolutely. We think that is the right position.

[Thomas Mulcair, NDP, Outremont, QC]

I would like to put the same question to Mr. Whyte. I listened attentively to what you were saying earlier and I found it rather interesting that Mr. Del Mastro admitted that his government lacked ethics. You said the same thing. Employers and employees made monetary contributions for a very specific purpose. Yet, the government is appropriating it.

My question is straightforward: Do you agree or disagree with the government's action?

[Garth Whyte]

As we have said, we think it should be a bigger gesture. My concern is about where the $54 billion is going to come from. If we take the $54 billion back, that will drive us into a deficit and a debt, and no one would support that.

At the same time, I don't think employees and employers should have to backstop the program if it goes beyond the $2-billion surplus. I think that number was pulled out of the air, and we need to have something else in there to ensure that employers and employees do not cover rate increases for many years because of an economic downturn.

[Thomas Mulcair, NDP, Outremont, QC]

One cannot be for and against something simultaneously. You initially said that there was an ethical problem. Significant contributions totalling $54 billion were made by employers and employees with a very clear objective in mind, which was to provide an income to those who lose their jobs, and play an important role in our economy. The government took this money and earmarked it for something else entirely. I will put it another way.

Will you support our amendment or not?

[Garth Whyte]

I don't know about your amendment.

[Thomas Mulcair, NDP, Outremont, QC]

I will reread it. I read it to Mr. Weir earlier: That the accumulated surplus in the Employment Insurance Account, totalling $54.1 billion as of March 21, 2007, be considered as a Consolidated Revenue Fund debt to be credited to the Employment Insurance Financing Board.

Do you support this amendment, or not?

[Garth Whyte]

I'd have to go to our membership, but I do know they were upset by the surplus. I don't like the fact that the $54 billion is gone. At the same time, I'm concerned about the payments. If $54 billion was all of a sudden moved to a separate account, the government would be in debt by $54 billion, and that would be a problem. I don't know how your amendment would work. I'd have to talk to you more about that.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you. Be that as it may, I share your point of view, Mr. Whyte. The fact that the government has acted in this manner demonstrates a total lack of ethics. In addition, we note that this lack of ethics is cropping up again. In fact, earlier, the Liberals talked about what they call a notional amount, almost as though this was science fiction. We are not talking about 54.1 billion notional dollars, but real dollars paid by real employers and real employees.

I would now like to address Mr. Weir.

At present, the balanced economy that has been constructed since the end of the Second World War, which relied heavily on a strong manufacturing sector, has been destabilized. Since the Conservatives came to power, 116,000 people have lost their jobs in Quebec in the manufacturing sector alone. Last week, I met with the Golden Brand company, which will be announcing 500 layoffs in the days to come. The company is turning a profit, but obviously, this is not sufficient for it to maintain ownership. This company manufactured suits for Moores. They are now relocating to China.

But setting aside ideological references, when the government supports the tar sands sector, which can produce as much as it likes without any thought being given to the impact of this on the environment and future generations, the government is making an economic choice. This government likes to boast about being non-interventionist, but it is indeed intervening. Clearly, they're picking their winner and their winner is the tar sands.

Do you agree?

[Erin Weir]

Yes, I agree. I think all government policies have a wide range of effects on many sectors. Cutting taxes only for major companies and corporations has the effect of assisting those economic sectors turning the highest profits. As you said, the main beneficiaries are the oil and gas industry, particularly in Alberta, and a few financial industries. This is not helping the manufacturing sector in any way whatsoever; it is losing money. Each policy represents a choice; there are always winners and losers, and the government's priorities are rather clear.

[Thomas Mulcair, NDP, Outremont, QC]

If you will allow me, Mr. Trahan, I'd like to ask you to share with us a few of your thoughts, on behalf of the Canadian Manufacturers and Exporters of Quebec, on a possible greenhouse gases control system that would include fixed caps, in other words a carbon exchange that would obviously be located in Montreal.

What do you think about this? It would be akin to a system that has worked well in Europe following a decision to replace regressive carbon taxes. This system has been able to produce very measurable and concrete results in Sudbury. Rather than taxing misconduct, this system would oblige companies to come up with solutions. In fact, a carbon tax has the disadvantage of allowing companies to pollute as much as they like so long as they pay their prescribed taxes. Do you have any thoughts on this subject?

[Jean-Luc Trahan]

What we are discussing is the situation of the manufacturing sector, both in Quebec and across Canada. We are fighting to carve out a space for ourselves on the world stage. We have to adapt and deal with any additional regulations. Seeing as how we are working to develop a global market, it is certain that we will have to draw inspiration from international best practices and learn from mistakes. The fact that 80% of our market is in the United States means that we are joined at the hip. However, we may be in the process of finding other allies in Europe. So we will therefore have to work with European standards. Perhaps I haven't replied clearly to your question.

[Thomas Mulcair, NDP, Outremont, QC]

You have raised some very good points.

[Jean-Luc Trahan]

Recently, I read a book entitled How We Compete. People are always in search of a single solution. But for the manufacturing sector, there are multiple solutions. We believe that this is the path to take.

[Thomas Mulcair, NDP, Outremont, QC]

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move to our second round.

Mr. Boshcoff, you have five minutes.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

First, on the scientific research and development tax credit, over the past 18 months or so, much of the money for scientific research, microbiology, and some of these other things, instead of coming out of the national fund, has been diverted through federal regional economic programs. I wonder if anybody here has any particular knowledge about the source of those. Should it come out of the regional funding, or should there be a designated fund that is used for new innovative scientific research or microbiology?

Second, and perhaps Mr. Trahan or Mr. Weir may know, the forest industry has long been asking for a longer capital cost allowance based on the premise that if the businesses aren't making money they can't really access this. They're looking for an extended period of time. We hear the Forest Products Association of Canada and numerous other groups that have made presentations to the natural resources hearings say the same thing. I'd be interested in your comments.

Third, since February 2006, border crossings have been dropping dramatically. In terms of border infrastructure, one of the issues is a combination of marketing tourism. The City of Toronto now does more than the Canadian government on marketing internationally and in North America. Some of the other issues are problems at the border that American tourists incur.

The fourth question is on the fuel taxes. In the blue book of 2005-06 there was a promise to eliminate the double taxation on the excise tax and to not charge GST after 85¢ a litre. I'm wondering, Mr. Whyte, if you want to comment on that. We can add up two more broken promises, I would guess--just add that to the long list.

Thank you.

[Garth Whyte]

Let me go on all of them.

We would agree with a longer CCA.

We like the changes that were done on the scientific research and experimental development tax credit.

As you know, Chair, the advisory committee on paperwork reduction started under Ralph Goodale, and we've continued it under these ministers, now Minister Ablonczy. It's going along.

We can certainly talk a lot about border and border infrastructure issues. Corinne is co-chairing with the Canada Border Services Agency on ways to improve the border. I'm on the advisory committee to the president of the Canada Border Services Agency.

On the fuel tax issue, yes, we'd like to see those two initiatives. We are going to be approaching the Conservative Party on those initiatives--very much so--the tax on tax and also the 1.5¢ deficit reduction tax that has been in place several years after the deficit was gone. We think that should be gone as well.

[Erin Weir]

It's interesting that in your question you've mentioned marketing with respect to the border. In terms of forestry, the other thing you asked about, all budget 2008 does for that industry is introduce $10 million of funds to promote Canadian forestry abroad. I'd have to put that in the column of national challenges that this budget doesn't address.

Certainly one of the ways to address it is through targeted tax measures. We'd like to see an enhancement and improvement of the research and development tax credit. I've talked in previous sessions of this committee about the possibility of an investment tax credit for manufacturing, which would certainly include forestry through sawmills, pulp mills, and all the aspects of it that are part of manufacturing. Indeed, Mr. Trahan spoke about that proposal again today.

In terms of the accelerated capital cost allowance, I think that was an example of a measure that actually was tied to real investment in the Canadian economy. It's interesting to note that the budget extends it only at a reduced rate. When you add the measure extended in the 2008 budget with the original accelerated capital cost allowance from the 2007 budget, the total value of those measures is about one-twentieth of the value of the “no strings attached” corporate income tax reductions. A lot more needs to be done in terms of these targeted supports that are tangibly connected to actual investment in the Canadian economy.

An interesting comparison to note is that the 50% capital cost allowance for manufacturing, which is now being extended on a declining basis, can be viewed alongside the accelerated capital cost allowance for the Alberta oil sands, which will continue at a 100% rate until 2010. Again, going back to Mr. Mulcair's question, it illustrates where the government's priorities seem to lie.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Monsieur Laforest.

[Jean-Yves Laforest, Bloc, Saint-Maurice—Champlain, QC]

Mr. Trahan, while talking about the manufacturing crisis in Quebec, you stated that the companies which are succeeding are those which invested in research and development, upgraded their equipment, or invested in training. I don't know if you have any specific statistics on that, but those are the companies that are faring the best.

For a long time, the Bloc Québécois has been demanding guaranteed loans for companies. Had there been more loan guarantees over the last five or six years, more Quebec companies would probably be doing better today, and they would be in a better position to compete.

Do you think that's a fair statement?