This week, I changed much of the tech behind this site. If you see anything that looks like a bug, please let me know!

Evidence of meeting #6 for Finance in the 39th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was students.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Pierre Le François  General Director, Association nationale des éditeurs de livres
Claire Morris  President and Chief Executive Officer, Association of Universities and Colleges of Canada
Darryl Smith  President, Canadian Dental Association
Bob Harvey  Member, Tax and Fiscal Policy Committee, Certified General Accountants Association of Canada
David Bradley  Chief Executive Officer, Canadian Trucking Alliance
Pierre Sadik  Senior Policy Advisor, Sustainability Specialist, David Suzuki Foundation
Nathalie Bourque  Vice-President, Global Communications, CAE Inc., SR & ED Tax Credit Coalition
Peter Look  Vice-President, Tax, Nortel, SR & ED Tax Credit Coalition
Carole Presseault  Vice-President, Government and Regulatory Affairs, Certified General Accountants Association of Canada
Susan Mullin  Vice-President of Development, Association of Fundraising Professionals
Margaret Lefebvre  Executive Director, Canadian Association of Income Funds
Chris Tabor  Manager, Queen's University Bookstore, Canadian Booksellers Association
Michael Atkinson  President, Canadian Construction Association
Gerry Barr  President and Chief Executive Officer, Canadian Council for International Cooperation
Amanda Aziz  National Chairperson, Canadian Federation of Students
Mark Yakabuski  President and Chief Executive Officer, Insurance Bureau of Canada

5:40 p.m.

Some hon. members

Oh, oh!

5:40 p.m.

President, Canadian Construction Association

Michael Atkinson

--so I think it's an apolitical feathering of the nest that's been going on for some time.

But in all seriousness, it is very disturbing to my members, 90% to 95% of whom are small business employers, to have what amounts to a payroll tax and then find out that the government is taking more than is required for the needs of the fund, knows it's taking more than is needed in the fund, and then ties the hands of the chief actuary and the Employment Insurance Commission and absolutely forbids them to look backwards in setting future rates. In other words, you're not allowed to correct your past mistakes or miscalculations.

The throne speech did make a commitment to look at the governance and management of the EI fund, but with no specifics. I think that opens the door for this committee to make some strong recommendations to change how the rates are set for that fund. I can guarantee you, if the EI fund was running an annual deficit, this would have been fixed a long time ago.

5:45 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Thank you very much.

I'll move on now to Madame Lefebvre.

We've had many discussions over the government's broken promise on income trusts, but I think today, rather than debating the overall issue, you're here on more specific issues.

I would find it rather unusual that so little has been done to manage the transition. You say there's no certainty or legal clarity on the transition period, no legislative framework to facilitate conversion back to corporate status. Aren't these yawning gaps in implementation? My question, if you wish to go there, goes to motive. My feeling is that the government is really out to destroy income trusts. If that's not the reason, how do you explain this yawning gap in the implementation process?

5:45 p.m.

Executive Director, Canadian Association of Income Funds

Margaret Lefebvre

I think the main way I would explain it is that this was a piece of legislation that was rushed in, and the implementation was simply done on a very ad hoc basis. Specifically, most of the implementation measures in fact refer back to a press release that was issued on December 15, and in that press release there is a statement that this is a policy that was being announced by the government and that can be changed from time to time. The enormous concern, from the point of view of ongoing business, within the framework of the policy as passed into law, is the fact that it's extremely difficult to plan how you're going to implement when the implementation rules are not clear and when there is a statement on record that they could change it from time to time. We are looking for a statement from--

5:45 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

So you mean this is a law that states that this is the law, but they can change it from time to time as they see fit, by regulation?

5:45 p.m.

Executive Director, Canadian Association of Income Funds

Margaret Lefebvre

In actual fact, that is not clear. So what we are looking for is a statement of intent, a statement that says this is what we will recognize, this is the intention. That is how they dealt with the transition, for example, from an income trust to a corporate entity. They specifically said that the unit holder will not suffer tax consequences. There has not been a change in the law, but the statement was enough. We would look for a similar statement dealing with the issuers.

5:45 p.m.

Liberal

John McCallum Liberal Markham—Unionville, ON

Thank you very much.

5:45 p.m.

Conservative

The Chair Conservative Rob Merrifield

Thank you very much.

Monsieur Crête, you have seven minutes.

5:45 p.m.

Bloc

Paul Crête Bloc Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC

Thank you, Mr. Chairman.

First of all, I want to commend you, Mr. Barr, for the work carried out by your council. It is important to maintain that awareness on a daily basis within our society, which is in a privileged position, compared to the rest of the planet.

What solution can you see to the absurd situation we have currently, which is that the Prime Minister of Canada is in Tanzania saying that additional monies are being devoted to this and that the only reason we cannot meet the government's current commitment is that growth in Canada has been stronger than what was forecast? Therefore, we won't honour our commitment as regards the percentage.

Is there a solution whereby, when we get richer and grow faster, we avoid reducing our contribution, in percentage terms, to the fight against poverty?

5:45 p.m.

President and Chief Executive Officer, Canadian Council for International Cooperation

Gerry Barr

You make a good point, sir, about the question of affordability. If Canada does not now reinvest in aid spending when it is so eminently affordable, when on earth will it do so? And it does go directly to the credibility not only of the Prime Minister, but also of the Government of Canada--and the credibility of Canada itself.

In the year 2000, world leaders used a uniquely powerful phrase with respect to the millennium development goals. The phrase they used was that they engaged between each other to “spare no effort” to achieve the millennium development goals. That is an unambiguously committed phrase. Since that time, since 2000, new aid spending in Canada is about $2 billion. Not more than 30% of that amount can be said to be identifiable as a contribution towards achieving the millennium development goals. So we have, with respect to the money already committed, not anything close to “sparing no effort”.

We have, I think--and Canadians increasingly recognize this--nothing in the performance of either the previous government or the current one that would give confidence to the idea that Canada is committed to grow its contribution to the 0.7% target, though one finance committee after the other has pleaded with the government to do so. And members of all parties have voted for those resolutions.

5:50 p.m.

Bloc

Paul Crête Bloc Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC

That means we need to finish our work in a reasonable manner. Also, the government has to make a serious commitment for the next 10 years, as you say.

Today, an international report was released which says that, in the short term, climate change will be the most significant cause of increased poverty on the planet. If we move forward with the percentage that you are suggesting, won't half of it be cancelled out—I'm not saying we shouldn't do it; I think we have to get there—because we will not have taken the necessary steps to mitigate the negative consequences of climate change?

5:50 p.m.

President and Chief Executive Officer, Canadian Council for International Cooperation

Gerry Barr

That's a pretty tough question. Climate change is going to have immense impact, especially on the world's poorest, almost no matter what. The real question is, how effectively can the world community marshal resources to help poor economies address this?

The principle of Kyoto is that those most responsible act first. That, unhappily, has not yet happened. The world's poorest countries will take the sharpest impact of climate change. But at a moment when aid resources are going to be plainly so imperative and essential, it really falls to us to make sure our resources are used in the most effective way.

The way in which Canadian aid spending is now undertaken diminishes the dollars we send abroad. Resources that are tied to Canadian sourcing never really see the inside of a developing country economy. Money is certainly spent for legitimate purposes, but not to reduce global poverty, support students in Canada, or for the settlement of refugee costs.

All these things have to be done, but Canada is harbouring these costs in its aid budget. The result, in our estimation, is that about 70¢ of every Canadian aid dollar actually make it to the developing world. We need to change that sort of thing as well. That's part of what Bill C-293 is about.

5:50 p.m.

Bloc

Paul Crête Bloc Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC

Thank you very much, Mr. Barr.

Mr. Atkinson, you talked about employment insurance. Would you support a decision to set up, once and for all, an independent employment insurance fund? In other words, 100% of contributions would be used for the employment insurance fund. There could be a joint employer-employee decision-making committee. That way, we would not end up in the same situation as occurred when the $54 billion—money belonging to employers, workers, and especially the unemployed—was used to fund Canada's deficit.

5:50 p.m.

President, Canadian Construction Association

Michael Atkinson

That's certainly one of the suggestions that's been made, but I think we would have to see the details and know exactly what the mix of representation on that governance board would be.

There are a number of other concerns about the EI fund that are somewhat beyond the control of employers and employees. So governments are important stakeholders there. We certainly wouldn't want to see the EI fund transformed into something it wasn't intended to be. I think both employees and employers are of one voice on that.

On the employers' side, we've had a number of situations where there has been an unwillingness on the part of the government to deal with substantive reports on EI because it's no longer a contributor. Historically, the federal government used to contribute 20% of the fund. Now it doesn't unless it goes into a deficit situation. When the government was an active contributor, it was easier to get its eye with respect to substantive reforms.

I'll give you one example that's in the report. Employer overcontributions are not refundable, but employee overcontributions are. The answer we get from the Department of Finance and HRSDC is that it would be too hard to keep track of employer overcontributions.

5:55 p.m.

Conservative

The Chair Conservative Rob Merrifield

Thank you very much.

We'll now go to Mr. Menzies for seven minutes.

November 27th, 2007 / 5:55 p.m.

Conservative

Ted Menzies Conservative Macleod, AB

Thank you, Mr. Chair, and thanks to our presenters today, some of whom I've met at different functions and some of whom I've met at different committees.

Let's start with Mr. Atkinson. We share your frustrations about EI. The present minister is struggling with trying to make some changes to that, and we certainly appreciate your support. I think we all recognize that we were handed a can of worms, and when we opened it up they were crawling all over. We're certainly trying to work with industry on the concerns you have raised.

This government has put forward a $33 billion infrastructure package for Canada, which is the largest infrastructure announcement in history. We're promoting the use of it through P3s--we want to triple it by involving private-public partnerships. What advice might you give us on that?

We think we can leverage this to $100 billion, which is an incredible amount of money. On the criticisms we received last week from the municipalities, they were saying $127 billion. But the $100 billion puts us awfully close to their rather grandiose ask--certainly closer than we've been for a lot of years.

How would your association be involved in that?

5:55 p.m.

President, Canadian Construction Association

Michael Atkinson

First of all, I think it's fair to say that public-private partnerships are only one tool in the toolbox. They aren't a panacea. They aren't necessarily the best way to go in meeting all of Canada's infrastructure needs.

As I am sure you are all aware, in order to go to a true public-private partnership situation, you have to guarantee a certain flow of revenue for the private sector investors. That's pretty hard to do for certain aspects of Canada's infrastructure in certain regions, particularly underpopulated regions in the country. So my best advice there is to not look to one particular approach as being the panacea or as being the tool or solution in all circumstances. Certainly, P3s have their place, and they can, as you mentioned, leverage additional investment.

However, what's more important is having a long-term plan. In this country we have never had a long-term plan for something as important as our national highway system. We never had a plan.

It's very difficult for the construction industry, as arguably one of Canada's largest employers with over a million people, to do any effective planning with our public sector clients--governments--when we don't know sometimes six months out where the priorities will be. With respect to working in partnership with lower levels of government in municipalities and provinces, that's of even more importance.

I know this government is trying to make an attempt to make funding more certain going out by extending the excise fuel tax commitment to 2013-14. That is so important. It's very difficult for municipal or provincial governments to make long-term planning with respect to infrastructure investment without knowing whether or not the federal government, or another level of government, is going to be there as a player.

That's even more important in the private sector. You are looking to attract private sector investment; the more governments can get their long-term planning and priorities in place for infrastructure renewal and reinvestment, the more you'll attract the private sector community.

5:55 p.m.

Conservative

Ted Menzies Conservative Macleod, AB

Thank you, and point taken.

It's not a panacea, but it is a way to leverage government dollars, tax dollars, to the best advantage. I was in Chile not too long ago. Most of their roads are P3s, and are—I shouldn't say this—pretty good roads. They're incredibly good roads down there; it's a good example that we can use.

I have a question for the Insurance Bureau, Mr. Yakabuski, regarding your comment about improving productivity and the reference to harmonizing taxes.

We're hearing quite consistently from industry representatives, different associations, about the need to do this. Unfortunately, we're not hearing that from some of the provinces that haven't harmonized. I might suggest that we could enlist your help in perhaps talking to the provinces that your association represents.

6 p.m.

President and Chief Executive Officer, Insurance Bureau of Canada

Mark Yakabuski

I can assure you that you will have our help, and you have had our help. I never miss an opportunity to remind the Minister of Finance in Ontario, and elsewhere, that if he really wants to add to the productivity of his province, or elsewhere, he needs to harmonize the provincial sales tax. The fact of the matter is, the provincial sales tax basically is an invitation for Canada to underinvest in capital goods.

If you want to know what the single biggest source of our productivity gap is with the United States, it's our system of sales taxation. So we will certainly do everything we can, Mr. Menzies, to get that message across.

6 p.m.

Conservative

Ted Menzies Conservative Macleod, AB

Thank you.

Gerry Barr, I think, would have hurt feelings if I didn't address Bill C-293. In fact, you did bring that up, and I think you've probably heard all of my concerns about that bill.

The example our Prime Minister gave us with his Canada-led “save a million children in Africa” this week I think is a pretty good indication that we're solidly on track to doubling our aid to Africa, reminding everyone, as you have said, that it's as much about aid effectiveness as it is about the actual dollars.

We've committed to getting to the OECD average by 2015, I believe, in line with the millennium development goals.

6 p.m.

Conservative

The Chair Conservative Rob Merrifield

That's just a point you were making, right?

Thank you very much.

Seven minutes, Monsieur Mulcair.

6 p.m.

NDP

Thomas Mulcair NDP Outremont, QC

Thank you, Mr. Chairman.

To begin with, I want to apologize. Today's events were such that I had to grant interviews. As a result, I missed a number of presentations. I did, however, have an opportunity to review the written material. I want to thank all the participants for their help with our budget options. I also want to say how pleased I was to hear Mr. Barr's presentation. I caught a good part of it. I believe it is critical, for a country as rich as Canada, not to lose sight of the need to do its fair share. You spoke eloquently, and I think your comments should receive special attention from the government and all members of this Committee.

Mr. Chairman, I'm going to take the liberty of addressing my first question to Margaret Lefebvre, who is here today to talk about a subject of great concern to many investors. It is a complicated matter. Indeed, we in the NDP have never been in favour of income trusts, but I can assure you that we would never have lied to the people who invested in these trusts. The current government had stated very clearly that it would leave well enough alone, but it tricked us.

In her brief and in the part of the presentation I heard, Ms. Lefebvre made it very clear that not only were there two rates and people were misled by the Conservative government, but in addition to that, they were highly technical problems.

Ms. Lefebvre, I do not want to involve you directly in the work of this Committee, but I want you to know that next week—and this is quite exceptional—we will be meeting with the person who has been designated by the current government, without any prior consultation, to replace David Dodge at the head of the Bank of Canada. I refer to Mark Carney.

Mr. Carney played a critical role in this whole issue of income trusts, and the same applies to Mr. Dodge. My question is this: one of the reasons given was the loss of tax revenues. However, in light of what happened following the nice little Halloween surprise that Mr. Flaherty sprang on you last year, would you say that the reasons given at the time were correct or, instead, that certain things that have come to light since demonstrate that control of these income trusts has now moved to the United States, in particular, and that Canada is receiving even fewer tax revenues now?

6:05 p.m.

Executive Director, Canadian Association of Income Funds

Margaret Lefebvre

I think it is very clear that the original stated intent, the reason they moved as quickly and suddenly as they did...the official intent at the time was given as tax leakage. The tax leakage that was estimated at the time was $500 million at the federal level and a potential $300 million at the provincial level. We contested those numbers, and in actual fact we were able to prove those numbers were significantly lower than that.

Even if one took that to be the case, very shortly after that, as the income trusts started to fall one after the other, it became very clear that there would be no tax payment because the income trusts were being repatriated either into private equity or, more importantly, into foreign—and “foreign” as in “non-national”—equity.

It was very clear that the whole argument towards tax leakage was dropped in favour of one towards tax fairness. Now, the tax fairness argument was one that was based on the premise that corporations and income trusts basically should be taxed at the same level.

Even at that level we have a severe problem, because the effective corporate tax rate on corporations runs roughly between 6%, 5%, and maybe up to 10% maximum. The 31.5% tax rate, potentially reduced to 29.5%, is still absolutely crippling and effectively guarantees that the instrument cannot survive.

We understand that the government had a concern, but the severity and I think the lack of consultation in finding the solution will in fact damage the economy far more than was expected. We were here on numerous occasions talking about the unintended negative consequences.

So now, within the context of the law as it is passed, we are still prepared to sit down to see if we can find ways to mitigate and ameliorate the damage that has been done and see if we can find a way through this.

6:05 p.m.

NDP

Thomas Mulcair NDP Outremont, QC

Mr. Chairman, in the past, we received regular information from people who had invested in income trusts. This is the first time I have had a chance to hear a presentation from the group represented by Ms. Lefebvre. I am going to suggest to her, considering the answer she has just given, that she provide us with all the statistics she has to support her position. Nothing would make me happier than to be able to use that information next week when we meet with Mr. Carney.

The proof is in the pudding. We are being asked to entrust Mr. Carney with one of the most important jobs in the Canadian economy for the next seven years. I think the least we can do, as elected Members of Parliament, is to ask him to back up his predictions, given that, as you so aptly pointed out, we are losing more money than what he said we would save.

6:05 p.m.

Executive Director, Canadian Association of Income Funds

Margaret Lefebvre

I would be more than happy to provide you with the studies we had done by HLB Decision Economics Inc., an independent outside consultant who did the studies on the tax leakage estimates at the time.