Finance Committee on Nov. 28th, 2007

[Andrew Telegdi, Liberal, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

My question is to Mr. Lind.

Mr. Lind, what kind of impact is the sub-prime mortgage situation south of the border having on the housing industry locally?

[Richard Lind]

The impact is secondary; from what we're seeing, it's in the way it affects people's attitude towards investment.

The other aspect, and what we're watching very carefully, is whether we may see some of that kind of sub-prime activity taking place here in Canada, which would affect the investment regime here.

I would ask John Kenward to speak specifically to some of the numbers on that.

[John Kenward, Chief Operating Officer, Canadian Home Builders' Association]

Mr. Chair, we're very fortunate in Canada not to be going through the experience they've had in the United States with the sub-prime market. At the moment there is no evidence that we are faced with such a problem. Nevertheless, the Canadian Home Builders' Association believes that with a more competitive mortgage insurance market, which we endorse, conditions should be placed on the guarantee that government provides to mortgage insurers, conditions that would very much limit if not prohibit the emergence of sub-prime activity in Canada.

[Andrew Telegdi, Liberal, Kitchener—Waterloo, ON]

Mr. Lind, you're from Nova Scotia. In Ontario there is also a big concern about the lack of skilled trades in the construction industry. Do you have any idea what kind of cost that has for the industry?

[Richard Lind]

Mr. Chair, it's not only in Nova Scotia and Ontario but across the country that the lack of skilled trades is affecting house prices.

For example, in Alberta the lack of skilled trades means that most houses have to sit for several weeks, even several months, while the various trades become available to do the next phase of construction. Having a house sit waiting for the trades to be available means that there are significant increased costs in carrying that project for the additional time. There are severe effects to the homebuyer because of this lack of skilled trades to keep the production moving along efficiently.

[Andrew Telegdi, Liberal, Kitchener—Waterloo, ON]

That gets to my final question, which is about the affordability index as well as about what it means to the supply of rental housing; that is, the affordability index to buy housing and the impact on rental housing.

[Richard Lind]

John, could I ask you to address that specifically, through the chair?

[John Kenward]

Mr. Chair, one of the matters that Mr. Lind raised in his presentation was the need for reforms to Canada's tax regime for private rental investment. We're not measuring up to projected requirements in this country, and therefore, in relation to the entire issue of housing affordability and the opportunity for people to find accommodation that they can reasonably afford, this is definitely a very serious problem. As you know, rental markets are very tight in many places across the country.

So it's certainly an issue of housing affordability. It becomes a related issue with respect to the entire question of how we go about helping those in housing need across the country, as well.

[The Chair, Conservative, Rob Merrifield]

Thank you.

Mr. Crête.

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

Thank you, Mr. Chair.

I have a question for Mr. Burrows of the Railway Association of Canada.

In your first recommendation, you say: "Increase the capital cost allowance rate for rail rolling stock to at least 30%."

Mr. Burrows, am I to understand that you want the government to adopt, as quickly as possible, the recommendations contained in the unanimous report of the Standing Committee on Industry, Science and Technology which was tabled last February and which included this specific recommendation? If so, why should we adopt them as quickly as possible?

[Bruce Burrows]

Yes, I'm fully supportive of that measure.

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

And for what reason?

[Bruce Burrows]

For the reasons I outlined. As I said in the brief, the Standing Committee on Finance and the industry committee in the past have both supported a minimum 30% capital cost allowance rate for rail rolling stock on the basis of supporting investment in new green technology and supporting the innovation imperative at large for new and more efficient technology.

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

Thank you, Mr. Burrows.

My other question goes to Mr. Bach.

In my constituency, there is a lady called Nathalie Gamache who has a severely disabled child. She has written a book about it. She or her husband have this child in their arms for 18 hours a day. At the moment, it seems that existing tax credits for people with a disability are insufficient for the support they may require.

Are you in favour of an additional tax credit for spouses who must look after someone with a very severe disability, in the same spirit as the recently-created registered disability savings plan, but specifically for situations like the one that Ms. Gamache and her family are experiencing? Would a measure like that be of interest to you? Are present tax credits enough for extreme cases like hers?

[Michael Bach]

Yes, I absolutely agree. One thing we've learned as a community as we've tried to move forward with a disability and family support agenda in this country is that there's so much to be done. We find that when we put the full agenda on the table, people go, “Oh my gosh, this is just too much.” We're trying to narrow it down and do some pieces one at a time.

There's no question that families are being driven into poverty in this country; families who have children with significant disabilities are twice as likely to be living in poverty, and twice as likely to run out of money for food in a month. We've made families the front line of care for Canadians with disabilities and for seniors.

When we talk about funded disability supports, people with disabilities get their supports funded and served by community agencies. Only 20% to 25% of people with disabilities get all their needs met by community services, and 75% to 80% of supports in this country are provided directly by families. The cost to women primarily is extraordinary. They're not in the labour market. They don't have income security in their future years and they're much more likely to live in poverty. They're much more likely to have lower health status than other women.

There is no question that we need to work on both sides of this equation. Help create a floor that's going to have 100% more Canadians with disabilities begin to get out of poverty and begin to provide families with an opportunity to participate in the labour market while they care for their child or family member. Also, to significantly increase the infirm and caregiver credits and allowances in the tax system is one way to go.

We believe another possible measure is to provide some recognition in the Canada Pension Plan to women who have stayed out of the labour market their entire lives to do front-line care for family members with disabilities.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move on to Mr. Del Mastro.

You have five minutes.

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

Are my five minutes up already?

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you, Mr. Chair.

I just wanted to start by thanking all of today's witnesses for their comments and also for their submissions to the finance committee.

I wish I had time to ask questions of you all, but I don't. I'm going to zero in on a couple of you only, but understand that all of your recommendations will be considered by the committee.

Mr. Burrows, I look at the rail industry in two ways. It's serving the need of reducing congestion on roads and providing safe transportation. It's also environmentally the right way to move freight, at least in the quantities the rail industry is moving it. I know the rail industry is constantly building its overall capacity and it's certainly an industry that's not without competition.

You mentioned CCA rates for rolling stock. Would changes in our CCA rates result in significant investment here in Canada?

[Bruce Burrows]

Yes, it would. It would most likely result in at least another $400 million of investment. In fact those are the base numbers that we use to calculate the tax impact that I mentioned, starting at $5 million a year, working up to $25 million a year.

So yes, it would be significant in both locomotives and rolling stock. And as I answered Mr. Crête's question, that would help address the environmental agenda. It would also allow us to be competitive with both our U.S. rail competitors and the other modes in Canada.

[Dean Del Mastro, Conservative, Peterborough, ON]

Would it have a safety benefit as well?

[Bruce Burrows]

No doubt, because whenever we have the most modern equipment in use, that's a benefit for safety. Safety can always be better, and that's a prime--probably number one--objective for the industry, to be in the safest mode. We are the safest part of the rail industry in North America here in Canada, but that doesn't mean we stop focusing on that objective.

So yes, it would certainly help.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you.

Mr. Dancey, thank you for appearing before the committee again. I enjoyed listening to your comments. I think the Institute of Chartered Accountants has some good advice for government.

You spoke about the HST, and I was going to ask a question as to whether or not the Canadian Institute of Chartered Accountants had a position on interprovincial trade barriers.

[Kevin Dancey]

I guess anything that makes labour or capital or services flow more freely across borders is always a good thing. I think all you have to do when you do that is just make sure you have the right standards. What can often happen when you break down various trade barriers is that you get a race to the bottom in terms of standards. So you just have to make sure you have the appropriate standards.

For us that's not a particular issue, because CAs have the same standard across Canada. But in certain areas, you really just have to make sure you have the right standards.

[Dean Del Mastro, Conservative, Peterborough, ON]

Thank you.

I had the opportunity to take a number of economics and accounting courses at university, and often I will bring up the point that a lower tax rate doesn't mean lower government revenue. That's often misunderstood by some of the members of the committee.

Could you just take a moment to perhaps get into that a little deeper and explain why lower rates don't necessarily mean lower revenue for government?

[Kevin Dancey]

Basically, there are two things I will talk about. One is that the combination of lower tax rates, sales tax harmonization, etc., really incents businesses to grow. When they grow they create jobs, they create value, they earn money. They are more incented to have their head offices here in Canada as opposed to outside Canada, so there's that incentive.

Also, when you get into the technical areas of tax planning, you hear a lot about transfer pricing in the sense that there are various fees charged around the world to perhaps shift profits from country A to country B. If you're in a country with a very low tax rate, you tend to get more income coming in than expenses being charged to that area.