Good morning. My name is Shannon Renault from the Greater Victoria Chamber of Commerce. I thank you for this opportunity to present today.
Since 2000, the Government of Canada has introduced a number of tax changes that have been designed to place the country in a more competitive position and to lessen the tax burden on individuals. Significant as these achievements have been, at the chamber we believe we can do more.
Going forward, we believe the federal government should focus efforts on three fronts: first, encourage more active investment in the Canadian business economy; second, focus on the issue of labour attraction and retention; and third, invest in finding solutions to social problems that impact business and our communities.
In regard to encouraging investment, the recent announcement in October from Minister Flaherty about a reduction in corporate and small business taxes certainly will have a positive impact on the ability of companies to invest in productivity. Another important step that would encourage further investment would be a significant change in the taxation of capital gains, as promised in the 2006 Conservative election campaign. The elimination of capital gains tax for individuals on the sale of assets, wherein the proceeds are reinvested within six months, would encourage more active investment in our economy. That tax-exempt rollover of capital gains should be introduced in the next fiscal year.
Secondly, consideration needs to be given to including gains from the ownership of real property in capital gains exemptions. A good number of Canadians have investments in varying sizes in real property; however, these investments would not currently qualify for the capital gains deferrals. Investments in real property lack liquidity and portability, and the immediate application of capital gains makes it difficult for investors to grow their real property investments. As a result, and I'm sure I'll be supported by the real estate board on this, investments are locked in, and real property owners do not turn over their assets and have a more active participation in generating wealth in the economy. In addition, because owners are faced with a financial disincentive to maintain the overall quality of both commercial and residential investment properties, unfortunately, the unintended result of some of this is urban decay.
As to labour attraction and retention, the Greater Victoria Chamber supports the need for Canada to be more tax competitive with our U.S. neighbours. This is on a personal level, not a corporate one. Notwithstanding differences in our social service systems, the disparity in our respective levels of personal taxation are such that some of our professional and high-wage earners can be lured away to attractive opportunities in the U.S., where they personally benefit from significantly lower taxation. This is especially true of those in the top marginal tax bracket, which in Canada is 8% higher than in the U.S. In addition, the threshold at which the top marginal rate kicks in is much lower in Canada than south of the border. These two things together make Canada appear to be a less competitive market on an individual basis for our best and brightest.
Also, to become more competitive in the shrinking global labour market, it's advisable for the federal government to develop innovative tax policies focused not only on attracting skilled foreign immigrants but also on luring Canadians back to Canada--so those talented expatriates as well. Some suggestions might include introducing a tax incentive for individuals in targeted skills areas for which there is a particularly high need across the country. You might consider something not unlike municipal tax holidays, which are designed to encourage particular types of development in the cities. You could consider also federal tax holidays to attract back expatriates in specifically skills-short areas in Canada.
Also, we would suggest a tax credit for small and medium-sized enterprises for employing co-op students in positions that have the potential to grow into full-time employment. It has been well documented that co-op placements are a hugely useful way to anchor students to the places from which they take their education. Many small businesses and medium-sized enterprises don't participate in co-op placements because it's not in their budget to do so, and certainly a tax credit would assist in that.
Last, but certainly not least, the Government of Canada needs to take a far more aggressive lead in solving the problems of chronic homelessness across our country. Through the commitment of $256 million to the housing partnership initiative, we see the government is mindful of the homeless problem in Canada; however, the funding allocation is insufficient to deal with the size of the problem. By comparison, the U.S. government invests 3.6 times per capita what the Canadian government does on results-oriented homelessness initiatives. In the U.S., the numbers of homeless are decreasing; in Canada, the numbers of homeless are growing.
Businesses across the country, those that are on the front lines of our urban landscapes, are languishing each morning as they clean up the human mess that results from the problem that is being ill-handled and continues to grow. I might illustrate that you need only go a short walk from this hotel to see that for yourself. In this time of record government surplus, it is absolutely necessary for the federal government to apply a focused effort to reducing homelessness across Canada, and in doing so improve the business environment for thousands of Canadian companies.
So in conclusion, and to sum up our recommendations, the Greater Victoria Chamber of Commerce would recommend introducing the capital gains rollover and including the gains from real property in the group of qualifying assets; reducing income tax levels on the highest tax bracket and increasing that bracket's threshold; introducing a variety of tax incentives to attract workers in targeted areas of skill shortages and to retain our students with Canadian companies; and investing far more aggressively in a results-oriented strategy to reduce chronic homelessness across the country.