Finance Committee on Sept. 29th, 2009

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

That is fine, thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Laforest.

Mr. Dechert, please.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you, Mr. Chair.

Thank you, ladies and gentlemen, for your presentations this morning. It's a real pleasure to be in Alberta, in this vibrant and dynamic city of Edmonton.

I have a number of questions, and I'd like to start with the Alberta Chambers of Commerce, Mr. Kobly.

I took great interest in your suggestions for indexing various thresholds in the Income Tax Act. I think that's something we should certainly follow up on. I wonder, in addition to that, if you could comment on the competitiveness of our current Canadian corporate and business tax rate, especially when they're fully implemented by 2012. Do you see that as advantageous for encouraging growth of business investment in Canada? What more, if anything, do you think we ought to do in that regard?

[Ken Kobly]

Definitely, with a few exceptions, I think our corporate tax rates are competitive, especially in Alberta, because we have a very low corporate tax rate, particularly on small business. I think the importance of a competitive tax regime cannot be overstated. Capital can move, as you well know, from country to country very easily. The gentleman to the left of me knows that all too well with the commercialization of intellectual property. It's not the end-all and be-all to keeping or attracting business in Canada, but certainly it is a contributing factor.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you.

Yesterday in Vancouver we heard from the Canadian general accountants association, and one of their suggestions was simplification of our tax system. Specifically they suggested that the government appoint a panel of experts to undertake a fundamental review of our tax system and suggest changes to simplify it to make it easier for businesses and individuals to comply. What's your view on that suggestion?

[Ken Kobly]

Perhaps Don might want to supplement this answer, but both of us have a background in public practice accounting. Certainly, anything that government can do to reduce the compliance burden, the interpretation difficulties with the act, and the simplification of the act would be welcomed by not only tax practitioners but by individual businesses as well.

[Don Oszli, Chair, Alberta Chambers of Commerce]

Yes. Certainly I would echo that comment as well. The cost of compliance is steadily increasing, particularly when we get into globalization issues, transfer pricing issues, and the studies that have to be undertaken. Those things are horrendous and cost a lot of money to do. As for complying with a lot of the transfer pricing issues we have, it can be in excess of $50,000 to $100,000 merely to comply with that part of our Income Tax Act.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you very much for that.

My next question is for Mr. Kaumeyer of Almita Manufacturing.

I'm pleased to hear that some of the government programs for IRAP, SR and ED, tax credits, and CCA acceleration have benefited your business and small businesses generally across Canada. That's certainly very good news. On this side of the table, we understand that small business is the backbone of the Canadian economy and that more people are employed in small and medium-sized enterprises than in any other form of business organization.

I had a question for you with respect to your suggestion about acceleration of capital cost allowance and including additional types of equipment. My question is this: why should we restrict the definition at all? If it's capital equipment that a business needs to expand and to add to its productive capacity, shouldn't it just qualify for accelerated CCA?

[Lawrence Kaumeyer]

Absolutely. Yes, that's the key. Within some of the frameworks of small and medium-sized enterprises, the definitions are narrow, so a lot of things don't fit within that definition. For example, of the $2.76 million that we've invested in capital in the last two years, we find that a very, very small percentage of that is eligible. We'd like to have this accelerated program in place for that.

It's a substantial cashflow issue for companies, particularly now with the credit crunch, because you need to ensure that you have your capital turning over and that your cashflow is available to you for future growth. When you're growing as fast as we're growing, your cost of capital relative to its impact in being able to put it back into the company is dramatic. If you can accelerate that down payment, it just helps fuel the growth of the company even further. So yes, we would love to see that expanded.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you.

Congratulations, Ken, on the success of your business.

I have another question for the Prospectors and Developers Association, Mr. Bousquet. One of your suggestions is to increase, for a temporary period, the mineral exploration tax credit from 15% to 30%. First of all, can you tell us what the recent experience has been in your business during this global recession and what impact you think doubling that METC would have in terms of new investment in your industry in the short term?

[Philip Bousquet]

Thank you for the question.

There has been great impact on companies' ability to raise flow-through share financing. It's decreased over the past year. For this year, some estimates are that it would be approximately 50% of the 2008 total, so what we're looking for is to try to offer additional incentives to bring investors back to encourage them to consider mineral exploration.

Manitoba is an interesting example. Earlier this year they announced an increase, both for this year and for next year, for their own Manitoba mineral exploration tax credit. So there are precedents where some jurisdictions in Canada are looking at this.

Perhaps Eira could offer a comment on what she's seen on the financing side from companies.

[Eira Thomas]

Yes, further to that, in addition, jurisdictions like the Northwest Territories and Nunavut, which don't have the ability to bump up on the flow-through credit, would really benefit from this increase because it would put them on a more competitive playing field with some of the other jurisdictions in Canada.

But certainly from our own perspective, if you look at the costs to government associated with this tax credit, they are somewhere in the order of $55 million over a couple of years, but that's translated into, in 2007, an investment of $1 billion. It was less last year, obviously, at about $750,000, I think, and of course we're expecting lower numbers this year.

But again, if we can get that investment back into the market through extra incentive with this increase in the METC, I think we will certainly speed up the recovery of our industry overall.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you very much for that.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Dechert.

We'll go to Ms. Duncan for a seven-minute round.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thank you, Mr. Chair.

I, along with the chair, am happily an Edmonton, Alberta, member of Parliament, and it's a delight to be here. I'm sitting in for the regular member, and it's a delight to be with you today.

My first question is for the Alberta Pulse Growers Commission. It's delightful to see you. I have a long personal history with organic pulse growers, mostly in southern Saskatchewan. I really appreciate the value of your industry and the struggles you go through. Today, I'm unfortunately missing a presentation on the Hill by Dr. David Sauchyn from Regina, who edited and led the NRCan report on the impacts of climate change in Canada. He wrote the big section on agriculture, and he identified a lot of issues similar to those you've raised today.

I'm also aware, through my 35 years in the environmental and energy fields, of the crisis we have in science. I was previously on the board of a group called ECO Canada, which is the environmental sector table for the Government of Canada, and they do market studies on who's demanding jobs in the environmental field and what's available. We are fast reaching a crisis, and you've identified one of the key areas. I'm glad you raised that, and I hope you emphasize that, because in the area of the impacts of climate change and other issues, it's going to be a critical one for your industry.

I welcome your request for financial incentives for greening agriculture. I'm wondering if your sector is looking into offsets and if that is of any help to you at all.

[Sheri Strydhorst]

Offsets have been looked at and doing some life cycle analysis to quantify exactly what kinds of benefits we are contributing. One of the struggles we're facing, though, is the issue of early adopters, so producers who have been farming and growing these pulse crops for the last 20 years are not going to be eligible for any of those offsets. That's a very big frustration, that the people who were the early adopters don't succeed in getting those benefits. I think this is one thing that needs to be considered in terms of offsets.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thanks.

I have a question for Chief Laboucan. It's a delight to have you here. I appreciated your brief.

I wonder if you could talk a bit about your feeling about contribution agreements. In areas such as safe drinking water, one of the areas I'm aware of--and it may well be that there are contribution agreements for other things, like education and other public facilities--do you run into any kind of frustration where, as I understand, you can receive federal financing to do water treatment or waste water treatment, but only if you've signed the contribution agreement that passes liability over to your first nation?

[Chief Rose Laboucan]

That's exactly true. I'll speak of my first nation because we got a $6 million water treatment facility. My question to the federal government was, why invest that kind of money if it's not feasible to even run it and maintain it? Even with the ability to hire somebody to run it, that's a $75,000 to $80,000 cost these days. When we train somebody, they get scooped up and have to go and work somewhere else because they're willing to pay them that cost.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Chief, I found very interesting your recommendation that you should be given a greater level of independence in how the money is spent. There's an ongoing battle in the federal transfers to the provinces that the provinces don't seem to think they see fit to be accountable. Are you suggesting that perhaps you should be treated on par with provincial and territorial governments?

[Chief Rose Laboucan]

Definitely so, but not only that. One of the things that happens in this whole process is the inability to really look at the equitable way we can utilize it. I met with the Auditor General in 2007, and it seems that every time there's an issue with first nations and governments and the issue of accountability, it is the first nations themselves who have to bear the burden of a process. Like now, are we going to be funded differently? In 2011, there's a new scheme up front. Why couldn't we just fix what we had and make it better and more accountable? We have no problem with the accountability part of it. It's just costing the government many more dollars in waste that could be going to first nations communities.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Do I have time for one more question?

I have a question, but I'll put it to both Almita and Quadrise, because you seem to be seeking in the same direction.

I had the opportunity last week to go to the oil sands trade show. I wandered around and talked to the various entrepreneurs, from people who are selling lined pipes that don't have to be replaced as often, to people doing worker safety, to people doing technology to contain or to treat tar ponds waste or control sour gas emissions. One of the things they pointed out to me was that the issue isn't so much the taxation, although one always wants lower taxes or capital cost writeoffs, the issue is the lack of regulatory drivers.

I also sit on the parliamentary committee on environment and sustainable development, and we heard from very renowned scientists here in Alberta, engineers who are working on the technology, and one of the frustrations raised to us was that there seems to be money trickling in from government and some from industry to develop technologies, but there is little money out there to actually pilot or field test them.

I'm wondering if you could comment on whether you think a stepped-up regulatory agenda might actually shift the dollars over until you could improve private investment as well, in the uptake of your technologies.

[Ross Lennox]

I'd like to speak on that first. Our company has developed two environmental solutions. One is a zero-emissions oil sands plant, which we've tried desperately to get piloted. We've also developed a low NOx fuel solution, which we're now marketing in the United States because we have no regulation here. Those are both tragedies, to our mind, to work and invest money to develop solutions and still wait for regulation to follow.

Part of our suggestion of having government involvement in some of the NSERC centres of excellence is that it gives government a view of what's out there. Right now there isn't a good understanding on the regulatory side of what solutions there may actually be.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Ms. Duncan.

We'll go to Mr. Pacetti.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chair, and thank you to the witnesses for appearing.

Again, this is a challenge for us, because we're limited in our time and we have a lot of questions to ask, so we might not get to all of you.

I'm from an urban centre, so I like to know where my food comes from. I'm not a very knowledgeable person when it comes to food.

The question is to Ms. Strydhorst. We're promoting products like the ones you're trying to promote, the peas, the beans--the unknown products--and there are a lot of people saying they want more environmentally friendly products. The grocery store has a section, but it's always the smallest section, because they're the highest priced.

In your experience, price on price, if we do subsidize these types of products, would there be an increase in demand? I'm asking about your personal experience.

[Sheri Strydhorst]

I don't know if we're necessarily looking for subsidizing these products in particular, but I think we need to brand them environmentally so the consumer is aware, and maybe that would increase demand and create a market pull in that respect. Looking at carbon footprinting of the products would start that.

I guess that's the later stage, but we need to make sure all the producers are onboard with the right equipment to be able to further enhance those environmental attributes.