Finance Committee on Oct. 8th, 2009

[The Chair, Conservative, James Rajotte]

Okay.

You have 30 seconds left.

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

I just want to add that other briefs we received mentioned the fact that such measures also gave women more freedom and facilitated their entry into the workforce. Establishing a daycare system that works is important for children, but just as important for women.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go now to Mr. Dechert, please.

Oh, I'm sorry. Did you want to respond?

[Helen Saravanamuttoo]

Yes. I agree totally that this is a really important feminist issue. It's the same issue that we see in our second recommendation on EI; women are not getting the benefit there either. We have to support women in the workforce so that we can give them sufficient resources to bring up their children properly.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Dechert, please.

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

Thank you, Mr. Chair.

Thank you, ladies and gentlemen, for your presentations.

My first question is for the Business Tax Reform Coalition.

Mr. Stothart, I was interested in hearing your description of the current corporate tax rates and the plan to continue reducing them over time. We've seen some good news recently concerning investment in Canada, for example, with respect to the decision of Tim Hortons to bring their international headquarters back to Canada. One of the reasons given was that the tax rates are now more competitive and attractive in the province of Ontario in Canada than they are in the state of Ohio in the United States.

Would you comment on how you see the competitiveness of Canadian corporate tax rates proceeding over the next five to six years compared with those in the United States and Europe, especially given that Canada has the best debt-to-GDP ratio in the OECD? For example, our friends in the United States have a debt-to-GDP ratio of 13% today. One would expect them to increase or to have a need to increase their taxes over the next few years. Where do you see Canada's competitiveness going in the next few years?

[Paul Stothart]

I would just say that taxes are one very important component of what companies look for when they are investing. There are a number of other considerations involving project approval and regulatory efficiency and other considerations. But certainly tax competitiveness is a very important one.

It is our submission and the position of many other associations that come speaking about the movement to a 15% corporate tax rate by 2012 that it will position Canada very attractively in that area. There are other things to do, but that's very important. For example, the industry I'm most familiar with, mining and metals and the processing of those products, paid about $14 billion in taxes and royalties to governments last year in Canada. That's significant. And obviously there are a lot of supplier industries that build up around it, but that one industry alone paid a fair amount, and it has been paid while respecting the fact that this is a fairly attractive place to invest.

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

So new investment obviously spins off other, service-related jobs. That's good.

A number of organizations have made a presentation to us on making scientific research and experimental development tax credits refundable. Do you have a view on that?

I wonder whether Mr. Podruzny has a view on it as well.

[Paul Stothart]

It's not as big an issue for our mining and processing industry as for some other industries, such as high tech and computers, etc. All industries feel that the whole system can be made much more efficient. Never mind the size of the incentive; just the administration and design of the system can be made more efficient.

Dave may have more detailed thoughts.

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

Mr. Podruzny, do you have a comment on that suggestion?

[David Podruzny]

Just very quickly, we as CCPA haven't been supporting the refundability at this point.

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

Why not?

[David Podruzny]

We find the SR and ED tax credit system to be a very good system. It's a very rich system. It encourages the kind of research and development that we think needs to be in place.

But we would support the comment that the administration of it and the way in which you can predict whether or not you'll be eligible for projects, so that you can book the value and win the new R and D project here rather than somewhere else, so that we can actually count on it.... That part of it still needs some work.

The refundability issue isn't one that our members have raised. They're more concerned that they be able to predict whether they will qualify or not.

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

So better administration, okay.

I have a question for the Canadian Federation of Students and Ms. Giroux-Bougard. Similar to Monsieur Laforest's comment, I find your suggestion about eliminating all education tax credits a bit drastic. Have you studied what impact that would have on workers and part-time students who are trying to upgrade their skills? Isn't that something we want to support? Don't tax credits help them to pursue further education and skills training?

[Katherine Giroux-Bougard]

What we're considering is that we're operating in an environment where we have scarce resources and we're trying to see how we can maximize those resources to make post-secondary education as affordable as possible. For a lot of these credits, students can claim them once those fees have been paid, so they don't necessarily come at a time when students require them the most.

To give you a comparison in terms of numbers, in 2006, which is when we have some of the most comprehensive data on what was spent on tax credits, the government spent $1.44 billion on tax credits, and the same year lent about $1.92 billion through the Canada student loans program. In our opinion, it would be much more effective to be using the money that is going back into tax credits, when students don't necessarily need the money—

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

If I could ask you the question, do you know if part-time students who are working but trying to upgrade their skills, workers who are trying to move into higher-value-added jobs, typically get scholarships?

[Katherine Giroux-Bougard]

There is some lending in place through the Canada student loans program, so they are eligible for some level of borrowing, but again, the majority of people that do receive money from tax credits are often full-time students.

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

Okay, thank you very much.

I have a question for the Association of Consulting Engineering Companies, Mr. Gamble.

One of your suggestions is long-term, stable infrastructure spending. I assume your members are pretty busy this year with all the infrastructure spending that's going on, and I hope that's helpful. Given that this necessary infrastructure spending has obviously resulted in a deficit that everyone predicted, how would you suggest the government deal with the deficit question going forward, in light of your suggestion for long-term, stable infrastructure spending?

[John Gamble]

That's a very fair question. One of the challenges the public sector generally has is that you're subject to the tyranny of cash-in, cash-out annual budgets, and it's very hard for you to amortize costs. So you end up with the paradox where you must appear to save money regardless of the cost.

The problem with short-term programs is that we're dealing with infrastructure assets that are going to have design lives of 25, 30, 50, sometimes 100 years, and the spending decisions are focused very much on the here and now. We don't really take an opportunity to explore how we achieve life-cycle savings by extending the design life of assets. What if the replacement period for infrastructure is 70 years instead of 40 years? What if we can put more effort into the up-front design and planning so that a water treatment plant may require 20 operators instead of 35 operators?

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

I take your point. What do you think we should do in terms of the budget?

[The Chair, Conservative, James Rajotte]

I'm sorry, Mr. Dechert, we are over time.

We'll go to Mr. McKay, please.

[John McKay, Liberal, Scarborough—Guildwood, ON]

That was an interesting response, Mr. Gamble.

I wanted to go back to the conversation with Mr. Stothart and Mr. Podruzny.

Every year, the manufacturing industry comes to this committee asking for tax reductions, asking us to keep the corporate rates down, asking us for accelerated capital cost allowance, and every year productivity goes down, and every year fewer and fewer Canadian companies exist. In fact, productivity and efficiencies are actually statistically better by foreign companies coming in here and taking over Canadian companies.

At some point or another, the industries, as a general proposition, have to stand up and essentially explain to the taxpayers of Canada why their productivity is not competitive with that of foreigners. Both governments over the last ten years have essentially given the industry what it wants, and we are facing a rather grim situation in manufacturing.

[David Podruzny]

I'll give you a response from the Canadian Chemical Producers' Association first.

Our membership's productivity is roughly 50% higher than the same industry in the United States, and it's getting better. As long as we keep making new investments here rather than down there in our sector, we'll improve our productivity even more.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Why is it your sector as opposed to other sectors?

[David Podruzny]

In the late 1990s and in the first two or three years of this century we made investments. We made capital investments in this country in the newest and latest and best technologies. In the last five years that hasn't been happening. So we have in place newer equipment, more modern equipment, and bigger equipment in industrial chemical manufacturing than our American counterparts.