Evidence of meeting #54 for Finance in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was research.
General Manager, Opera Atelier, Opera.ca
Yes, it's marketing and.... These are all special projects, though, and not part of our operations. We do them when there is funding available. When there's not, we don't do it.
Conservative
The Chair Conservative James Rajotte
Okay. I appreciate that.
I want to thank all of you for coming in this afternoon and for presenting to us and responding to our questions—and also for your briefs. We'll certainly take them into serious consideration.
We do have a panel right after you, so we are going to ask the next panel to come forward.
Members, we will take a break for two or three minutes.
Thank you.
Conservative
The Chair Conservative James Rajotte
We're very pleased to have our fourth of four panels here today on our second day in Toronto during our pre-budget consultations across Canada.
We're very pleased to have seven organizations for this panel. We have the Canadian Retail Building Supply Council; we have the Canadian Network of Dance Presenters Canada, CanDance; we have the Professional Writers Association of Canada; we have the Investment Funds Institute of Canada; we have the University of Toronto; we have the Green Vehicle Exchange Program; and lastly, we have Upper Lakes Marine and Industrial Inc.
Welcome to all of you. Thank you very much for being with us here this afternoon. We have five minutes for each organization for an opening statement. I will indicate to you when you have about one minute left for your statement, but we'll begin in that order and we'll proceed along with the organizations.
We will begin with Mr. Campbell, please.
David Campbell Chair, Government Relations Committee, Canadian Retail Building Supply Council
Thank you, Mr. Chair.
I'm here today in my capacity as president of the Canadian Retail Building Supply Council, an umbrella organization comprising five of Canada's regional and provincial building supply associations. Our pre-budget submission is supported by the Canadian Hardware & Housewares Manufacturing Association. A letter to that effect is contained in our brief.
Together, the CRBSC and the CHHMA represent 2,300 companies that in 2008 employed 75,000 Canadians and generated some $83 billion in sales. Members include representatives of all major aspects of building materials, hardware, housewares, and lawn and garden product industries.
The contents of our submission reflect the views of 334 companies that participated in a survey in the summer. The prospects of the Canadian economy returning to growth this quarter or perhaps even in the third quarter are encouraging and would mean an end to the recession. The damage caused in the past year, however, will not soon fade away.
Within our sector of the economy, just consider these facts, all of which were obtained from current published Statistics Canada reports. Residential building permits for the first eight months of this year were worth almost $9.5 billion less than for the same period last year. Retail sales in building and outdoor home and supply stores in the first seven months of this year dropped $519 million from the same period last year. Wholesale sales of building materials were off almost $5.7 billion from the first seven months of 2008. There were 93,000 fewer construction employees in September 2009 than in September 2008, and 229,000 fewer manufacturing employees.
Budget 2009 announced four major programs to help Canadians acquire and improve their homes, all of which had a positive impact on the retail building supply sector. The home renovation tax credit was particularly beneficial. The standing committee asked what federal stimulus measures have been effective and the HRTC is definitely one of those ventures. Without it, the results for the housing market would have been significantly worse than those I pointed out to you.
Of our members, 86% of retailers and 87% of suppliers stated that the HRTC should be continued until the recession's impact on the Canadian business community has lessened significantly. Accordingly, we recommend that the home renovation tax credit be extended to February 1, 2011.
The standing committee asked what could be done to make stimulus measures more effective. EcoEnergy Retrofit and Energy Star are programs that are both designed to stimulate environmentally responsible behaviour. We've been struck this year with the contrast between the administrative burden placed on retail customers by the two environmental programs and the HRTC. That led CRBSC to ask whether retailers and suppliers felt the benefits under EcoEnergy Retrofit and Energy Star would be utilized more readily by consumers if they were offered a more user-friendly alternative, such as a tax credit modelled on the HRTC; 65% of retailers and 72% of their suppliers believe this would be the case, and that's what our brief recommends.
Our position paper reports that most respondents to our pre-budget survey favoured significant personal income tax relief to increased government spending. Therefore, our third recommendation advocates that the standing committee recognize the importance of broadly based and major personal income tax relief.
Thank you for the opportunity to appear before you today, and I look forward to your questions.
Conservative
The Chair Conservative James Rajotte
Thank you very much for your presentation.
We'll now go to Ms. Holmes.
Jeanne Holmes Board Chair, Canadian Network of Dance Presenters CanDance
Thank you for inviting me to speak today. My name is Jeanne Holmes. I am the dance programmer at Harbourfront Centre here in Toronto, as well as the chair of the board of directors of the CanDance Network, which is a national association of specialized dance-presenting organizations.
There may be no greater reward than standing at the back of a darkened theatre and listening to the murmur of anticipation in those last few moments before a performance begins. At that moment, you know the people gathered in that room are about to forget their daily trials and tribulations and be transported to another place. As a group of people sharing an experience together, at one with each other and the artists on stage, they are truly a community.
Live performances are taking place in literally thousands of communities across the country, in theatres, community halls, clubs, restaurants, bookstores, libraries, and the list goes on. The people responsible for making those performances happen are as wide-ranging as the performances themselves.
In the non-profit world, they are usually called “presenters”. They are the bridge between the artist and the audience, and a crucial part of our collective cultural identity.
In order to bring arts programming to communities, presenters plan seasons, select artists, negotiate contracts to promote and market engagements, arrange residency space, and help with a wide range of fundraising efforts. They provide needed facilities, technical production, house management, audiences for work-in-progress showings, administrative guidance and support, and tour-planning assistance. Presenters also provide animation and community development for the general public, emerging artists, and students.
The CanDance Network is a national arts service organization that serves the needs of Canada's dance-presenting community, all of whom are pioneers in the presentation and distribution of Canadian contemporary dance. In the past two seasons alone, network members have presented dance to over 250,000 audience members, and almost 30,000 individuals have participated in our members' audience outreach and development activities.
We are united in the view that sustained public investment in the arts by the federal government is essential to Canada's continued economic vitality, prosperity, and quality of life. We believe that all Canadians will benefit from better access to the arts and that Canadian artists and arts organizations play a key role in enhancing Canada’s reputation at home and abroad.
The 34 members of the CanDance Network applaud the Government of Canada’s five-year commitment to arts and culture. Support from the provisionally titled “Canadian arts presentation fund” is particularly important to the Canadian dance series presenters and festivals that form the CanDance Network.
The network makes the following recommendations to the committee.
Our first recommendation is to increase the investment in the Canadian arts presentation fund by $10 million, and to raise the cap on contributions to specialized dance presenters and dance festivals to 50% from the current 25%.
Although specialized dance presenters and dance festivals work diligently to diversify revenues by securing grants from provincial and municipal arts councils, fundraising within the private sector, and by generating earned revenue through ticket sales and sponsorships, many fall short of meeting their revenue goals, particularly in these tight economic times. As a result, they may be unable to access the full 25% contribution from the Canadian arts presentation fund. An additional investment to raise the cap would provide stronger support to specialized dance presenters and festivals, allowing them to reach more Canadian audiences with enhanced programming. The arts presentation fund has recognized dance, along with theatre for young audiences, as one of the most challenging arts forms to present, thus the need for enhanced support. This increased investment could also attract additional presenters in underserved areas who currently cannot meet the funding criteria.
Our second recommendation is to increase the investment in the Canadian arts presentation fund by an additional $10 million in order to raise the ceiling for series presenters to $500,000.
Under the current arts presentation fund guidelines, the maximum contribution for a series is $200,000, while the maximum for festivals is $500,000. It's important to equalize the contribution between the festivals and series presenters. While most festivals offer an intensity of programming over a limited period of time, series presenters operate throughout the year, cultivating and educating audiences, investing in a community's quality of life, and employing staff and artists year-round. Many series presenters have added costs, as well, of running and maintaining venues year-round.
Our third recommendation is to invest an additional $25 million per year into the expansion of the capacity and mandate of the Canada Council for the Arts to invest in international market development.
The 2010 budget should include a comprehensive program to ensure that our cultural sector can cultivate markets abroad. This $25-million investment would fill the gap left by the elimination of the Trade Routes and PromArt programs. Funds distributed directly to individual artists and companies contribute significantly to sustainable growth and development for the dance sector, which is not connected to a major commercial cultural industry. These funds increase the ability of an artist or company to compete on the international stage and will have wide-reaching impacts economically, diplomatically, and to the advancement of Canada’s cultural identity.
Conservative
The Chair Conservative James Rajotte
Thank you very much for your presentation.
We'll now hear from Ms. Gulliver, please.
Tanya Gulliver President, Professional Writers Association of Canada
Thank you, Mr. Chair.
My name is Tanya Gulliver, and I'm the president of the Professional Writers Association of Canada.
PWAC was established in 1976 and represents over 650 freelance writers and journalists across Canada.
In 1982 the Applebaum-Hébert report said that “the largest subsidy to the cultural life of Canada comes not from governments, corporations or other patrons, but from the artists themselves, through their unpaid or under paid labour”. Wages and fees for self-employed, freelance writers have remained static for close to 30 years. Creators in Canada annually contribute over $40 billion in economic activity. Canadian writers and artists, on average, make just over $20,000 per year, without the benefit of the safety net that others enjoy, including EI, extended health benefits, and retirement savings plans.
The creative community drives innovation, generating concepts and ideas that spread well beyond the entertainment and media clusters to influence science, industry, and public policy, to name a few.
PWAC would ask that the committee recognize the risks and extraordinary sacrifices made by the creative sector and consider the following changes to the Canadian Income Tax Act.
Reintroduce an income tax averaging system that allows artists to spread their tax burden over a period of at least five years, recognizing the fluctuation and unpredictability of income generated from self-employment in the arts. Creators should not be punished for their commitment to their crafts and their successes. Prior to 1982, income averaging was an option for all self-employed workers and was introduced on a provincial level in Quebec in 2004, where artists could spread out their earned income over seven years.
We would also recommend an increase in the basic personal exemption to at least $30,000. Similar measures are in place in the province of Quebec and in Europe, most notably Ireland, where there is a €250,000 exemption on income derived from creative output and where vital and successful creative workforces thrive. In 1995 Quebec introduced an exemption on an artist's first $15,000 in copyright royalties where the artist's income is under $30,000.
Our third recommendation is to extend EI and CPP benefits to all self-employed artists, to add incentives similar to the RESP top-up to encourage contributions to RRSPs, and to allow artists to deduct payments for extended health plans from their income tax. These are merely the typical benefits that an enlightened and progressive employer routinely provides to their employees. Self-employed artists are denied these benefits and security. We urge the Government of Canada to take on the role of an enlightened employer and support Canadian innovation and creativity.
As a further recommendation, PWAC would request that the ministries of finance, industry, and heritage commission and fund an in-depth study of the benefits and costs of tax reform for artists, such as those proposed herein. Long-standing models for such initiatives exist throughout Europe and in Quebec, and could be used to provide reliable data. PWAC would be willing to take a lead role in overseeing such a study in partnership with representatives from all artistic disciplines.
We thank you for allowing us the opportunity to voice our concerns and express our ideas. If Canada is to remain a leader in sustainable new technologies, we must actively support the imagination and entrepreneurship in which our artists excel.
Thank you.
Conservative
The Chair Conservative James Rajotte
Thank you very much for your presentation.
We now have the Investment Funds Institute of Canada.
Debbie Pearl-Weinberg Chair, Taxation Working Group, Investment Funds Institute of Canada
Thank you very much.
My name is Debbie Pearl-Weinberg, and I am chair of the taxation working group of the Investment Funds Institute of Canada, otherwise known as IFIC. I work for CIBC as a general tax counsel, but I'm here today representing IFIC. My comments do not necessarily reflect the views of my employer, CIBC.
IFIC is a trade association representing the investment fund industry. Investment funds are a particular type of pooled investment products, the largest of which are mutual funds. Canadians own approximately $600 billion in investment funds. They're widely held by Canadians and primarily owned by middle-income Canadians. Fifty-two percent of mutual funds are owned by people earning less than $100,000 per year, and 50% of mutual funds are owned either by those retired or those approaching retirement. They are the number one RRSP investment in Canada; 70% of RRSPs are invested in mutual funds.
IFIC's proposals to you are as follows. The first is equality for pension income-splitting. Allow RRIF holders the same opportunities to split income with their spouses as those with pension plans. The vast majority of Canadians will rely on their RRSP as their primary source of retirement income. But approximately two out of three Canadians are not members of a defined benefit or defined contribution registered pension plan. Currently those Canadians participating in a registered pension plan can split income with a spouse at the age of 55. But those holdings RRIFs, who represent 60% of Canadians, must wait until age 65 to similarly split income. This latter group includes those holding a RRIF, where the original funds were transferred from a registered pension plan to a locked-in RRIF, otherwise known as a LIF, or a life income fund.
The result is that some Canadians, who retire at a younger age with retirement savings held in RRIFs, will be left with lower household net income than their neighbours who retire at the same age but rely on registered pension plans to fund their retirement. IFIC recommends that income from a RRIF be eligible for income-splitting at age 55, similar to income from registered pension plans.
The second proposal is to adjust the dividend gross-up in means-tested net income. Currently the means test for determining whether a senior is subject to a clawback of both the guaranteed income supplement, GIS, and the old age security benefit, OAS, is based on the grossed-up amount of a dividend rather than the actual dividend amount received. That means income in determining whether a senior has met the clawback threshold uses the gross-up amount of a dividend rather than the actual amount of the dividend received.
For example, if somebody received a dividend in the amount of $10,000 for purposes of this means test, $14,500 would currently be included in their income. Because of this, seniors who earn dividend income, rather than other types of income such as salary or interest, may face a larger social benefits repayment. This encourages certain seniors to avoid earning dividend income altogether, which reduces the types of investments they'll hold on retirement. IFIC recommends that only the actual amount of the dividend be included in the means test for the clawback calculation of GIS and OAS.
Third, allow the application of capital losses against income. Many Canadians have experienced significant capital losses during the recent market downturn, which cannot be used to reduce their income from other sources. It would provide great relief to such investors if a portion of such losses were eligible to offset other types of income. Note that prior to 1985, Canadians were eligible to such an offset. IFIC recommends that up to $5,000 of capital losses be eligible to be applied against income from other sources.
Thank you very much.
Conservative
The Chair Conservative James Rajotte
Thank you very much for your submission.
We'll now hear from the University of Toronto, please.
Judith Wolfson Vice-President, University Relations, University of Toronto
Thank you very much, Chair.
I'm very pleased to be here to speak on behalf of the University of Toronto.
Today's economic circumstances are indeed challenging, as we all know. But Canada has been through tough times before. The difference today is that we're playing in a global world where we can no longer rely upon our natural resources alone as the foundation of a competitive economy. Our wealth now must focus on Canada's human resources: they must be nimble, globally aware, and innovative. This is where the contribution of Canada's universities makes a significant difference to our present and future competitiveness and prosperity--namely, by producing the talent that will lead our country and the economy.
Canada's universities are places where new ideas, new discoveries, and new innovations are generated. Canada's universities are the places that generate the basic and applied research that leads to the next big discoveries, the discoveries that bring significant economic benefits to all of us.
Examples are always helpful. A wonderful example of potentially world-altering, university-based research is that being led by U of T nanotechnologist Dr. Ted Sargent. Professor Sargent has developed a solar technology that can literally be woven into every aspect of daily life, from our clothes to our roads, using a spray-on solar cell. It's quite extraordinary, frankly. His research has led to the founding of a spinoff company that has raised venture capital and has created jobs. And they're not just any jobs. They are the jobs of the future.
Canada's universities are at the forefront of the economy. We are the eager partners with industry and governments in this task, but we need the necessary supports to maximize our contributions of talented human capital and world-changing research.
The Government of Canada has made important investments in knowledge creation and innovation, even in these current times of economic uncertainty. And I would like to register our appreciation for the sustained investment in research, science, and technology made by the Government of Canada over the past few years. At the same time, however, competitor jurisdictions have been aggressively investing in the full cost of research as well as in infrastructure support.
Canada's innovation economy depends on investing in the best minds and in the best research. The University of Toronto believes that competing to win on innovation means embracing and striving for excellence. It means ensuring that researchers have the support to achieve their full potential. It means internationally competitive levels of funding to support the full costs of research.
I am aware that you've heard from other presenters about the need for greater support from the government for the full cost of research being done at universities. These funds are necessary to support the grants to the researchers themselves. Canada provides its researchers, its universities, with 20¢ for each dollar of grant support. Suffice it to say that in competitive jurisdictions, the support is in excess of 40¢ for each dollar.
Canada is one of the most prosperous countries in the world. Our people are highly skilled. They represent a wide diversity of backgrounds and beliefs. The University of Toronto produces an inordinate share of Canada's graduates at both the undergraduate, graduate, and professional graduate levels. Each year we support 10% of Canada's new doctors. We produce 8% of Canada's new engineers. We produce 16% of Canada's new Ph.D.s.
Those are just a few examples. The most important part is that the quality of the human capital goes beyond the particular degrees awarded and the accreditations achieved.
Talented, nimble, creative human capital is critical to a robust innovation economy in Canada. In particular, the high-tech sector is critically dependent on broad creativity and business acumen. As President David Naylor--who unfortunately could not be here today--likes to boast, Research In Motion didn't really get the ball rolling until they brought in a guy named Jim Balsillie, a commerce graduate from the University of Toronto, to serve as co-CEO and take the BlackBerry to market in a serious way.
Technological innovation is relatively common, but management creativity and business acumen separates the winners from the losers in the global marketplace. We need to ensure that the innovation pipeline is supplied with young research talent that will generate the next big ideas. This talent resides in future graduate students, who are both domestic and international. However, universities do not have the financial resources to recruit and retain this international talent without increased graduate scholarship funding. A program like Vanier Canada graduate scholarships is so important to the next generation of Canada's leading researchers. Canada needs to develop and attract the best and brightest minds to contribute their energies to the economy. To achieve this, our research environment must be internationally competitive.
We need more supports like the Vanier scholarships for both domestic and international graduate students. We need support for students at the post-doctoral level who can make a huge contribution to the innovations agenda. Creating a new program to support 1,000 post-doctoral fellows at $60,000 each for two years, awarded on the basis of peer-reviewed excellence, will help make Canada a more attractive location for research. We believe Canada can best address the challenges ahead by playing to our incredible strengths in human capital innovation.
Thank you very much for your attention.
Conservative
The Chair Conservative James Rajotte
Thank you very much, Ms. Wolfson.
We'll now go to Mr. Young, please, with the Green Vehicle Exchange Program.
Fraser Young Executive Director, Green Vehicle Exchange Program
Good afternoon. I'm Fraser Young. I'm with the Green Vehicle Exchange, a non-partisan, non-lobbied organization of my own that's spent two and a half years advancing a significant and profound system that I've developed and designed for rapidly extracting old cars and polluters from the roads, similar to the cash for clunkers program that we're all very well aware of.
Today I'm here to pitch and propose that a GST freeze should be implemented in the upcoming budget. I'm prepared to defend that case with 15 different ways in which it would pay for itself within the economy.
Basically, the proposal is that not only would you be provided that GST credit, but it would only be provided on the basis that one vehicle was retired from the fleet in excess of over 10 years of age, and also that one decent vehicle would be also passed down from a person with a seven-, eight-, nine-, or ten-year-old vehicle to somebody who also has a secondary badly performing vehicle but who can no longer afford to purchase a new vehicle. The benefit of that is you don't leave the poor behind and you allow the people who have the wealth and the means and the jobs to purchase a vehicle to do so.
The object here is to advance an industry that's in deep decline. In Canada alone we've seen it drop as the GDP's number one producer from 19% to 12.5%. We've seen jobs drop in DesRosiers report as of today, or yesterday I believe I received it, from 150,000 down to 100,000. So we have a one-third decline in our automotive industry. That's evident in the Ontario budget preamble today indicating the shortfalls in the economy.
One of the strongest pieces on advocating for such a proposal is that this would reduce the requirement for provincial transfer funds. The result of more people purchasing vehicles in other provinces where they have to have transfer funds is of course that they get more retail sales tax revenue. Retail sales tax revenue occurs at its highest point from vehicle sales. It's 20% of basic general revenues for the governments.
The proposal goes on to say that for 100,000 vehicles based on an average purchase price of $25,000, the cost to the government is $1,250 per vehicle, or $125 million. This is no staggering amount: it could stimulate the economy by $3 billion for every $125,000 given up.
I'll give you the rationale for why we want to propose this on an argumented position that it will be either revenue neutral or revenue positive to the government by doing so. I have 15 different examples of why this will be that way.
If you are only talking about a 5% give-up, what you're getting in these next 15 issues described... I could not do the algorithms. The math is very extensive to try to do 20, 30, 40 different equations to produce the true outcomes. But when you listen to these features, you will understand why, with the combination of these 15, returns in the economy will far outweigh the 5% give.
First of all, you would bring back 18,000 related jobs for every 100,000 vehicles produced.
Second, as I mentioned, the PST revenues produced would reduce the amount of transfer payments required from the federal government to the provinces.
Third, corporate and personal income tax revenues would immediately rise.
Fourth, Canadian government stock values in General Motors and Chrysler would be protected and preserved, and the likelihood of getting our money back would be greatly improved.
Fifth, the likelihood of repayment of these bailed-out companies would be more likely to occur.
Sixth, the GDP output across the entire economy resulting from the trickle-down of all of the car purchases, the car dealers, the car salespersons, and all the people in the related industries would also help to offset this.
Seventh, there would be reduced unemployment costs. We would have less employment insurance as people would be going back to work who have been laid off.
Eighth, we would have reduced retraining costs. Instead of spending money retraining people, let's put people back in jobs that already existed and should still be there.
Ninth, we would reduce our health care costs as a result of decreased pollution. We have a proven statement in Ontario that 6,000 people in this province die each year in direct relation to air pollution. That was published two years ago and again last week. It would also reduce accidents and health care cost demands.
Tenth, we would have less demand on the costly direct subsidies that are being given to the OEMs, and therefore less demand on these manufacturers to keep requesting more money--
Conservative
Executive Director, Green Vehicle Exchange Program
I have two or three more points, and that's it.
Executive Director, Green Vehicle Exchange Program
Eleventh, it mitigates our oil sands production and our pollution outputs.
Twelfth, it reduces our fuel consumption and lessens our import oil demands.
Thirteenth, it supports an industry with a heavy prior federal and provincial investment that is obviously not showing a return currently.
And fourteenth, it reduces the downside effect of further job losses and the severely lagging U.S. economy that will continue to occur.
Conservative
The Chair Conservative James Rajotte
Thank you very much, Mr. Young.
We'll now go to Upper Lakes Marine and Industrial, to Mr. Dewar, please.
John Dewar Vice-President, Strategic Services, Upper Lakes Marine and Industrial Inc.
Thank you for this opportunity to address the committee. In the interest of everybody, I will refer to a prepared text, and my topic is shipbuilding.
The Government of Canada is currently reviewing options for the renewal of the government fleets, based on a commitment to build in Canada, at a nominal cost of more than $40 billion for more than 50 ships over the next 20 years. It would be very good news indeed for the entire shipbuilding industry in Canada if at least some of these contracts for these vessels were awarded over that 20-year period, because it's been almost that long since the crown awarded any major contract for shipbuilding. If the crown wants and intends to build ships for the federal fleet in Canada, given the sporadic nature of the demand, steps must be taken to ensure that there is a sustainable commercial shipbuilding industry.
There have been no new ships built for the Canadian Great Lakes fleet since the shipbuilding subsidies were eliminated in the mid-1980s. At this time, the average age of a laker is 40 years; new ones are only 25 years old. The shipyards in Ontario survived on major repair and overhaul of existing ships, including the replacement of up to 80% of the hull structure in a process known as a forebody conversion, but this type of conversion work can be done only so many times.
There is a clear need to replace the Great Lakes fleet, which currently numbers some 60 Canadian-flagged ships, partly because of fair wear and tear, but mainly because of the need to meet modern environmental standards for ballast water management and emissions reductions.
At this time, a laker can be delivered FOB a shipyard in China for less than one-third of the price for the construction of a similar ship in Canada. This is no reflection on the productivity of Canadian workers. By any objective measure, such as man-hours per finished tonne of steel work, the productivity of our shipyards is first-rate. The shipyard in St. Catharines has set standards of less than 24 hours per tonne, which are unparalleled at even the most efficient overseas shipyards.
Asian shipyards in particular have obvious price advantages from subsistence-level wages. But just as important, these facilities are not subject to the same standards of occupational health, safety, and environment that are rightly required for Canadian workers.
As an illustration, by the regulations of the Ministry of Labour, a welder working in a confined space—and a ship is nothing more than a complex array of confined spaces—must be under constant observation by a sentry, the result being that two workers are required for the same job. Moreover, these overseas facilities derive benefit from a supply chain for equipment and material that operates under the same discount conditions, although everyone has seen some of the quality issues that emerge from such systems.
The federal government has several policies in place intended to encourage the construction of ships in Canada, including an import duty on vessels built overseas and entered into Canadian flag registration. The structured financing facility, an interest rate buy-down program for ships built in Canada, administered by Industry Canada, can reduce the overall cost of a ship by up to 15%. The accelerated capital cost allowance for ships permitted to Canadian owners by Finance Canada is also available.
It should be noted that the structured financing facility and the accelerated capital cost allowance are mutually exclusive. When building a ship in Canada, a Canadian owner must choose one or the other--although, interestingly, should a foreign owner elect to build a ship in Canada, in many of the flag-of-convenience countries, that owner would be able to benefit from the Canadian SFF, the structured financing facility, as well as capital cost allowance in the country of registration.
Every maritime nation, including our NATO allies, takes steps to preserve an indigenous shipbuilding capability, not just for commercial reasons but also in the interest of national security and sovereignty. In June 2007, Peter MacKay said, “Canada is a maritime nation, and a viable shipbuilding industry supports our security and our sovereignty”.
It is clear that the current policies are not sufficient to support this viable shipbuilding industry, and it should be made clear that we are in favour of free trade, certainly in our company. But we think it must also be fair trade. To insist on appropriate health and safety standards for Canadian workers, while permitting international competitors to avoid comparable standards and benefit from huge price advantages for goods sold in Canada, does not seem to suggest a fair trade practice.
So we suggest three things that we think would improve the conditions for Canadian shipbuilding. The first is to ensure that the structured financing facility is sufficiently funded rather than being subject to periodic and arbitrary top-ups. The second thing is to permit Canadian owners to combine the structured financing facility and the accelerated capital cost allowance for ships built in Canada. The third recommendation is to establish a tax credit program for direct investment in the marine industry.
Such programs have been previously established for the oil and gas industry, as well as for labour funds. In Germany the kommanditgesellschaft financing, more commonly known as KG financing, and more pronounceably—my apologies to any German speakers—is highly successful in promoting investment in the marine industry. It's actually one of the world's leading contributors to marine development.
I'll leave the rest there. I've got one other comment, if we have some time.
Conservative
The Chair Conservative James Rajotte
I'm sure you'll get some questions. I know we have a former chair of the marine caucus here.
Vice-President, Strategic Services, Upper Lakes Marine and Industrial Inc.
I'm well aware.
Conservative
Mike Wallace Conservative Burlington, ON
I'm still the chair--unless you found out something I don't know about.
Conservative
The Chair Conservative James Rajotte
Oh, you're still the chair. Okay.
We'll start with questions from members.
Mr. Pacetti, please.
Liberal
Massimo Pacetti Liberal Saint-Léonard—Saint-Michel, QC
Thank you, Mr. Chairman.
Thank you to the witnesses for appearing. It's an interesting panel. I'll try to get as many questions in as I can.
I guess I'll go in the same order.
From the Canadian Retail Building Supply Council, Mr. Campbell, you talked a little bit about EcoEnergy Retrofit and Energy Star. My understanding is that the problem with the program is that you have to get somebody to come in and evaluate whether you're eligible or not, so you need some cost outlays and then you have to wait to find out if you're actually eligible for the retrofit.
I'm not sure how that would fit into converting the program to the same as the home renovation program.