Finance Committee on Oct. 22nd, 2009

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

Is it marketing, is it language issues?

[Carol Wilding]

I'm going to let Brian speak to a couple of specific ideas we have in terms of getting at that market.

[Brian Zeiler-Kligman]

One of the largest issues that we've experienced, working with a number of the other organizations that already exist within Toronto specifically targeted at integrating the immigrant population, such as the Toronto Region Immigrant Employment Council, is that all the current programs tend to be targeted at the foreign-trained professional, not necessarily at the employer.

So while they're extremely effective, there is a need for a lot of...especially the small and medium-sized enterprises. The vast majority of companies in Toronto are very small, with fewer than 100 people and often fewer than 10 people. They don't even have an HR function, for the most part. So they have difficulty hiring generally, and when they have to put thoughts to hiring someone where there might be some more difficulties due to language, due to figuring out what their credentials are--

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

To make them aware of the qualifications that new Canadians have or to...?

[Carol Wilding]

Part of it's awareness, part of it is just creating that linkage. As Brian said, when you're a small business with two or five or ten persons, you don't have the resources of a large enterprise to know how to reach out to them or how to get to them. So they may be aware, they just don't know the day-to-day tactics of getting access. Organizations like Triact, as an example, provide some of that matching, so to speak. We need a lot more of that, and faster.

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

Thank you very much. I appreciate that clarification.

I'd like to ask a question of the Tax Executives Institute.

You propose to eliminate withholding taxes on dividends and for certain types of cross-border services. In terms of the cross-border services, could you give us examples of the services you're talking about? As well, can you break down for us the cost of this suggestion of loss in government revenue versus the benefit to the economy that you would predict this would generate?

[Sherrie Ann Pollock]

So you're more concerned with the withholding on services as opposed to--

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

Well, yes; I think I understand the removal of withholding on dividends, but you can talk about what the benefit of that would be to the economy, if you like. I'd also like you to expand on cross-border services and the reduction of withholding tax on cross-border services.

[Sherrie Ann Pollock]

First, to give you a bit of background when we're talking about cross-border services, we would be looking at things like consulting services or management services that are, if you will, imported into Canada by a Canadian resident company. When you do engage a foreign supplier and they perform work, you will have to withhold on their invoices. if you will.

At that point with the withholding, most non-resident suppliers will simply gross up their bill or their charges to incorporate that withholding. Ultimately the Canadian payer is going to have their cost increased.

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

So what do you think the cost of eliminating that withholding tax on cross-border services would be to government revenue? And if we did that, how much benefit do you think we would get out of that?

[Sherrie Ann Pollock]

I think this is explored more thoroughly in the advisory panel report, but the initial view of it, in most cases, is to the extent those non-resident suppliers are entitled to either credit or refund of the tax, there shouldn't be a significant loss to the government. I don't have a number, if you're looking for a number.

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

Okay, fair enough. Thank you.

I'd like to ask a question of Opera.ca.

Ms. Hargraft, we have seen the Imagine Canada proposal before. From the perspective of your opera organization, I wonder if you could tell us what you think, how much more you think that would generate, if we were to make that change to increase the tax credit from 29% to 39%. What percentage increase would you anticipate seeing to your organization?

[Jane Hargraft]

That's a very good question. I think it really depends on how well we can sell it.

The majority, about 60%, of our donations come from people who are donating less than $10,000. Really, for our organization it's less than $500. For us, it would probably result--knowing the numbers as I do--in about a 3% to 10% bump. But we'd have to be very creative about letting people know exactly what the advantage for them would be and how it would affect us.

David, do you have anything to add?

[David Ferguson]

Yes.

In the case of a larger company like ours, the vast majority of the donors would fall into this category. While we have lots of high-end donors, the great majority of our donors aren't giving the full amount.

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

Then increase it by 10%, maybe?

[David Ferguson]

I would say, in that wheelhouse, it could be a meaningful increase. I would say a 5% to 10% increase in revenue, or in that area.

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

Am I out of time?

[The Chair, Conservative, James Rajotte]

Your time is up, Mr. Dechert.

Monsieur Laforest, s'il vous plaît.

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

Good morning to all the witnesses.

My first question is for Mr. Rosenberg. I'm going to allow you the time to put on your headset.

You said there wasn't any growth in Canada. A number of people said there is no growth, and you say the real benchmark should be net domestic product rather than gross domestic product. You say the way to calculate net domestic product is to take gross domestic product and subtract depreciation and amortization.

Gross domestic product is often used to compare with other countries. If we use net domestic product instead, as you say, will there be any places in the world where there has been actual growth? By doing that calculation, doesn't it amount to the same thing for everyone? Gross domestic product less depreciation would be the same thing everywhere in the world. Doesn't that amount to the same thing in any case?

[Michael Rosenberg]

The main result would be that everybody would be seen to be doing somewhat worse than we currently think they are doing. So those countries that really do have some growth would be places like India and China—where they would have growth under this measure as well, but just less than what it appears to be. But for countries that have been industrialized for a long period of time and are only going through the kinds of technological changes we see, which are not so much in productive technologies as information technologies, there hasn't been any further increase in wealth as a result of that. Those technologies do consume a lot of resources.

So in a more resource-constrained future, they will actually contribute to a decline in wealth.

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

If we rely on net domestic product, why would there be any growth in China? Would it be because of the large number of inhabitants?

[Michael Rosenberg]

I think it's because the kinds of developments they've had are the same ones we had in the 1960s: basic industrialization, which actually does produce growth, as opposed to what's going on in our country now, which does not produce growth.

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

Very good, thank you.

I have a question for the representatives of Opera.ca, Mr. Ferguson or Ms. Hargraft. Mr. Dechert may have already asked the same question, but I'm going to ask it all the same. You propose to increase the tax credit for donations of more than $200 to 39%.

How much can that measure generate for your organization? Do you have any figures? Does it have a basis? Is that a random figure?

[David Ferguson]

This is a difficult thing to forecast, but in our case at the Canadian Opera Company, we would rely, if you think about our revenue base, on the roughly 18% to 20% from government, the 40% from the box office, and the rest from fundraising. The fundraising pyramid is heavily weighted towards higher-end donors, but in the middle of that pyramid is a very substantial base of people who provide relatively modest amounts.

So the concept would be that through a larger tax cut, we would hope to increase that bigger part of the pyramid—at least in terms of the numbers of donors—to increase the frequency of giving and, hopefully, increase the size of giving.

In our case, I would think that for our $12 million of funding that we get from the private sector and corporations, of that, maybe $8 million comes from the private sector, and we might see an increase in the $300,000 to $500,000 range for our company.

[Jane Hargraft]

Perhaps I could add to that.

Our experience when people were able to donate stocks without capital gains was that our company got 2% to 3% more in fundraising. That was $5,000 to $15,000 a year for us, which for a small company is significant.