Finance Committee on Nov. 25th, 2009

[The Chair, Conservative, James Rajotte]

I declare the 65th meeting of the Standing Committee on Finance called to order.

Our order of the day, pursuant to the order of reference of Wednesday, May 27, 2009, is Bill C-288, an act to amend the Income Tax Act--tax credit for new graduates working in designated regions.

Colleagues, we have two panels today of an hour each. In the first panel we're very pleased to have our colleague, Madame Deschamps.

Welcome to the Committee.

Ms. Deschamps is the member of Parliament for Laurentides—Labelle. She is accompanied by Mr. Jean-David Beaulieu, a researcher for the Bloc Québécois.

I would also like to welcome Ms. Lysiane Boucher and Mr. Mathias Boulianne from the Fédération étudiante universitaire du Québec.

Welcome to the committee.

We will give each of you time for opening statements. You have an hour for questions and opening statements.

We'll start with Madame Deschamps for your opening statement. You may proceed at any time.

[Johanne Deschamps, Bloc, Laurentides—Labelle, QC]

Thank you very much.

First of all, I would like to thank committee members for inviting me to appear today to discuss Bill C-288, which is intended to create a tax credit for new graduates working in remote areas.

The main objective of the bill is to attract young graduates to remote areas. It is also intended to mitigate two problems affecting these regions—an exodus of young people and a serious labour shortage. It is important to encourage young graduates to move to the regions to take up their professional activities and ensure, in the best interest of the regions, that they are able to recruit skilled workers.

As mentioned, the youth exodus is a growing problem in terms of the economic vitality of regions located some distance from the major urban centres. They need the contribution of young graduates to stimulate regional development and increase their capacity for innovation. There is no doubt that providing a $3,000 annual tax credit, up to a maximum of $8,000 over a three-year period, to new graduates working in the regions would help to revive the local economy and meet labour requirements.

Many students leave their home region to pursue post-secondary studies in the major urban centres. Young people who leave their regions to study in these centres establish ties there, develop friendships and build networks. It is thus more likely that, when they complete their studies, they will have many more reasons and opportunities to establish themselves in their new environment, as opposed to returning to their home area. According to Statistics Canada, people with the highest educational attainment generally migrate to the major urban centres. The tax credit proposed under Bill C-288 would give young graduates an incentive to go back to the regions and establish themselves there.

The youth exodus has negative consequences both socially and economically. There is an acceleration of population aging and a decrease in average educational attainment among those who remain, which undermines the capacity for innovation. The most remote regions are those losing the most people. Often, they depend on a particular type of industry—the so-called single industry regions. Often there is little room for skilled jobs in the traditional economic base of these regions, which tends to be extraction or primary processing of natural resources. The time when resource regions could rely solely, for their prosperity, on the extraction of natural resources intended to be processed elsewhere, has come and gone. In order for the regions to develop, they must make the technology shift and further develop their processing industry.

My riding of Laurentides—Labelle clearly illustrates the disparity between a remote region and one close to an urban centre, as well as the impact of a resource crisis in a single-industry region. I am referring here to the crisis in the forest industry. The most southerly part of the Laurentians region has, for some years, seen an increase in its population because of quite significant interregional migration, primarily from Montreal and Laval. However, in the RCM of Antoine-Labelle, which includes the municipalities north of the Municipality of Labelle, the population is experiencing considerable decline. The forest industry crisis has hit that RCM with full force. Although its decreased population cannot be attributed to the forest industry crisis alone, many young people have had to leave the area due to inadequate job opportunities following the closure of forest companies and related businesses.

Of the 17 forestry companies in my riding, 14 have been forced to shut down their operations. More than 1,250 jobs have been lost. Heavy machinery operators, engineers, technicians and truckers are the ones most affected by these job losses. The people with the most education, with skills or with special expertise—engineers, for example—have been forced to leave this beautiful region in order to seek employment in their field elsewhere.

As for the Government of Quebec, it believes that diversifying the economies of these regions will mean developing new business activity in other areas.

This is a significant brake on development of secondary processing activities and high-tech industries in the region.

In all the studies that have been done, many entrepreneurs have said that they could only keep their business operating in the region if they were willing not to expand. As long as the business remains small, they can handle anything requiring professional or technical expertise. However, if the business expands, they have no choice but to hire skilled personnel. The problem associated with finding that kind of personnel in their region could mean they might have to move their business to urban centres, where they would be more likely to find skilled labour.

Bill C-288 would be a beneficial tax measure for all eligible young Canadian graduates. The youth exodus phenomenon does not only affect Quebec. All across Canada, economic activity has gradually been moving from the so-called rural areas to the major urban centres. Some provinces, including Quebec, Saskatchewan, Nova Scotia, New Brunswick and Manitoba, have developed a tax credit for young graduates. The government of Quebec created its own such tax credit in 2003. It was subsequently amended and now resembles the one proposed in the bill I am discussing with you today.

Many young graduates have taken advantage of this tax credit and, according to the most recent available statistics, more than 16,000 people used it in 2007. In the Saguenay—Lac-Saint-Jean region alone, as of April 2009, 22,074 individuals had claimed it since it was first introduced. So, the tax credit is enjoying tremendous success. In Saskatchewan, the government introduced a tax credit to encourage graduates with a post-secondary degree to remain in the province. The provincial government also created a tax exemption of up to $20,000 for graduates, depending on their educational level.

Bill C-288 has received support from many different groups and generations across Quebec, including the Fédération étudiante collégiale du Québec, or FECQ, and the Fédération étudiante universitaire du Québec, or FEUQ, which represent 40,000 and 125,000 students, respectively, all across Quebec. The FADOQ network, with 255,000 members, as well as the Fédération québécoise des municipalités, representing 972 municipalities across Quebec, have voiced their full support for this bill. In addition, the bill is supported by many RCMs, chambers of commerce and Carrefours Jeunesse.

When we toured Quebec to promote Bill C-288, people expressed strong support for this bill. The youth exodus is only too real for the people of Abitibi-Témiscamingue, Saguenay—Lac-Saint-Jean, the North Shore, Gaspésie, the Magdalen Islands, the Lower St. Lawrence region and northern Quebec.

According to the reference scenario used by the Institut de la Statistique du Québec in its most recent publication on population prospects from 2006 to 2031, there could be slightly negative growth by the end of that timeframe, one of the factors behind the decline being higher levels of regional migration in the later years.

The federal tax credit for young graduates could prove to be an effective means of countering too significant a population decline in the regions. The challenge today is to keep our young people in the regions and encourage others to establish themselves there.

I am therefore calling on the finance committee to help the regions of Quebec and Canada and support our young people. We must put a stop to population decline and the youth exodus, which are far more significant in the regions than in the urban centres.

What is at stake here, gentlemen, is the future of our young people and our regions.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation, Ms. Deschamps.

Ms. Boucher, please proceed.

[Lysiane Boucher, Coordinator, Federal and International Affairs, Fédération étudiante universitaire du Québec]

Good afternoon, Mr. Chairman, ladies and gentlemen. First of all, allow me to express my thanks for this opportunity to take part in your work on Bill C-288.

My name is Lysiane Boucher, and I am the coordinator, Federal and International Affairs, for the FEUQ, or Fédération étudiante universitaire du Québec. Mathias Boulianne, our policy assistant, is with me today.

The FEUQ represents more than 16 member associations. Today we are speaking for more than 125 000 university students in Quebec, almost half of whom are in the regions. Twenty years after this organization was first created, we continue to defend the rights and interests of university students before, during and after their studies through our interaction with the appropriate government and educational authorities.

The exodus of young people from the regions is a very real problem, the effects of which are deeply felt. Our member associations see students leaving to study in major urban centres, but not often returning there to live, for a variety of reasons. For example, the perception of greater job potential, relationships that have built over time, and so on. Migration to the urban centres is very much a reality. The effects of negative migration and prospects for population growth are now being felt. An example from Quebec would be Abitibi-Témiscamingue, which had negative net migration and population prospects, in 2006 and 2007, of minus 12.9% over the longer term. Studies have shown that people's propensity to migrate to the urban centres or other regions increases with age and over time. The number of people returning is not adequate to completely compensate for that progressive migration. As a result, the net population of some regions has declined.

That is the reality in Quebec, but also in the rest of Canada. At relatively comparable levels, all the provinces are experiencing an aging population, decreased birthrates and youth out-migration to the larger urban centres. Some examples of that would be the maritime provinces or northern Ontario.

Bill C-288, which is now at second reading, is an excellent way of encouraging new graduates to go and live in the designated regions, in order to slow the youth exodus while at the same time fostering economic development in those regions. Some might say that this is only a stopgap measure. However, this incentive should be seen as an immediate solution in terms of lifting barriers to student mobility—one which, in particular, will complement regional revitalization measures. When they are fresh out of school, young graduates or couples don't necessarily have the money to pay back their student debts or purchase a home, for example. It should be noted that students in the regions generally have higher debt levels, because of the fact that they are required to be far more mobile in order to continue their studies. This tax credit would lower their tax burden, once graduates had established themselves in a region, enabling them to invest directly in the new life they are beginning.

Once the tax credit is exhausted, the graduates will finally be established and more comfortable financially, having the assurance of a stable salary. The idea of spreading the tax credit over three years is excellent, as it will encourage people to stay. After three years spent in a region, graduates are far more likely to establish themselves there—for example, by starting a family, buying their first home or setting up their own business—all of which serve to anchor them to the community.

In Quebec, a similar form of tax credit is already in place. It is yielding concrete, positive and—most importantly—irrefutable results. In the first year of operation, 4,578 students or new graduates returned to work in the regions. And, four years later, in 2007, 15,991 new graduates went back to the regions. So, every year, more and more new graduates are contributing to the revitalization of a designated resource region, by stimulating the local economy and providing skilled labour.

Certainly, in times of economic crisis, where political action is focused on economic recovery plans, it may seem ambitious to propose depriving the government of tax revenues. Most of the steps taken recently are intended to stimulate the economy by creating new jobs. But what happens if no potential candidate is interested in taking the position because of its geographic location? As a means of keeping young people in the regions, stopping the demographic hemorrhaging and fostering the development of processing industries, by giving entrepreneurs the ability to access the skilled labour they require, this investment is relatively small—not to mention the fact that the economic stimulus plan focuses on short-term measures.

The problem of the youth exodus can be seen in connection with the current economic crisis. However, this was an issue long before the crisis emerged and it probably will not diminish over time, if we don't act now. And, it is important to remember that Quebec's society will, sooner or later, be confronted with the obvious problem of an aging population. Now is the time to take action through legislation that will provide a stable, long-term solution to the problem of moving the necessary skilled labour to the regions.

The days when resource regions could rely on natural resource extraction are gone. Development of the processing sector and an ongoing concern for innovation are an absolute must in order to stimulate regional economies. Only with skilled labour can this challenge be met. And the first step is to attract and retain new graduates.

In a word, the FEUQ has always felt strongly about regional development, as we see it as a necessary ingredient for a prosperous Canadian economy. We believe that it is by responding to the youth exodus that we will be in a position to meet this societal goal. The introduction of skilled labour, thereby revitalizing the targeted regions at multiple levels, will serve to guarantee our long-term economic prosperity and competitiveness.

For all these reasons, the FEUQ is strongly recommending that Bill C-288 be passed. Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you very much, Ms. Boucher.

We will now open it up for questions from members.

Mr. McCallum, for seven minutes.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you for being here today.

First of all, I want to say that I support this bill. I believe the Liberal Party also supports it in principle.

I have two questions. First of all, this bill creates a deduction, not a tax credit. If I am reading this correctly, this is a deduction, not a credit. Am I right?

[Johanne Deschamps, Bloc, Laurentides—Labelle, QC]

I do not claim to be a tax expert, but in my opinion, it is a non-refundable deduction.

[John McCallum, Liberal, Markham—Unionville, ON]

This is an important point. If it is a non-refundable tax credit, that is fine. This is important if you want to see this bill passed. If this is actually a refundable tax credit, the bill will not receive royal assent and will not pass. Can you confirm that?

[Johanne Deschamps, Bloc, Laurentides—Labelle, QC]

Yes.

[John McCallum, Liberal, Markham—Unionville, ON]

All right.

I have proposed an amendment. I have discussed this with your colleagues, Mr. Bouchard et Mr. Laforest, and I would like to ask you this: would you agree to this amendment? I am suggesting that the regions be defined as proposed in the bill, but that metropolitan areas with a population of 200,000 or more be excluded.

There are two reasons for this. Under the current definition, the provinces of Saskatchewan and Manitoba and almost all the Maritime provinces would be deemed to be regions. That means that if you live in Halifax, Saint John, Regina or certain cities in Quebec as well, you will be eligible. So, if the goal is to encourage people to return to the small cities and towns, it would not be a good idea to subsidize people living in large cities.

Also, if cities with a population of over 200,000 are excluded, the cost will be lower. Would you agree to such an amendment?

[Johanne Deschamps, Bloc, Laurentides—Labelle, QC]

I feel like saying: your offer is accepted.

[John McCallum, Liberal, Markham—Unionville, ON]

Thank you very much.

That completes my questions.

[The Chair, Conservative, James Rajotte]

Thank you.

Mr. Bouchard, please.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chairman. Ms. Deschamps, Ms. Boucher et Mr. Boulianne, thank you all for appearing today.

We know that this is the second try for Bill C-288. The first bill was supported by the Liberal Party and the NDP, and even reached the Senate during the last Parliament. This bill—the same one—is currently being reviewed in this Parliament.

Ms. Deschamps, I know you held consultations and met with a lot of people in the regions, so I'd like to know what you have heard from the people you talked to.

[Johanne Deschamps, Bloc, Laurentides—Labelle, QC]

We visited every region of Quebec affected by this bill, Mr. Bouchard—the person I love to refer to as the « father » of the bill. We heard the same arguments in every one of the regions. Young people are leaving. There are very few, if any, opportunities to find employment, because there is no market. Also, the unemployment rate is very high. There have been a number of attempts to try and set up secondary and tertiary processing plants, but it's kind of a vicious circle: if we cannot keep young people in the regions and give them jobs, unfortunately, they have to leave their home area to settle in one of the larger centres.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you.

My second question is addressed to one of the two witnesses from the FEUQ—either Ms. Boucher or Mr. Beaulieu-Mathurin. Bill C-288 is aimed at people living in remote and rural areas in Quebec and across Canada.

Could you tell me why you support this bill, which is intended to help mainly rural and remote areas, but which does not do anything for the major urban centres?

[Lysiane Boucher]

Getting people back into the regions is important. A successful economy generally depends on the sum of all its parts. As a federation, we look after students before, during and after their studies. There is a large cohort of students from the regions who pursue their studies in more urban centres, but who want to go back to their home area, either because they have family or friends there, or because they like the pace of life. However, they are waiting for incentives.

We see Bill C-288 as an additional measure to complement other incentives already available in the regions. In Quebec, there are a lot of initiatives in place that promote tourist and other attractions in the regions. However, there is a lack of capital. And this is the type of support which will make all the difference for people.

We have some actual examples, in our respective circles, of people buying houses and starting a family. We look at this from a longer term perspective, but the fact is that more families in the regions mean economic stimulation. That means jobs can be created. For example, physicians are needed to provide medical care to families and they then become local consumers. For us, providing stimulus to the regions is a way to ensure the whole province is on a sound footing.

I don't know whether my colleague, Mathias, has anything to add.

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

I am going to pick up from here, Mr. Chairman. There are two minutes remaining.

I may ask a question at the end, but first I would like to make the point to you, Ms. Deschamps, that the bill you are proposing responds to what people have been calling for, obviously, and also reflects the program introduced in Quebec, where it has had a very positive impact. It also meets the needs of many regions outside Quebec.

The Standing Committee on Finance has just completed a cross-Canada tour as part of its pre-budget consultations. I was present for almost all the meetings. Very often we heard from groups who came to talk about problems that your bill will correct. Many other regions of Canada are experiencing a youth exodus. We need help similar to the arguments you are making, to highlight the benefits of your bill. This bill would help the resource regions, that really need young people born there to go back home, so that they can benefit from their newly acquired knowledge and skills. This bill would make it possible for them to settle there, thereby ending the exodus. That would stimulate economic development, which is an important factor.

I don't necessarily have a question, but I do want to congratulate you. I want you to know that what you are doing is very important to all young people, not only in Quebec, but across Canada.

[Johanne Deschamps, Bloc, Laurentides—Labelle, QC]

Thank you, but I am not doing the work by myself. We are working as a team. There is a desire in the communities and the regions to see this happen. And there currently exists a similar program in Quebec. In my opinion, it cannot be seen as anything but a success. The last reference year was 2007, and 16,000 people availed themselves of the program in that year. It is an incentive to young people.

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

I was saying earlier that witnesses had come from across Canada. There were people from British Columbia, northern Alberta, northern Ontario and the Maritimes, in particular. I think the rural communities are facing the same problem.

Thank you.

[The Chair, Conservative, James Rajotte]

Merci, Monsieur Laforest.

We'll go to Mr. Wallace, please.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

Ms. Deschamps, thank you very much. I'm sorry, but I will have to ask my question in English, so it might take a little longer. In this particular round, I have some specific questions on the bill, and hopefully I will get another round.

I just want to be clear on this. In the bill you're proposing, you must have been from the area to qualify to go back to the area as of December 1 of the calendar year before you do your income tax. Is that correct?

[Johanne Deschamps, Bloc, Laurentides—Labelle, QC]

Perhaps I should put it a different way. Once the student graduates, he or she has 24 months to settle somewhere or find a job.

I don't know whether that answers your question.

[Mike Wallace, Conservative, Burlington, ON]

No, it does not.

Let me simplify it a little. If my daughter, who is at the University of Ottawa, graduates from the University of Ottawa and moves to a rural area in Quebec, can she qualify if she hasn't lived there the year before?

[Johanne Deschamps, Bloc, Laurentides—Labelle, QC]

Yes.