Finance Committee on Sept. 27th, 2010

[Daniel Paillé, Bloc, Hochelaga, QC]

Do you not feel that it would still be preferable to extend the deadlines in order to be able to meet the targeted costs? We get the impression that the intention here is to meet the costs as well as the deadlines, but obviously, you can't do the impossible. If the deadlines were extended, the costs would at least become reasonable.

[Gabe Miller]

Your point of view is valid enough, but we feel it is important to maintain a target of completing projects by their deadlines, when possible, while at the same time allowing for flexibility in cases that require it.

[Daniel Paillé, Bloc, Hochelaga, QC]

I want to get back to March 31, since it appears to be a very important date. Perhaps we will have a new government by then; you never know. People here have mentioned that in the field of R & D, a certain number of mineral exploration tax credits provisions will end on March 31, 2011.

Doesn't not knowing whether the tax credits will be extended beyond March 31 have an impact on new exploration expenditures or new uses of the mineral exploration tax credit? Would it not be good management to announce, well in advance, that the mineral exploration tax credit will be extended beyond March 31, 2011?

[Eira Thomas]

Yes, absolutely. That does create uncertainty. Exploration requires a commitment on planning as well as execution. It takes a long time to explore for deposits. So having certainty around that tax credit would be very helpful. We'd certainly like to see it extended, but as Pierre indicated, we'd like to see it made permanent. We think that would be a great benefit.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Paillé.

Mr. Hiebert, seven minutes.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Thank you.

Continuing along that line of questioning with respect to the mineral exploration tax credit, is there any downside to making it permanent? One of you mentioned that it has been extended on an annual basis since the mid-1990s. Is there any reason why the federal government would not want to communicate or suggest that it's an ongoing tax credit?

[Pierre Gratton]

Not that I can think of. The original rationale for this in the 1990s was there had been a pretty steady decline in Canadian exploration, particularly for base metals, and it was seen as an important way of stimulating that kind of grassroots exploration. It has been tremendously successful. Since then it has also been really important for diamond exploration.

Coming out of the recession, where exploration took a beating once again, providing a sort of longer-term continuity for this provides industry with the ability to plan long term and not just sort of go year by year, wondering if you are going to have sufficient budgets to carry out your exploration. It allows for longer-term planning.

There is, I believe, a sort of cost to the fisc through this program. The finance department has estimated it as $65 million in lost potential revenue. We would certainly argue that this is more than outweighed by the kind of private sector investment it generates.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Right. I'm sure you wouldn't be disappointed if it were not made permanent if it were given a longer-term horizon, maybe being renewed for two years or three years as opposed to annually.

[Pierre Gratton]

The B.C. government has done that, and it was very welcome. In their last budget they did provide a three-year window.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

I have an additional question for Ms. Thomas. You mentioned in your third point the allowance for flow-through shares. I think you said it would include costs such as issuance compliance, duty to consult. Did I get that right? You are basically saying that currently flow-through shares do not allow the costs for those things to be offset, and you would like that to happen?

[Eira Thomas]

That's correct. What happens is junior companies can go out and raise flow-through money but they can't actually get access to the land because they don't have the capital to go and actually do their consultations with aboriginal communities and pay legal and other compliance costs. So that burden has increased in recent years, and we feel that it would be very justified to have some of those costs as eligible under renunciation under CEE. That would make the system far more efficient.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Do you have any idea what that would cost the treasury?

[Eira Thomas]

It would all be included under the.... Do you mean additional costs? We don't have specific statistics on that, but I would argue that it wouldn't be a cost at all, because it would result in increased fundraising and actual investment and exploration on the ground. As I said, a lot of companies actually will not raise flow-through because they can't raise the hard dollars that are necessary to implement their exploration programs. I think we'd see a lot more exploration activity as a result of that additional renunciation.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

All right.

Ms. Wallace, I find your presentation quite interesting, and I was hoping you could elaborate. At the end you talked about the need to examine the Income Tax Act for amendments that would reflect the realities of the modern working world. You referenced things like employee relationships, reporting slips. I was wondering if you could just elaborate in more detail on the request you are proposing here.

[Loretta Wallace]

Sure. The CRA's testimony referred to or considered that some personal services corporations were taking advantage of tax loopholes and that the federal small business tax rate was actually using the 11% versus what a normal tax rate would be, namely 19%. So there were also discussions of individuals realizing some unfair tax advantages. Basically, we believe that it was a little bit misleading.

An independent consultant can take money out of a corporation in two ways. One is obviously as a salaried person and the tax rate would be exactly as it would be for full-time individuals. The second way is through retained earnings and paid in dividends. In this case, dividends are taxed at a provincial rate--and I only have Ontario's at 31.5%. So we believe that any changes in the ability for an independent consultant to utilize the retained earnings and dividend option would be detrimental for the long term.

This has arisen out of the fact that in the greater Toronto area there have been about 12 longstanding independent consultants being recently audited. It's sending a ripple through the community. It is our hope now that moving forward the government will actually realize this type of employee engagement rather than always having to wonder whether the CRA is going to go back and actually deem them actually as an employee versus an independent consultant and a small business corporation. We really just want that whole avenue legitimized and moving forward.

I'm not the person to solve that and what that should look like, but I think the whole risk and uncertainty is what is sending ripples through the community.

To give you an example of why this is becoming a bit of an unsure thing, legislation in the U.S. created a shift in the U.S. from contracted services to employee-like arrangements, largely driven by large companies. There was a fundamental shift in contracting. Basically, services to corporations went up, and cost of services went up to corporations and government. As a result, there was more burden in administrative costs and the actual salaries to contractors declined. I think that's created some fear north of the border that something similar might be in the works and is being discussed based on the audit.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Hiebert.

We now go to Mr. Davies, for a seven-minute round.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Thank you all for coming and giving us your views.

I'd like to address some questions first to Ms. Kerner.

You pointed out--if I have this correct--that only 8% of spousal assaults or sexual assaults or rapes are reported to police, leaving many victims out there. I'm just wondering if you could tell us why you think those women are not reporting those acts to police. Would you have any suggestions about what we can do to address that situation?

[Hilla Kerner]

From our experience, most women would not go forward, for two reasons. One is that the criminal justice system is constantly failing women, especially on the issue of rape and sexual assault when there is no collaborating evidence and it is word against word. There is a lot of bias against the victim. Very few cases are being thoroughly investigated by the police and fewer are actually being pursued by the crown.

Especially in B.C., the crown will not submit the charges forward if there is not a high likelihood of conviction. This is a problem with the criminal justice system. It's not flat.... In some provinces, there will be a reasonable likelihood, but in B.C. the burden is on the crown to decide whether or not he can take the charges forward or higher. So it is likely the crown will take only cases where there is a certainty of conviction. Women know that. On the one hand, that's why they choose not to use the criminal justice system.

On the other hand, it's the issue of poverty. All over Canada, the welfare rates are completely embarrassing. Canada has been scolded by the United Nations in connection with CEDAW for its shameful welfare rate. When a woman leaves her abusive partner, she is doomed to poverty. That's the second reason why women will not dare to break the status quo and hold the men accountable through using the criminal justice system: because it means separation and it means impoverishment for them and their children.

So for sure, one important way to empower women, to enable them to leave and therefore come forward and ask the state to hold men accountable, is through any form of guaranteed livable income: higher welfare rates, first and foremost, and other forms that enable women to actually provide shelter, food, clothing, health, and education to their children.

I do believe that the road to ending the male violence against women is in breaking this economic vulnerability and the economic dependency that women have on men.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

You mentioned transition houses. Can you give us a general idea of the general adequacy--or not--of transition house space in British Columbia?

[Hilla Kerner]

For women who are fleeing abusive relationships, there are enough “beds”, in the jargon of the services, for the first month. There are different agreements, but we will never turn a woman away and we will never tell her that her month is up and she needs to go out. We will make sure that she has adequate housing afterward.

But the issue of this after the immediate crisis is very, very complicated: women do not have housing. The B.C. Housing priority list--or at least the short list--is huge. Women have to wait months and sometimes years until they get subsidized housing.

So again, it's the issue of poverty undermining women in regard to leaving. The immediate crisis support is there. The transition houses are there and are offering very useful services to women: immediate life-saving services and immediate support and resources. But when the woman leaves the transition house, she has very little to go on.

[Don Davies, NDP, Vancouver Kingsway, BC]

I'd like to address a question to the Prospectors and Developers Association and the Mining Association of B.C.

We're in British Columbia and we have the HST here, which has been a raging issue. I think it's fair to say that life got 7% more expensive for consumers and average people on hundreds of everyday items. As well, EI premiums are going up for workers across this province. Those people are seeing the taxes going up, yet the corporate sector is getting a general corporate tax cut.

Each of you proposes a further tax cut. In the case of the prospectors, you want a doubling of your tax credit and to have it made permanent. In the mining association, you would like a deep-drilling tax credit. I think you also argue, or the business community does, that the HST gives a form of relief from taxes--at least, that's how I understand the argument from the corporate sector.

So there are three major tax cuts coming, and I'd just like you to address that in the context of the $55-billion deficit, and whether you think it is the time now to be giving corporate tax cuts when consumers' taxes are going up and we have a massive federal deficit. I would also like you to put that in the context of the fact that I think Canada already has the lowest corporate tax rate among all the G-8 countries. If I'm wrong on that, I wouldn't mind being corrected.

[Pierre Gratton]

Well, I don't know if this committee wants to weigh into the B.C. HST political debacle, but our industry is supportive of the HST. I have a few points that are certainly worth noting in response to your comments.

The HST was brought in, but the PST was removed, so it's not on all consumer products that consumers are facing an increase. Secondly, when this was brought in, the provincial government also brought in a number of other measures to ensure that low- and medium-income families are net better off with the HST, because there are HST tax credits to go with that. So really, the ones who will be feeling the impact of higher consumer prices are those who are middle-income and higher. Lastly, this is an economic tax policy that we are seeing implemented around the world. In countries like Germany, it's at 25%. We're looking at 12% here.

Over the long term, studies have shown--like in Atlantic Canada--that the impacts on consumer prices are negligible, because removing the inputs into the tax system that curb productivity and prevent industry from actually making the capital investments necessary to expand their businesses has a long-term positive effect on prices. So the full impact on the consumer turns out to be negative.

[The Chair, Conservative, James Rajotte]

Okay--

[Pierre Gratton]

Do you want to interrupt me?

[The Chair, Conservative, James Rajotte]

Well, we are running over time here. We might have to come back to that, because it's a very big question.