Finance Committee on Oct. 5th, 2010

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you.

With regard to international education attracting more students, I couldn't agree more. It becomes a real competitive advantage for us in the future. If you look at the cabinets of countries like Brazil or China or India, about one-half of the cabinet ministers have some education experience in either the U.S. or the U.K.

Should we be doing more to develop national scholarships that have the kind of international reputations that Rhodes scholarships or Fulbright scholarships have? And is there a way to combine the sector represented by Mr. Johnson and government, setting up arm's-length foundations and attracting philanthropic money? Should we be doing more on that?

[The Chair, Conservative, James Rajotte]

Ms. McBride, just a very brief response on that.

[Karen McBride]

The second recommendation in our brief, Mr. Brison, speaks to the need to continue to expand our scholarship offerings. I believe there is absolutely room to look at new mechanisms that would attract private sector donations as well, because I believe industry recognizes the importance of attracting top talent.

[The Chair, Conservative, James Rajotte]

Thank you.

Monsieur Paillé, s'il vous plaît.

[Daniel Paillé, Bloc, Hochelaga, QC]

From the outset, I want to make it clear that I am in a conflict of interest situation with Financial Executives International Canada, as I belong to the organization. I was not at your party yesterday. I hope it went well, in Montreal.

In your report, you say you want to increase the deduction for the first $5,000 individuals contribute to their RRSPs to 125%. Would you go so far as to say that for the first $5,000 contributed to a registered retirement savings plan, we should follow the model of workers' funds in Quebec, namely the Solidarity Fund QFL and the CSN fund? Would you go so far as to give further tax deductions for the first $5,000, similar to these workers' funds in Quebec?

[Michael Conway]

Our recommendation is to encourage Canadians to put more away in retirement planning. Clearly there's a challenge, as the demographic curve continues for all of us, to make sure that all Canadians have appropriate retirement income. We went to the point of saying that there are many Canadians who are not saving enough. This would provide them with extra stimulus to encourage them to put aside the moneys for themselves.

Anything the government can do to encourage Canadians to save for their own retirement will be helpful, because ultimately the piper will probably have to be paid. So it's better to encourage Canadians to take it upon themselves to responsibly save for their retirement, rather than wait for an ultimate government solution.

[Daniel Paillé, Bloc, Hochelaga, QC]

Thank you.

Mr. Johnson, you talked about charities and the receipts issued by those organizations. The government recently introduced a bill to prevent employees of trusts that issue tax receipts from earning more than $250,000 a year. That gives rise to certain problems when it involves universities or hospitals, for example.

I have already met with people in Quebec regarding this matter. Have you noticed that people elsewhere in Canada are concerned about the idea of a salary cap for anyone working for a charity trust, in order to prevent such organizations from issuing tax receipts if they happen to employ a doctor, an engineer or a director who makes more than $250,000? Have there been reactions to this outside Canada?

[Donald Johnson]

I serve as a volunteer board member on the Toronto General & Western Hospital Foundation, and I'm well aware of this private member's bill. The concept of putting a cap on the compensation of executives in hospitals in particular, universities, or any non-profit organization is not a good idea.

The boards of directors of hospitals and universities need to attract the best talent, and we are competing with the United States for the best talent. To put a cap of $250,000 on what the head of a hospital or university can earn would be very counterproductive. We would lose our best talent to institutions in the United States. The compensation decision should be made by the board of directors of the hospital or university, and they should make the judgment as far as what kind of compensation package, research support, and so on is required in order to attract the best and brightest talent.

I'm totally opposed to the concept of a cap on the compensation, and I have offered to appear as a witness before this committee when it has its consultations on that private member's bill.

[Daniel Paillé, Bloc, Hochelaga, QC]

I hope that all the committee members heard you.

Mr. Morsky, you talked about the deadline for infrastructure projects. The government seems to have forgotten that it will rain this fall, that there will be frost and snow. The government also seems to have forgotten that when projects are carried out too quickly, it leads to overtime and consequently a higher wage bill, since people will have to do the work at a faster pace.

As for the availability of materials, in your industry, have you noticed, or can you give us any examples to suggest that people are scrambling, that there will be a shortage of certain materials, that materials will be scarce and that, once again, producing those materials will be more expensive, especially pipes?

Instead of making decisions on a case-by-case basis, should the government not just announce that the deadline can be postponed?

[Wayne Morsky]

We have not experienced a materiel supplier shortage, to my knowledge, across the industry. There has been shortage of certain things. Labour has been one of the issues, of course, not only because of the stimulus package but also because our industry, as I said earlier, is struggling with a shortage of people.

It's a matter between governments to extend this policy. We as an industry are very cautious in the face of the fact that any kind of change in that deadline could lead to a lot of legal ramifications. This was a stimulus package; it wasn't for the economy. It certainly wasn't one for a legal economy, but we believe that the ramifications of extending the stimulus deadline could lead to that.

What we are seeing is that people are working very hard to meet these completion dates. They knew what they were in the beginning when they tendered their projects, and it's in no way different from bidding a job today that's not under the stimulus package: you know what your completion dates are and you have to work towards them.

[The Vice-Chair, Liberal, Massimo Pacetti]

Thank you.

Merci, monsieur Paillé.

Mr. Wallace, you have seven minutes.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chairman.

Thanks go to our guests for coming, and our apologies for being late. We were at a previous meeting and we had to get here. It's a little further than we expected.

I have a couple of questions, first of all for our friends from the financial executives group. Do you want to comment on the four- to five-day work week and whether that payroll tax, which would be federal, if the Liberals support it...? I'm surprised Mr. Brison brought it up today.

Has your organization looked at changes to the EI system, as are being proposed by the opposition, reducing the amount of time you need to work before you could collect EI, and at what it would do to payroll taxes?

It's a yes or a no.

[Michael Conway]

We haven't looked at it in great detail, but we were appreciative of the reduction, recognizing that everything is a balancing act between the need to balance the deficit and the date and timing of when the EI rate increase was scheduled. We were supportive of the rollback down to the level it was reduced to.

[Mike Wallace, Conservative, Burlington, ON]

So you're supportive of that. Very good.

In your presentation this morning—it's a nice segue, in terms of balance—a lot of your submissions, which I don't necessarily disagree with, were about reductions, but you also said at the end that the reduction needs to be neutral, in a balanced sort of approach. There are two sides to every balance sheet, which you guys are well aware of, and to an income statement. If we're reducing on the income coming into government, where is the balance? Where do you see us taking money out of the system to be able to pay for those cuts?

[Michael Conway]

Well, I guess we have two things. One is that we suggested being revenue-neutral over the short to medium term. For example, in the writeoff of equipment, if it's going to be written off over a short period of time versus a long period of time, over the medium term it will still be written off. So the revenue to government will be unchanged, but slightly delayed in the case of an accelerated depreciation.

In terms of where to find the money that is needed to balance the deficit—or ideally, ultimately, eliminate the deficit and return to a surplus position—it's efficiency. It's not efficient for the government—or corporations—to deal with something like this. There are many ways to simplify the tax act, and in doing so we'll be able to streamline, using it both from the government side and therefore they will....

[Mike Wallace, Conservative, Burlington, ON]

I appreciate that. Does your organization actually have in writing a guide to where the streamlining could take place? Do you have recommendations on what should be done?

[Michael Conway]

Absolutely. We mentioned group tax reporting. Most countries in the world have group tax reporting. This is where a variety of companies in a corporate group put a consolidated tax return together, rather than individual returns.

[Mike Wallace, Conservative, Burlington, ON]

Have you costed out what that costs the treasury?

[Michael Conway]

It's really what it costs in terms of the complexity involved, and also the fairness of it. Large corporations go into elaborate planning to effectively get consolidated tax returns. For smaller firms, the burden is disproportionate, so they can't. That's not fair. And with all due respect to tax colleagues, time spent by tax executives and other financial executives doing these things, and by the government in monitoring and trying to understand these mechanisms, is not really a good use of resources that could be more profitably—

[Mike Wallace, Conservative, Burlington, ON]

But I could call your organization, and you would have actual, specific recommendations in writing that I could get—perhaps off your website?

[Michael Conway]

We certainly.... That's one. In various submissions we have referred to reduction of the number of CCA classes. There are 40-odd CCA classes and a lot of.... There are very many reductions that we'd love to work with.

[Mike Wallace, Conservative, Burlington, ON]

From our perspective, for us to incorporate.... Big, broad suggestions are great, but specifics get action.

[Michael Conway]

Right. We have some more specific actions, and we'd be willing to work with you. For example, for small companies, why not just have their accounting income equal their taxable income and eliminate all the reconciliations that these poor small businesses are trying to do but really can't do, so they have to have high-priced advisers to do them? The government needs to understand that: just simplify things.

[Mike Wallace, Conservative, Burlington, ON]

Okay. I appreciate that. I'm going to move on to Mr. Johnson about the real property issue.

I think Mr. Brison is accurate that...and we have a private member's bill from one of our members who was here earlier who is following up on some of your suggestions.

From a practical point of view, if I were to donate real property, such as by making an actual transfer of three acres to my local museum, could I do it and be exempt from any capital gains on it now? Is there any issue with that? Can I transfer real property to a not-for-profit under the current tax system?

[Donald Johnson]

My understanding is that if it's defined as ecologically sensitive land, it is exempt; it goes to a nature conservatory. However, if it's just regular property that you're giving to a charity, no, you're not exempt.