Evidence of meeting #32 for Finance in the 40th Parliament, 3rd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cost.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Karen McBride  President and Chief Executive Officer, Canadian Bureau for International Education
Wayne Morsky  Chairman of the Board, Canadian Construction Association
Michael Conway  Chief Executive and National President, Financial Executives International Canada
Donald Johnson  Senior Advisor, BMO Capital Markets
Dennis Howlett  Coordinator, Make Poverty History
Peter Effer  Vice-President, Taxation, Shoppers Drug Mart, Financial Executives International Canada
Laurel Rothman  Steering Committee Member and National Coordinator, Make Poverty History
Bill Ferreira  Director, Government Relations and Public Affairs, Canadian Construction Association
Sharon Baxter  Executive Director, Canadian Hospice Palliative Care Association
Michael Sangster  Vice-President, Federal Government Relations, TELUS, Canadian Hospice Palliative Care Association
Susan Eng  Vice-President, Canadian Association of Retired Persons
Gillian Barnes  President, Canadian Association of Speech-Language Pathologists and Audiologists
James M. Laws  Executive Director, Canadian Meat Council
Margo Ladouceur  Regulatory Affairs Manager, Canadian Meat Council
Sean Whittaker  Vice-President, Policy, Canadian Wind Energy Association
Ondina Love  Executive Director, Canadian Association of Speech-Language Pathologists and Audiologists

9:50 a.m.

Conservative

Mike Wallace Conservative Burlington, ON

Is there any concern, sir, that Mike Wallace owns two numbered companies and I sell my real property to my other numbered company and take the tax deduction for it but maintain the asset, and I give the money to a charity and get a tax receipt for it and have no capital gain on it. Is that a real possibility?

9:50 a.m.

Senior Advisor, BMO Capital Markets

Donald Johnson

Well, what we're proposing is that the charity issue a tax receipt to the donor only after it receives the cash.

Now, in the case where the purchaser of the asset is not at arm's length from the donor, there is potential for valuation abuse. We propose, to address that concern, that before the charity can issue a tax receipt to the donor—one of your numbered companies—the charity would have to obtain two independent professional appraisals of the value of that asset, to ensure that the cash it has received for the value of that asset is fair market value.

9:55 a.m.

Conservative

Mike Wallace Conservative Burlington, ON

This is your method for getting around it: transferring it directly to the charity, and they're responsible for the sale. Is that correct?

9:55 a.m.

Senior Advisor, BMO Capital Markets

Donald Johnson

The donor could arrange for the purchase of the asset, but if it's not at arm's length, the charity has to obtain two independent appraisals to make sure that the value received for the sale of the property to the other party was fair market value. That addresses the concern about potential valuation abuse. The charity gets the cash and —

9:55 a.m.

Liberal

The Vice-Chair Liberal Massimo Pacetti

Okay. Thank you, Mr. Johnson and Mr. Wallace.

Mr. Martin, you have seven minutes.

9:55 a.m.

NDP

Tony Martin NDP Sault Ste. Marie, ON

[Inaudible--Editor]...and perhaps it will give Laurel a chance to speak a little bit about domestic poverty.

I have just a couple of lead-in questions and then it's all yours.

Not doing anything about poverty has been measured by various organizations in terms of impact on the economy. I'd like you to speak about that.

Also, given that this has been brought up here in another context, maybe you could comment as well on the “two models” approach to eradicating poverty: the charitable model versus government actually taking action and putting in programs and paying for them and making sure everybody gets access.

9:55 a.m.

Laurel Rothman Steering Committee Member and National Coordinator, Make Poverty History

Sure. Thank you.

I think we have some broad recommendations, which include a designated federal poverty reduction plan that complements what the provinces and territories have been doing; a federal anti-poverty act, and, Mr. Martin, you've introduced a private member's bill that certainly embodies key commitments; and sufficient federal funding to programs that would include a decent standard of living. We also have a specific recommendation for this budget, but I'll address your other question first.

The committee should know or recall that even before the full impact of the recession in 2008, more than three million people lived in poverty in this country. Almost one in ten are children, and that doesn't even include the shameful situation of first nations, where one in four children live in poverty. You've asked what the cost is, and obviously there are costs to individual children and their families and tremendous costs to all of us.

A group of economists worked with the food banks last year in Ontario. They actually did some projections and calculations about the costs, and for Canada they estimated that the cost of poverty is between $17 billion and $20 billion each year in terms of increased health care costs, which of course is something we are all paying close attention to; lost productivity as a result of people not being able to be in the workforce for a number of reasons, whether it's accommodation for people with disabilities, reliable and affordable child care for lone-parent families, or whatever it is; and as well, the cost of the criminal justice system, for everything from policing to courts to incarceration to victims' expenses.

Those were the large costs across the country. So I think it behooves us all to take seriously the need for investments.

With regard to the issue of taking the charitable sector route versus a broader one--let's call it a universal public policy route--I work for one of the largest charities in Canada, Family Service Toronto. There's no doubt about the fact that the services we provide are important, but they're no substitute for public policies that not only support low-income people but prevent people from falling into poverty.

As well, I want to say just a couple of things. The fallout from the recession remains today for many Canadian families. Household debt is at an all-time high, and as the Canadian Payroll Association recently reminded us, or surveyed, six out of ten employees reported that they'd have trouble making ends meet if one paycheque was late.

So I think we have to look at preventive strategies as well as strategies to help lift out of poverty those who are in poverty now. We have a ready-made solution that can be implemented in next year's budget, and that will certainly help many people. We want to see you commit to increase the Canada child tax benefit and the national child benefit, the combination, to $5,400 over the next three years.

The Government of Canada's own research has shown that the national child benefit supplement for low- and modest-income families prevented 59,000 families with 125,000 children from living in low income.... So it has a solid track record, it's efficient to administer, and it's clearly in the federal jurisdiction. There's something you could do: a very specific recommendation that would assist many children and their families in this country.

Let me say that as Canada's population declines slightly and our aging population increases, we all benefit from strategic investments, as some of the economic projections have shown, particularly those that bolster children's health and development and help to prepare them to become our future citizens, parents, workers, and taxpayers.

10 a.m.

NDP

Tony Martin NDP Sault Ste. Marie, ON

Do I have more time? Two minutes?

Dennis, you mentioned the response to the recession being more a bailout of banks and corporations as opposed to the ordinary man and woman trying to keep body and soul together. You related it to the global experience and the third world, the developing countries. Could you relate that a bit to Canada for us and how that played out here?

10 a.m.

Coordinator, Make Poverty History

Dennis Howlett

Well, in Canada, we didn't have to bail out the banks as much as other countries, but in Canada the auto sector and other sectors did receive federal support. Also, the bulk of the stimulus spending went to infrastructure, which is important, but relative to other countries, very little of it went to direct investment in green energy, which would actually produce more jobs than some of the things that we did put it into. Also, very little went to helping people cope with the downturn.

So now that we're hopefully moving out of a recession, the poor, who really did not get much help, in Canada or globally, now shouldn't be the ones to bear an unfair burden of cuts to social programs or cuts to development aid. It's simply not fair when they didn't get much help to begin with and now are being asked to bear an unfair burden.

10 a.m.

Liberal

The Vice-Chair Liberal Massimo Pacetti

You have about 10 seconds, so I'll use it up. Thank you, Mr. Martin.

Mr. Szabo, five minutes.

10 a.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Ms. McBride, I was very pleased to have your presentation on the whole idea of promoting international students for Canada, providing support for scholarships and related things, basically. Given what Australia has done, what the U.K. has done, and other countries, our numbers have been declining. I believe your report says since 2004. What's the economics of all of this if we're going to make investments of some $22 million a year for five years? How does that translate? This is important. This as an investment that has a real payback. It didn't come out really clearly in your presentation. I'd like to give you a chance to make your last pitch.

10 a.m.

President and Chief Executive Officer, Canadian Bureau for International Education

Karen McBride

Thank you very much.

The presentation highlights a few critical facts with respect to the economic impact of international students in Canada. Some of them are short-term economic impacts and some of them are longer term that are very important.

In 2008, international students spent $6.5 billion in Canada. That was the total value of their cost of living expenses and tuition. That's a $6.5 billion impact across the country, and in fact that translated into 83,000 jobs in communities across the country. This is a very strong economic impact. When you look on a comparative basis, for example, however, with Australia, with two-thirds of the population and a smaller education system, they had an economic impact of $15 billion from international students in 2008. That's two and one-half times what the impact was in Canada. So we could be doing far better.

In the longer term, I would point out that more than 50% of international students here in Canada intend to apply for permanent residency. We have a demographic crisis on the horizon. International students who come to Canada end up with a Canadian credential. They are already well integrated. There are new measures that have been put into place by Citizenship and Immigration called the Canadian experience class, which allows them to stay. So it is a way to address our labour market challenges.

10:05 a.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Terrific. That's exactly what this committee should hear: that there is a situation, there is an initiative, and there is a payback over the near and longer term too. That's very important.

Let me move on to Mr. Conway. I'm glad you raised, as a significant part of your presentation, the whole issue of retirement. The United States actually some time ago started to phase in increasing the age of retirement. When you consider the impact on employees when we have economic downturns, and some of them are in the age range of 55, etc., it's a very difficult time to get back into the labour force, to obtain gainful employment, and be able to earn maximum CPP benefits. Are you convinced that we as a country need to consider these realities, that people aren't able to earn the maximum and provide for retirement? Is this as important an initiative for us to consider as some of the things that have already been talked about in Parliament?

10:05 a.m.

Chief Executive and National President, Financial Executives International Canada

Michael Conway

Yes, there are several reasons it's in our submission. Number one, it's just the demographics. This provides more time for people to put money away. The government has extended the mandatory date for concluding CPP contributions, I believe, from age 68 to 70. We're now saying to provide the option to go to age 75.

You mentioned work displacement, that some people find it difficult to find other gainful employment. One of the other recommendations that we had in our submission related to somebody who's been working for a long time. Hopefully for them they get a large termination payment, but then they have difficulty finding spots. Actually, the interesting thing is that some of these people then stop, look around, and decide to start their own businesses. We said, why not defer the taxation for a while on that termination payment they get from working for this employer for 15 or 20 years and allow them to use those moneys to start a new business and get on a good footing, to possibly start a company that creates employment and the like? It's trying to look at things in an innovative manner.

10:05 a.m.

Liberal

Paul Szabo Liberal Mississauga South, ON

Unfortunately, my time is up, but I hope to talk to the gentleman later about the fact that people aren't using their full RRSP contributions, the RESPs, and the tax-free savings accounts are also--

10:05 a.m.

Liberal

The Vice-Chair Liberal Massimo Pacetti

Thank you, Mr. Szabo. Merci.

Monsieur Carrier, cinq minutes, s'il vous plaît.

Mr. Carrier, you have the floor for five minutes.

10:05 a.m.

Bloc

Robert Carrier Bloc Alfred-Pellan, QC

Thank you, Mr. Chair.

Good morning, ladies and gentlemen.

We have the good fortune of being a country that is well organized, where every lobby group is able to come and articulate its priorities and comments. I think that is a very good thing. Since we have a limited amount of time, we have to focus in on certain issues. It is very refreshing to hear from people who work to fight poverty. I am thinking specifically of the presentation Mr. Howlett gave earlier.

I have been an MP for six years, and I have the privilege of belonging to a parliamentary association. I chose Africa as a priority because that continent needs our help and our cooperation. I went to Africa two weeks ago. We visited two of the poorest countries, Benin and Burkina Faso. Assistance from the government was cut because they are no longer considered target countries for international aid. Our government made that decision as part of its move to freeze international aid. I simply want to point out we need to realize that even though we have many issues that need to be addressed here, at home, it is still important to look beyond our borders and to view our situation in terms of what is going on elsewhere.

In your presentation, Mr. Howlett, you talked about the poverty that exists here, in our own country. I agree with you. We do have poverty here, and we do not do enough about it. For a number of years now, the Bloc Québécois has been trying to give disadvantaged seniors the Guaranteed Income Supplement to bring them up to at least the low-income cutoff, which used to be called the poverty line, and the government has always refused to do so, saying it would cost too much. So it costs too much to keep people living at the poverty line. What a shame, but that is where things stand right now.

You talked about a national social housing strategy. I agree that it is important to build more social housing. In my own municipality, in Laval, Quebec, there are at least 1,000 people on the waiting list for subsidized housing, affordable housing provided by the city. So there is a desperate need for affordable housing across the country. Ms. Rothman raised the point that there is a cost attached to that, that people who are mistreated and living in poverty give rise to social costs that are always seen as exorbitant, but that doing nothing leads to other costs.

I have a question for Mr. Morsky, of the Canadian Construction Association. What do you think of the financial repercussions, at a minimum level, of a massive plan to build social housing units? Would it be a good expense, in terms of creating construction jobs across the country?

10:10 a.m.

Chairman of the Board, Canadian Construction Association

Wayne Morsky

Any kind of stimulus that is directed towards infrastructure is a good stimulus, in our opinion.

I know the two things a lot of people who live in poverty want, and in particular in first nations communities, are a job and a place to live. If you train them and you create the avenue for these homes to be built and the places to work, you're killing two birds with one stone.

I believe that kind of package would be very, very beneficial to the economy, because it would create jobs for people and it would also create places for them to live.

10:10 a.m.

Bloc

Robert Carrier Bloc Alfred-Pellan, QC

Yesterday, at another committee meeting, I was comparing the financial repercussions for the country of building housing with investing in the aerospace sector, when it involves buying airplanes that are built outside the country. I was told that regardless of the investment, there is always a return on investment, in other words, a positive impact.

Do you think it would have a more direct impact on the construction industry in terms of creating jobs across the country?

10:10 a.m.

Chairman of the Board, Canadian Construction Association

Wayne Morsky

Yes, of course we would, because that would stimulate the economy through many different avenues. There are surveys out there that show that when infrastructure is a priority, the money that goes back into the economy through the purchase of materials and labour costs is a very good return on the investment.

10:10 a.m.

Liberal

The Vice-Chair Liberal Massimo Pacetti

Merci, M. Carrier.

Mrs. Block, you have five minutes.

October 5th, 2010 / 10:10 a.m.

Conservative

Kelly Block Conservative Saskatoon—Rosetown—Biggar, SK

Thank you very much, Mr. Chair.

Welcome to each of you.

I apologize. I arrived late, so I missed a couple of the presentations, but perhaps I will be able to ask questions anyway, as I've had a chance to look at your submissions.

My first question is for Mr. Johnson. I just want to say how much I appreciate that the title of your executive summary is “An Opportunity to Unlock Greater Private Wealth for Public Good”. I think that's rather inspiring.

In your summary you say that the total tax revenue cost for the federal government would be approximately $40 million. Then you say that the net foregone federal tax revenue on $100 million of charitable funding would be $11 million. I just want to provide you with an opportunity to explain that for the record.

10:15 a.m.

Senior Advisor, BMO Capital Markets

Donald Johnson

The way the Department of Finance looks at the tax revenue cost of this proposal is to combine the cost of the charitable donation tax credit and the foregone capital gains tax. It adds the two together. So for $100 million in donations, whether they be cash, stock, or, under our proposal, other assets, the cost to the federal government of the charitable donation tax credit would be about $29 million.

Then the question they ask is how much capital gains tax they are foregoing if they implement these measures. We make the assumption that the cost base of a typical gift would be about 25% of the market value of the gift. On that basis, what the federal government would forego in capital gains taxes would be about $11 million.

The combination of the two, the $29 million and the $11 million, is $40 million. That is the cost to the federal treasury of the incremental giving of $100 million.

Now, with respect to the foregone capital gains tax, one thing that needs to be taken into consideration is that if the capital gains tax is not removed, the donor might just decide not to make the donation, so the federal government would not be receiving that $11 million in capital gains taxes. That's something else to take into consideration.

10:15 a.m.

Conservative

Kelly Block Conservative Saskatoon—Rosetown—Biggar, SK

Thank you very much.

My second question is for Mr. Morsky. Although I didn't hear your presentation, I noted that you state in your introduction that Canada's global productivity and competitiveness are among the highest in the world. You also say that one need only look at the levels of foreign investment. Then you talk about a significant number of challenges.

Yesterday we heard from an economist that governments need to be rethought, and they referenced productivity and efficiency. I want to give you an opportunity to perhaps highlight the challenges you're seeing in terms of productivity.

10:15 a.m.

Bill Ferreira Director, Government Relations and Public Affairs, Canadian Construction Association

If I may answer, the reference in our brief is actually to our global ranking. When you look at where Canada actually sits vis-à-vis other countries, whether you look at the measurement used by the World Economic Forum or another measure, we're actually quite high. When you look at our infrastructure and the link between infrastructure and productivity, most economists now find that Canada's productivity level, to some degree, has not been able to keep up with that of other countries, in part because our infrastructure is declining.

If you look at the investments, or the lack of investment, made in infrastructure throughout the 1990s and at the reductions in capital spending cross the board, not only at the federal level but at the provincial level as well, we saw significant declines in the adequacy of that infrastructure. We as an industry probably see that more than others do, because we actually are responsible for the maintenance and construction of that infrastructure.

When you look at what our international competitors are doing, such as China and Brazil, there's a long way for them to go to actually reach the level of infrastructure we currently have in Canada, but they're moving quickly. When we look at where we're going to be 10 to 15 years out, we may not be in that leadership position. We believe that infrastructure is an important investment and that Canada has to stop seeing infrastructure as just an expenditure, but as an investment in productivity, which is really what it is.