Finance Committee on Oct. 26th, 2010

[Lorraine Hébert]

No.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

In the arts sector, in Quebec, we have a vision which is a little different. There is no doubt that the two cultures are different. There is no doubt about that. But that's not what I'm talking about.

However, Quebec addresses the issue of culture in a different manner from how it is done in the rest of Canada. Increasingly, the arts are a way for business people to set themselves apart. At the Olympics, companies from Quebec were involved in the opening ceremonies. When a company is launched, there will be a show featuring artists as a way to present the company.

This happens a lot in Quebec, so why isn't it happening elsewhere in Canada? Why don't we see the same mix, the same agreements, the same partnerships? Why don't we see this kind of thing happening more often?

[Lorraine Hébert]

It depends on the level of development of the disciplines in the various regions of Canada. There is a varying level of support on the part of municipalities and provinces. Consequently, people are at different levels of development.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

If we stressed the importance of art and culture as a commercial activity and that the sector was in need of development, would that be a better approach?

[Lorraine Hébert]

I think we have to be careful with terms like “commercial activity.” Artists are much closer to the innovation side of things than to economic development, in the sense that the witness talked about earlier. A distinction must be made.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you very much, Ms. Hébert.

Just quickly, Mr. Tak, we see a lot of people investing in hydrogen cells, and we see that the government has invested. In terms of your percentages, I think you said you're up to 80% private money versus 20% public money.

[John Tak]

Yes.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

At what point do we get rid of the public money?

[John Tak]

That's a great question...a great question. Industry Canada shows that for every dollar of private sector investment in the biotech sector and life sciences, there's more than a dollar matching of public funding. So right off the bat, our sector is hitting the ball out of the park, but in energy—

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

I'm sorry, but the argument is that everybody else who comes here says the same thing. Some may say five to one, some may say ten, and some say a hundred to one.

[John Tak]

Sure. Let me answer that question.

[The Chair, Conservative, James Rajotte]

Very briefly.

[John Tak]

The answer to this question very simply, in a word, is that there is no energy we use on this planet that does not have some combination of industry and government policy. The government has rightly legislated that 5% of gasoline will be ethanol. That's not industry driving this. That is the government.

The IEA, the International Energy Agency, announced a month ago the global subsidies for the oil and gas industry are $580 billion. There is no energy that doesn't have some combination of subsidy in it--it always will.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Pacetti.

I'm going to take the next Conservative round. I want to start with CGA.

I found your proposal very interesting with respect to the sunset provision for unlegislated proposals. But perhaps one reason for the fact that there are so many grey areas in the Income Tax Act is that every time Finance proposes something to address a problem, or to try to remedy a situation, you get all these other groups coming forward to say that in fact while they've tried to remedy a situation, what they've done has had a lot of unintended consequences.

So therefore, they're perhaps being cautious and trying to do as much consultation as possible. That may not apply to the 2003 provisions, but certainly within the last few years it does. Is this the reason for that? Or do you not see that as a valid excuse for some of the grey areas?

[Denis St-Pierre]

Well, I practise in the area of tax, so I do see where you're coming from. Just look at the TFSA when it came out.... Revenue Canada right now is constantly giving out rulings because people are trying to circumvent the rules and trying to do certain things.

I do appreciate what you're saying. However, maybe the answer is that the system is so complex and so convoluted that taxpayers don't know really how they should file. Maybe that's why there are so many grey areas: because people just cannot understand the legislation. It's too complex. As for the new laws right now, if they were simpler and easier to follow, perhaps people wouldn't go into all this great detail to circumvent the law.

[The Chair, Conservative, James Rajotte]

So in addition to your recommendation, which I'm sure the committee will consider, should we also consider another tax reform commission to look at it en masse? That has been recommended to me by some of the chamber folks in Edmonton. They say we need a commissioner to look at it en masse to propose some wholesale changes.

[Denis St-Pierre]

I do concur. That's part of our presentation. We recommend that an expert panel review the system as it is. Whatever the form, whether it's an expert panel or this committee, as you're explaining, I believe it's time for reform of the tax system.

[The Chair, Conservative, James Rajotte]

Okay. I appreciate that.

I did want to talk about the two-year writeoff for CCA for five years. I appreciate the recommendation. Obviously I've recommended this in the past, but I just want to challenge the groups here today, because you know what the finance department is going to say, and you know what the Privy Council Office is going to say, which is that if it's a five-year writeoff, it's an immediate fiscal cost to the government of at least $2.3 billion, if not $2.8 billion.

I know your groups will argue that it's a tax deferral, but that is something the Minister of Finance is going to have to deal with immediately--that it is an upfront fiscal cost--and he's going to have to be convinced that there is an economic benefit.

Now, Mr. Tak provided some information with respect to hydrogen, but I would just respectfully state to the groups that you're going to have to make a strong argument with respect to some immediate economic benefits that can be seen to be providing revenues to the government immediately.

Would any of the groups want to address that, Mr. Mains, or Mr. Watkins, Mr. Stothart, with respect to the accelerated capital cost?

[Ron Watkins]

Perhaps I can start.

First of all, thank you, Mr. Chair, for that advice. We're certainly aware of that argument.

That is why, from our point of view, it's important, not simply for our own industry but for the manufacturing base, to have access to this kind of provision. You know, we're coming out of a recession where cashflow really took a hit. As the analysis by CMA and others has shown, that translates directly into the next cycle of what's available for investment in R and D and other measures.

Can we use a tax measure like that to accelerate investment? I think that really goes to a more fundamental thing, which is that we need to grow our way out of the situation. This is all about growth and innovation, and I think those are strong public policy interests. While I recognize that obviously there's a fiscal impact, there's also an impact, frankly, on our economic development prospects. We need to capture that next wave of investment, and this is the time to move on it, I think.

[The Chair, Conservative, James Rajotte]

I appreciate that, but the more specific examples we can get as a committee to help us deliberate on that, the better.

I have time for one more quick question.

With respect to SR and ED refundability, which I believe was mentioned by you, Mr. Monk, that's a fairly expensive proposition. Have you costed out your recommendation on allowing it to apply to all companies?

[Richard Monk]

No, we haven't costed that out yet. We are looking at the innovation and generating the productivity that would result from that on a long-term basis. We haven't looked at the short-term cost on that.

[The Chair, Conservative, James Rajotte]

Thank you.

I do have time for a quick round for....

This room cost $6 million but we don't have a clock in the room.

[Voices]

Oh, oh!

[The Chair, Conservative, James Rajotte]

At any rate, it's a Liberal round. I know that Monsieur Paillé also had some questions, but it's up to....

Go ahead, Mr. Pacetti.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Perhaps I can start. I have just a quick question that I'd forgotten to ask the CGAs.

As a CGA and as an accountant who practises--I first have to put in that disclaimer--I can't agree with your presentation any more. But we had this discussion, in terms of trying to simplify the tax act, with the financial executives who were here. My problem with their presentation was that they said, “Let's make the tax act easier”, and then the next two recommendations made the tax act even more complex.

Is there a specific example you can give us that right away we can cut the tax act in half--without having to go through an expert panel?