Finance Committee on Sept. 29th, 2011

[The Chair, Conservative, James Rajotte]

I call this meeting to order.

I apologize for the slight delay in getting started this morning. The committee just prior to ours did not get out until 10 a.m.

I want to welcome everyone here this morning. We are continuing our pre-budget consultations for 2011 in advance of next year's budget.

We have two panels here this morning. In the first panel, we have seven individual organizations: first, the Tax Executives Institute, Inc.; second, the Aerospace Industries Association of Canada; third, the Canadian Alliance of Student Associations; fourth, the Canadian Electricity Association; fifth, the Shipbuilding Association of Canada; sixth, the Canadian Council for International Co-operation; and seventh, as an individual, Mr. Donald Johnson, who is well known to all of us at the finance committee.

We welcome all of you. We have an hour and a half for this session. It's a short time period, both for presenters and for members, so we will ask you to keep the length of your comments to a maximum of five minutes for opening statements for each organization. Then we will start with members' questions.

We'll start with Mr. Penney, please.

[David Penney, President, Tax Executives Institute, Inc.]

Thank you, and good morning.

I am the general director of taxes for General Motors of Canada Limited, and I am here today as the international president of the Tax Executives Institute.

TEI is the pre-eminent association of business tax professionals worldwide. Our 7,000 members work for 3,000 of the largest companies in Canada, the United States, Europe, and Asia. My comments today are endorsed by both TEI's Canadian members and others whose firms have significant operations and investments in Canada.

During the past decade, the government has focused on making Canada's business tax structure more competitive. By reducing the federal corporate income tax rate from 21% to 15%, the government has confirmed its commitment to keeping Canada competitive, enhancing the prospects for sustainable economic growth, and increasing the attractiveness of investments in Canada. But Canada must remain vigilant, especially as other countries restructure their tax systems, implement rate reductions, and lower marginal effective tax rates. Thus, TEI welcomed the 2010 commitment to consider changes to the taxation of corporate groups, and we are pleased to participate in the Department of Finance's consultation.

In our April 8, 2011, comments, we explained that the implementation of a corporate group taxation system will both improve the competitiveness of the system and better align it with the rest of the world. More than two-thirds of OECD countries provide legislative or regulatory regimes for loss transfers, with Canada being the only G-7 country that lacks such a feature.

History shows that following a financial crisis, economic stagnation may occur as credit markets tighten. Permitting corporate groups to offset profit and losses and share other tax attributes in an efficient, straightforward fashion will moderate the attendant effects by improving corporate liquidity, reducing borrowing costs, and eliminating transaction costs that are incurred today. As important, Canada Revenue Agency will no longer have to devote considerable resources to issuing advance income tax rulings and ensuring transactions are onside with CRA guidelines. TEI has provided detailed recommendations for a group loss transfer system to the Department of Finance.

In summary, we believe that an annual elective tax loss or attribute transfer system will be the simplest and most flexible to adopt, requiring the fewest modifications to the Income Tax Act. Attributes that should be part of the system include non-capital losses, capital losses, carry-forward of such amounts, and investment in other tax credits.

Next, in December of 2008, the Advisory Panel on Canada's System of International Taxation issued a report with recommendations for enhancing the competitiveness, efficiency, and fairness of Canada's tax system. We highlight two recommendations dealing with withholding taxes under regulations 105 and 102 for the committee's consideration.

First, with respect to regulation 105, the advisory panel found that service providers commonly gross up their fees to offset the withholding tax, which raises costs for Canadian businesses and hampers their ability to engage skilled workers from outside Canada. The costs associated with complying are significant and the waiver process is so cumbersome that it is not used as often as it should be. The advisory panel also determined that regulation 102 places significant administrative burdens on non-residents as well as Canadian corporations that carry out the administrative duties on behalf of related non-resident employers to account for and report non-resident employment earnings.

To improve access to skilled services, the advisory panel recommended replacing the current advanced waiver requirement with a system whereby non-residents will self-certify their eligibility for reduced withholding taxes, especially where the non-resident is exempt under a treaty such as the Canada-U.S. treaty. TEI endorses those recommendations.

Finally, TEI urges the government to consider a broader, even a full, exemption system for dividends from active business income from foreign investments. A broader exemption will enhance the inherent economic advantages of foreign investments, with significant savings to taxpayers because of the cost of complying with the foreign affiliate tracking and reporting rules, and that would be eliminated or substantially reduced.

The Department of Finance recently released a legislative package to streamline foreign affiliate reporting. TEI is studying the package and expects to comment by the consultation deadline. The proposals, however, do not provide a full exemption system for active business income. We urge the committee to embrace the advisory panel's recommendation for a broader exemption system.

In conclusion, TEI thanks the committee for the opportunity to participate in the pre-budget consultations. I would be pleased to respond to any questions you have.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Penney.

We will now hear from Mr. Quick, please.

[Jim Quick, President and Chief Executive Officer, Aerospace Industries Association of Canada]

My name is Jim Quick and I am the president and CEO of the Aerospace Industries Association of Canada. I am pleased to be here today to present some urgent challenges facing the aerospace industry in Canada. Before I do that, let me give you an overview of the impact of the aerospace industy on the Canadian economy.

The Canada aerospace industry is the fifth largest in the world. It generates revenues of more than $22 billion annually. It employs more than 80,000 highly qualified workers across Canada. We invest approximately $1.4 billion annually in R and D, and we contribute $1.5 billion in tax revenues to federal and provincial governments. Our industry R and D initiatives are highly integrated with Canadian universities, with more than 25 universities, colleges, and research centres offering aerospace programs and activities as part of their curriculum.

The Canadian aerospace industry offers extraordinary potential for growth in every province and region of the country. In fact, the forecast for global demand for commercial aircraft is estimated to be at 29,000 units, representing $3.2 trillion over the next 20 years. A Deloitte report indicates that a 10% increase in market share would generate an additional 45,000 highly skilled and high technology jobs for Canada. A substantial increase in R and D intensity and access to skilled workers could result in doubling aerospace jobs over the next 10 years.

That being said, the aerospace competition globally is extremely fierce. Other nations, industrialized and developing, have and are developing very competitive aerospace industry sectors, and Canada must keep pace. That is why we are very pleased with the 2011 budget commitment to review all policies and programs having an impact on aerospace, with the view of providing Canada with a strategic aerospace policy framework. We thank the government for proposing it and the opposition for supporting it. This review will provide us with an opportunity to ensure that we remain competitive and a world leader in aerospace.

While we are anxious to start this work, there are three initiatives I would like to raise today that would help industry in the short term. They include investments in technology demonstrators, the preservation and enhancement of scientific research and experimental development--or the SR and ED tax credit--and ensuring efficiency of the Canadian aircraft certification process.

The commercial aircraft manufacturing industry is in the midst of a technology revolution. For example, the rapid shift from primarily metal aircraft to those largely comprised of composites has resulted in the fundamental and rapid change in the competitive landscape for OEMs and the international supply chain. The competitive advantage has been recognized by other aerospace countries, as evidenced by their growth and investments in composite demonstrator projects.

Unfortunately, Canada lags behind other jurisdictions in this area, and as a result we are missing opportunities to participate in aircraft development and design and the production of major structural components. If Canada had collaborative demonstrator projects, it would significantly increase our ability to compete in those international jurisdictions.

Industry, universities, and government research bodies would like to partner with government to develop technology demonstrator programs. This is the type of partnership that has allowed other jurisdictions to leap ahead of Canada. If we are to retain or preferably increase our global ranking in technology demonstrator programs, this is critical. AIAC recommends that government and industry partner to launch a technology demonstrator program. We expect the program would be around $240 million over a four-year period, and that would be cost-shared by government and industry.

The SR and ED program and SADI are of strategic importance to the continued creation of high-value, high-skill jobs in Canada. Earlier this year we commented on the SR and ED policy review project and basically asked government to look at considering whether or not SR and ED needs to be refundable regardless of entity size, or make SR and ED credible against income and payroll taxes. We want to allow R and D costs to occur outside of Canada and be eligible for SR and ED tax credits and allow the protection of research and development intellectual property.

In order to compete in a competitive global marketplace, Canada's aerospace companies must follow through on all aspects of commercialization, sale, and delivery of products. Aerospace is a highly regulated sector. All designs and regulated manufacturing processes must be reviewed and approved by the civil aviation branch of Transport Canada.

AIAC recommends that programs such as Transport Canada's aircraft certification program be maintained and possibly enhanced to ensure continued economic growth and job creation.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from Mr. Dayler, please.

[Zachary Dayler, National Director, Canadian Alliance of Student Associations]

Thank you, Mr. Chair.

On behalf of our membership of 26 post-secondary student associations across Canada, representing over 300,000 students, I'd like to thank you and the members of the committee for inviting CASA here today. We are here to present three reasonable, affordable, and necessary investments that the Government of Canada can make, with high returns, to improve the lives of Canadians. I'm sure around this table there's no disagreement that accessing and persisting in education will contribute to a more prosperous and engaged citizenry.

Discussions around Canada's aging population are prominent. In the media, in scholarly articles, and around the dinner table, Canadians are aware that our aging population will cause strain on our social services and labour force in the years to come. As increasing numbers of Canadians retire, labour shortages will become an economic trend. We need to ensure that the education and training opportunities are available now so we can continue to prosper in the face of our future challenges. The realistic investments that the Government of Canada can make to help address the educational needs of the country as well as the future demands of our economy include creating a vehicle exemption in the CSLP assessment, removing the 2% cap on all AANDC funding, and amending the Copyright Act to remove the parallel importation regulations.

On the vehicle exemption, Canadian students' needs are dynamic and ever changing. The standards for assessing needs today do not reflect those of a decade ago. Today many students, particularly those in suburban and rural areas, need a vehicle to go between their home, class, and jobs every day. Unfortunately, public transit is often inadequate, so a dependable vehicle is fundamental to their participation. A low of 31% of students in Atlantic Canada and a high of 49% in British Columbia rely on a vehicle to attend school. The current vehicle exemption is $5,000, despite the median advertised price of a used vehicle in Ontario being $11,400. Given the changing reality for many students, we ask that the federal government exempt a single vehicle from the CSLP assessment of borrowers' assets.

On increasing access for first nations and Inuit students, Canada's aboriginal peoples face persistent inequalities in educational outcomes due to chronic underfunding of programs and services. Between 1971 and 2001, Canada's aboriginal population grew 322% compared to 37% for the non-aboriginal population. Furthermore, a large proportion of the aboriginal populace is now of school age. Forty-five percent of the first nations population is under the age of 25 while a quarter is under the age of 15. These numbers highlight the importance this demographic will play in ensuring Canada has the labour force to grow and be competitive in the future.

CASA recommends that the federal government lift the 2% cap on spending to AANDC's post-secondary student support program and ensure that the program is supported with the appropriate program delivery budget. Our estimates suggest that the government would need to initially invest $424 million with an escalator fixed to eligible enrolment and costs.

Finally, allow parallel importation of academic materials. No Canadian student should carry the burden of unaffordable university textbooks. These regulations force retail booksellers to buy at an inflated price. They also prevent domestic booksellers from finding price efficiencies through competition. If these regulations were eliminated, it would save close to $30 million annually for students alone. As a matter of perspective, the most recent reduction in the GST of 1% saved students around $3.75 million on textbooks. These savings do not include further savings through competition by breaking the federal government endorsed monopoly of exclusive book resellers. CASA recommends that C-32 be amended to eliminate section 27.1 prohibiting the parallel importation of books from foreign distributors.

In closing, let me emphasize the importance of increasing the percentage of people pursuing post-secondary education in this country. By 2025, the number of persons retiring from the labour force will exceed newcomers by 34%. To continue funding health and social services, we need to substantially increase the value of our workforce. The federal government cut investment in education in the mid-1990s to help reduce the deficit. Due to these cuts, Canada faced a brain drain as researchers and graduates left to find opportunities elsewhere. If we want to invest in ourselves and invest in the future solutions to our challenges, this committee will invest in education as a cornerstone to amplifying our human infrastructure and strengthening Canada's economic position.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Dayler.

We will now hear from Ms. Schwartz, please.

[Sandra Schwartz, Vice-President, Policy Advocacy, Canadian Electricity Association]

Thank you, Mr. Chair. Merci, monsieur le président.

My name is Sandra Schwartz. I am the vice-president of policy advocacy with the Canadian Electricity Association.

Every day our member utilities generate, transmit, and distribute electricity to industrial, commercial, residential, and institutional customers across Canada. The energy we make, move, and sell is essential to our homes, our businesses, and the entire economy. We often talk about natural resources being the backbone of Canada's economy, along with manufacturing, etc., but we rarely think about the role that electricity actually plays in our economy.

Today's system has had competitive prices as one of its core features, a tremendous competitive advantage for Canadian business. This advantage is a product of the foresight of previous generations, who built the stable and reliable system that has served us so well for decades. In that sense, electricity policy in Canada has de facto been an industrial strategy for Canada. It has served business, retail customers, and the economy well for decades.

The Canadian electricity system, or the “grid”, as many of you will know it, is the largest and most complex and interconnected machine in North America. It's safe, solid, and well maintained, but it is showing its age. Like other major infrastructure that we see, and municipal governments are talking about infrastructure needs, our electricity system is in need of major transformation and in need of major investment. Our system is outdated, and it can't support our growing population or our technological growth.

Today the challenge faced by Canada's electricity sector is three-pronged: replace aging infrastructure while still meeting new demand; achieve continuous improvement and emissions reduction efforts; and incorporate digital technology to progressively replace analog equipment.

The existing infrastructure must not only be renewed, but the system itself must be transformed from one designed to support a smaller economy and smaller population base to one that supports the energy-intensive information and electronic devices that consumers demand. It also needs to support the sustainable economy of the future and the mass use of electric vehicles, among other electricity-hungry consumer innovations.

As a result of this investment deficit and the new pressures on the system, estimates from the Conference Board of Canada and the International Energy Agency conclude that Canada needs to spend a minimum of $293 billion over the next 20 years, or approximately $15 billion annually, on the infrastructure to maintain existing assets and to meet economic growth.

I have brought copies of the Conference Board report, which does go into detail about where those specific electricity infrastructure needs are in terms of generation, transmission, and distribution assets.

Consequently, investment in electricity infrastructure is an issue of significant national importance. While it is provincial jurisdiction, there is still a federal role that must be played in electricity infrastructure. Electricity investment must be thought of as a major national priority linked directly to securing Canada's economic competitiveness. Shoring up and expanding the power grid could be one of the biggest public works projects in the country's history. It means business for the manufacturing sector and jobs for Canadians.

As you know, having read our pre-budget submission, the Canadian electricity industry is not seeking federal funding to meet this infrastructure challenge. We're asking the federal government to provide a supportive legislative and regulatory environment for these investments.

The $293 billion over 20 years is, on its own, a major stimulus package and will continue to provide jobs for Canadians long after project construction is completed. In a report released just yesterday by the CIBC, entitled “Energizing Infrastructure”, economists estimate that the $293 billion investment in electricity infrastructure projects will create 320,000 jobs over 20 years.

In the last decade, infrastructure projects have faced growing legislative and regulatory complexity, characterized by lengthy and often duplicative regulatory processes. In some cases, regulatory approval and construction periods can take more than 10 years from decision to grid connection itself.

In previous years, and in submissions to this committee, the CEA has outlined how the sector is changing and evolving.

Whereas in many provinces provincial crown corporations continue to provide generation, transmission, and distribution services, they are now joined by new players. The new players can be investor-held companies that look to the federal government for tax relief.

Over the last six years, CEA has asked this committee for a number of changes to the tax system, and I will quickly remind members of a few key requests from our industry.

[The Chair, Conservative, James Rajotte]

Ms. Schwartz, we're over our time here.

Members have your submission, so we can address it during questions.

We do have seven witnesses here.

[Sandra Schwartz]

We have made a number of submissions in the past. As we recommended last year, we are once again asking for reform of key federal acts to enable investment in electricity infrastructure, specifically the Species at Risk Act and others.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Schwartz.

We will move on to Mr. Cairns, please.

[Vice-Admiral, Retired) Peter Cairns (President, Shipbuilding Association of Canada]

Mr. Chair, ladies and gentlemen, my name is Peter Cairns. I am the president of the Shipbuilding Association of Canada.

Shipbuilding is a hot topic right now, and I am sure there is no one in this room who hasn't heard of the national shipbuilding procurement strategy. I am not going to talk about that strategy this morning but about issues that are affecting the small commercially oriented shipyards that are unlikely to be directly involved in the national shipbuilding procurement strategy. The number of shipyards I am talking about varies between 18 and 20.

There are some impediments in this country to commercial shipbuilding, and the first one, to remind everybody, is the North American Free Trade Agreement. We do not have access to the United States market, which is a natural market for the United States, so we must compete against the Chinese, the Europeans, the Koreans, and whomever.

Subsidization is still rampant within shipbuilding on the global stage, though it is not as freewheeling as it used to be. National states do not subsidize much any more, but provinces or states within countries do subsidize, and cities subsidize in the form of tax-free buildings and those sorts of things.

One of the problems we face in these small shipyards is a lack of maritime awareness in the country. Unless they live on a coast, people are not very aware of what goes on in a shipyard and why ships are important.

Last, I would mention the arbitrary removal of tariffs by the finance department for some classes of vessels in 2010.

There are four things I would like to talk about, which we have talked about before. The first is the structured financing facility. It was implemented in 2001 under the administration of the industry department and the Minister of Industry. It provides an interest rate buy-down of the financing used in the acquisition of a vessel. It has a nominal value of 15% of the cost of that vessel, but the true value is closer to 8% after tax. It has been a very useful program to the shipbuilding industry but is somewhat moribund at the moment. We understand that it remains authorized but unfunded at the moment. We are concerned that it is going to be lost in the government's search for reductions in spending. We think this program is really quite useful to the industry. I would remind everyone that under this program, a job only costs $17,000 Canadian, which makes it a pretty efficient program.

The next is the accelerated capital cost allowance. A Canadian shipowner can get the accelerated capital cost allowance to write off his ship within four years, if he has the right balance sheet and provided he builds the ship in Canada—or he can use the SFF, but he can't do both. We are advocating that shipowners be able to use both. That would make Canada's shipbuilding industry a little bit more competitive with foreigners.

The last is long-term financing. We have advocated this before but would like to talk about it again--to get long-term financing for the shipbuilding industry. You can long-term finance a house, you can long-term finance a motor home, but you can't long-term finance a ship. We believe long-term financing would allow payments on the financing to be made when the ship is at its most productive, that is, after it has been running awhile. We think the government and industry should sit down and talk about that and see what is possible. In the United States they have the Title 11 program, which allows U.S. shipbuilders of similar size to the ones I am talking about to compete internationally.

Those are my recommendations. We are looking for the SFF to remain funded to about $20 million for the next five years and then be re-evaluated to see whether it continues to be necessary. We would like to have a serious look at combining the SFF and the ACCA. We would also like to look at long-term financing.

That is the end of my brief.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Cairns.

We'll hear from Mr. Reilly-King, please.

[Fraser Reilly-King, Policy Analyst, Aid and International Co-operation, Canadian Council for International Co-operation]

Thank you for inviting me to appear before the committee this morning.

My name is Fraser Reilly-King. I'm a policy analyst on aid with the Canadian Council for International Co-operation. It's a national platform of 93 voluntary sector organizations that work on sustainable development issues.

We have three messages for the 2012 budget. They are to include a long-term plan for the growth of Canadian aid, to enhance commitments to climate financing, and to support the first replenishment of the Global Partnership for Education.

On the first message, in recent years the Canadian International Development Agency, CIDA, has been driven by an aid-effectiveness action plan. In the past few years, this has led it to increase its focus, to be more effective and efficient, and to be more accountable. This has generated improvements to the quality of aid that Canada is providing. While the quality of aid has improved, less can be said of the quantity of aid. Budget 2012-13 is expected to be the second year in which the government will announce a four-year freeze on the international assistance envelope, leaving our official development assistance at a little over $5 billion. This represents around 0.3% of gross national income.

With no increases to Canadian aid in the coming years, it's expected that Canada will drop to among the lowest performers of 22 donors in the Organization for Economic Co-operation and Development. Some donors, including the United Kingdom and Australia, despite much harder economic conditions, have still maintained ambitious commitments on aid. The British government still intends to provide 0.7% of its gross national income by 2013, and the Australian government 0.5% by 2015.

Why should these governments commit to this? Last week, UN Secretary General Ban Ki-moon, speaking about the millennium development goals and the gap that exists in trying to realize those goals, noted that a number of donors were limiting their aid budgets at a time when it was most needed. He said that a sobering economic outlook was no excuse not to deliver on these commitments and that in fact such commitments represented smart investments in a shared future.

We believe that Canada is in a position to make these investments. According to the 2011 budget plan, Canada has the best fiscal position in the G-7, with our debt levels historically and internationally lower for the coming years. Furthermore, speaking at the International Monetary Fund last week, Minister of Finance Flaherty said that Canada's economic resiliency has left both real gross domestic product and financial domestic demand significantly above pre-recession levels. Furthermore, the current freeze will only amount to 1.2% of the planned savings, or $2.2 billion, in order for Canada to balance its budget by 2014. What we propose is that the 2012-13 budget be an opportunity for Canada to renew its commitments and to set a gradual 10-year timetable to increase Canadian official development assistance to the UN target of 0.7% of gross national income. This would amount to approximately $680 million in the international assistance envelope for Budget 2012.

In our second message, beyond basic development needs, climate change is intensifying conditions of poverty in a number of countries around the world. November, for us, is a chance for Canada to make its second commitment toward the fast-start initiative. In 2010 Canada provided $400 million in fast-start financing for developing countries, and we're hoping that ahead of the next Conference of Parties meeting in Durban on climate change, in November and December, that Canada will make its second commitment of $400 million, and that the 2012 budget will be an opportunity to provide the third commitment of $400 million to such mechanisms as the least developed country fund or the UN adaptation fund that will prioritize the needs of the poor.

In 2012 we're also hoping that, just as it will generate a plan and timetable for its commitments around ODA, it would do the same on climate change financing. This will enhance the predictability of necessary funds, and we're also hoping that these funds will be additional to existing aid commitments. We can't rob Peter to pay Paul. In 2010, for example, of the $400 million it provided for financing, $100 million came from the existing aid budget. Finally, we hope that this money will be in the form of grants, not loans, hence ensuring that it doesn't sow the seeds of future debt crisis.

On the third and final message--and I can make it very brief--Canada was one of the founding members of the education for all fast-track initiative, which is now called the Global Partnership for Education. We're hoping that ahead of the first replenishment meeting of the Global Partnership for Education, Canada can commit to making a three-year commitment to the $125 million over three years. This is in keeping with its current thematic priorities around sustainable economic growth, children and youth, and food security, and it will enhance those objectives.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We will hear from Mr. Johnson now, please.

[Donald Johnson, Member of Advisory Board, BMO Capital Markets, As an Individual]

Good morning, Mr. Chairman and distinguished committee members.

Thank you for giving me an opportunity to appear before your committee this morning.

For those of you who don't know me, my name is Don Johnson, and I am appearing today in my role as a volunteer board member of four not-for-profit organizations in health care, education, the arts, and social services.

We are here today to urge your committee to support two measures in the next budget that will stimulate much needed private sector funding for our charities during this global economic crisis, when all levels of government are facing fiscal challenges. The removal of the remaining capital gains tax on gifts, a list of securities in the 2006 budget, has resulted in over $1 billion in gifts of stock to Canadian charities every year since that date. It has been an enormous success. We recommend that the government capitalize on this success by removing the capital gains tax on charitable donations of private company shares and real estate in the 2012 budget.

There are five compelling reasons. First, our charities desperately need additional funding as the demand for their vital services continues to grow. However, all levels of government are focusing on reducing their deficits, primarily through restraint in spending.

Second, the timing is important because the current global economic and financial crisis has created new challenges for charities to secure private sector funding, particularly in gifts of stock.

Third, in producing these measures in the next budget, it is estimated to increase charitable giving by approximately $200 million per annum.

Fourth, in the U.S., gifts of appreciated capital property, which include listed securities, private company shares, and real estate, are exempt from capital gains taxes. These measures would level the fundraising playing field for Canada's charities as we compete with our U.S. counterparts for the best and the brightest talent.

Fifth, currently entrepreneurs who take their companies public are able to donate their stock to worthy charitable causes and be exempt from capital gains taxes on their gifts. However, entrepreneurs who decide to continue as private corporations are denied this benefit. In principle, they should all have the same benefit from giving back to their communities.

Let me address the two main concerns about these proposals. First is the tax revenue cost to the government. The estimated $200 million annual increase in charitable giving will result in the loss of some tax revenues to the federal government. It is estimated the tax revenue cost to the federal government would be approximately $50 million to $65 million per annum. Obviously, the benefits to our charitable sector, $200 million in these proposals, far outweigh the tax revenue cost to the federal government.

Let me address concerns about valuation abuse. There is a public market for donations of listed securities. However, there is no public market for private company shares or real estate. To address this concern about valuation abuse, we recommend the charity would not be allowed to issue a tax receipt to the donor until the charity has received the cash proceeds from the sale of the asset. This restriction should address any concern about potential valuation abuse.

There is also a concern if there's not an arm's-length transaction. If a purchaser of the private company shares or the real estate is not at arm's length from the donor of the asset, we recommend that the charity, not the donor, must obtain two independent, third-party appraisals to confirm the value attributed to the gift is the fair market value.

Let me talk briefly about public support for these measures. There is a high level of awareness and support for these measures across Canada, particularly among the tens of thousands of volunteer board members who serve on not-for-profit organizations, as well as the management and employees of our hospitals, universities, arts and cultural organizations, and social service agencies. Earlier this year, full-page advocacy ads were published on this issue by Canadian charities in 13 newspapers across Canada. The total circulation of those newspapers is 3.2 million and the readership is five million.

Also, two prominent umbrella organizations are supportive. The Canadian Federation of Independent Business, CFIB, has 107,000 members. They are interested and supportive of these measures because all members are private enterprises. Many of them want to give back to their communities, which has contributed to their success.

Second, most of the 1,800 mayors who are members of the Federation of Canadian Municipalities are supportive. Not-for-profit organizations in the municipalities would receive incremental funding from donors who live in their community.

[The Chair, Conservative, James Rajotte]

Mr. Johnson, can you wrap up very, very briefly, please?

[Donald Johnson]

There is no tax revenue cost to the municipality.

Finally, on political support, the NDP is supportive. They are now the official opposition. Mr. Thomas Mulcair communicated that support two years ago. The Hon. Scott Brison, finance critic for the Liberal Party, is supportive.

In conclusion, we urge the finance committee to recommend that the government implement these measures in the upcoming budget. It is one of the few public policy issues where all political parties can agree, for which all Canadians will be very grateful.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We will begin members' questions with Monsieur Mai. Cinq minutes, s'il vous plaît.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Thank you, Mr. Chair.

Thank you to all the witnesses for the presentations and also for the well-prepared briefs that we have received.

Unfortunately, I will not be able to ask questions to every one of you, but I will start with Mr. Dayler of the Canadian Alliance of Student Associations.

You talked about first nations and the importance of education for first nations students. We met with a lot of chiefs yesterday. You talked about investment of $424 million. In terms of benefit, can you tell us how much it will bring to the Canadian economy?

[Zachary Dayler]

Absolutely. In terms of the increase, it's an increase in investment of $424 million on top of the initial $300 million that exists right now. Our estimates are that it will impact the lives of about 36,000 students, along with other investments in the area of access for first nations youth. There are investments that need to be made. The chronic underfunding of the program has turned a lot of students away. Making sure that those student who have turned away have the access to pursue education is incredibly important.

In terms of the actual value we will see, I can't give you an actual dollar figure in terms of the impact on the economy. But we do know this is the fastest growing demographic within Canada and that this demographic of individuals has been chronically underfunded.

I think it's a matter of national importance to ensure that these folks have the education and training to help address the labour shortage we are going to be experiencing.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

On page 3 of your brief I see you are talking about a potential tax revenue increase of $3.5 billion per year and a reduction in expenditure of $14.2 billion.

I don't know if the $3.5 billion per year is related to that, in terms of increased tax revenues that you might get from that type of investment.

[Zachary Dayler]

Assuming that as these people are educated and trained, in terms of buying homes, in terms of contributing back to the economy, that's what we could expect to see.

[Hoang Mai, NDP, Brossard—La Prairie, QC]

Excellent. Thank you very much.

I have a question for Mr. Jim Quick.

Very quickly, we know there is a lot of money. We are talking about $500 billion being kept in the coffers of private companies.

How can we help the private companies, especially the aerospace industry, to invest that money back? We're talking about maybe investing $140 million and that the aerospace industry would be doing the same. Is my understanding correct?

[Jim Quick]

Yes, that is the understanding, Mr. Chair.

What we've done with regard to technology demonstrators...we're saying to the government that we would like to share the cost of a technology demonstrator program. To give you a bit of understanding of it, when we look at technology and you have a concept or an idea, you have programs through NSERC and CFI to help fund those programs so your concepts and ideas can go forward. What you have on the other hand, in terms of how to operationalize those ideas, are programs like SADI and IRBs.

The problem is in the middle of that. We need to actually demonstrate this technology because the OEMs will only accept proven technology. We are looking for funding that would be co-costed by government and industry to do that work.