Finance Committee on Oct. 4th, 2011

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

We spoke about that yesterday. We talked about cross-jurisdiction, and somebody mentioned that again this morning. That is provincial, and we'd have to have some arrangement. We did do a number of things in the last budget supporting.... I think we had 30 new industrial research chairs. We provided $80 million, and I think this probably came out of the Red Wilson report, exactly the things you're talking about, where industry is working in conjunction with colleges and universities to help small and medium-sized enterprises to move into the areas we're talking about, and allocating $12 million to joint college-university commercialization projects.

Are you familiar with them, and would you like to comment?

[Dr. Brian McMillan]

Yes. They're excellent programs and they have significant merit. Springboard is another group in the Atlantic region that just received federal funding from ACOA to do the very things you're talking about. So it's money very well spent, and it's a reinvestment in existing capital in infrastructure, which I think is very smart. From the colleges' perspective, there still is quite an imbalance between the amount of funding that goes to colleges versus the amount that goes to universities. All we're suggesting is that there be consideration to giving colleges more access to research funding.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

We're going to go to Mr. Mai, but because I cut him off, I am going to allow Mr. St-Pierre to answer Mr. Giguère's question.

[Denis St-Pierre]

I'd have to be refreshed on the question.

I understand there was some tax planning done that was fairly aggressive. I can't talk to individual taxpayers' positions.

All I can say is that there are certain things, but there is very good work that has been done by the government at challenging these types.... If you look at the Antle decision, Copthorne...these are trusts that were done outside. Antle, for example was caught by the government and it didn't work. So I think the government is working very hard--the CRA.

Unfortunately, when you talk about $200 million, there are some people who will hire people like me to try to find a loophole. Simplifying the tax system might cut off those loopholes. I don't know.

[The Chair, Conservative, James Rajotte]

Mr. Mai.

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

I would like to continue with Mr. St-Pierre.

You mentioned that large corporations plan their adjustments in relation to tax cuts. We know that in 2008 the corporate tax rate was already fairly competitive, compared to our neighbours to the south. Do tax cuts benefit consumers? I have to wonder, since you keep making a connection between tax hikes and the fact that they are bad for consumers in the end.

Do tax cuts not benefit only the shareholders of the companies, which consequently make more profits?

[Denis St-Pierre]

A distinction needs to be made in that regard. People need to understand that investors receive the money after taxes. It is up to the corporation to decide how much to give to its shareholders.

Based on my observations, in real life, most of the time, a tax cut results in additional cash flow. In times like these of fiscal austerity, those people can then use that money to respect their obligations or, in times of prosperity, they can create more jobs. Cash flow is what makes a business work. The more cash flow is paid out in taxes, the less there is available to the company to be used at the discretion of the head of the company.

Personally, I do not think that a tax cut can—

I think you understand what I mean.

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

However, some $500 billion remains in the coffers of businesses. That is another issue.

That said, I will now don my hat as my party's critic for national revenue. Once again, we agree that reforms are needed to simply our tax system.

As for the increasing number of tax credits, but only for certain... For instance, we talked about the tax credits offered by this government. Could you tell us what direct financial impact these really have on the government, the benefits they provide?

[Denis St-Pierre]

In terms of statistics, a 2010 study shows that seven out of ten people do not file their own tax returns. This demonstrates that preparing an ordinary personal tax return has become very complicated.

There are various kinds of credits, like the one given for public transit passes, that are given in communities like mine where there is no bus. These credits only weigh down the legislation and make it harder to know how much it costs compared to what the taxpayer must pay in compliance costs. But I don't have the numbers.

It is only logical that any time a tax form is made more complicated, it becomes harder and harder for people to prepare their own tax returns. So people are spending their money on accounting fees. Our profession is probably the only one that is in no danger of disappearing.

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

So make the most of it.

Thank you very much.

I have a question for Mr. McMillan.

You were talking about levelling the playing field in terms of large real estate investors and small real estate investors. Obviously, within the official opposition we've been pushing to help small businesses. Can you tell us what type of levelling of the playing field you want?

I'm sorry, the question is more for the Canadian Real Estate Association.

[Gary Simonsen]

I'd be interested to hear your response.

[Dr. Brian McMillan]

Do you want me to try?

[The Chair, Conservative, James Rajotte]

Mr. Simonsen.

[Gary Simonsen]

You were asking in terms of what...?

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

What the actual target...the goal of levelling the playing field in terms of helping--

[Gary Simonsen]

Well, there are a couple of things. Certainly, there are a number of properties that we know are simply not being turned over, by virtue of that tax disincentive. So it's going to be and it is targeted to the small investor, not to the real estate developer, to provide a more equal playing field, a level playing field, that would treat the small investor in the same manner that a real estate developer is currently being treated.

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

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Mai.

We'll go to Mr. Jean, please.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you, Mr. Chair. I'm pleased to be here today.

My question really relates to what the future is of Canada, and it is that we're going to have a very low number of workers and a very regional high demand for workers, depending on where we are. My interest is in relation to the housing question.

I would say to you, Ms. Smith-MacDonald, that I actually knew a single mother from Port Hastings, and I'll just give you the story. The gentleman she finally married is from Miramichi. He went to Port Hawkesbury after the pulp mill closed down and he worked in the heavy water there, and then he moved to Fort McMurray. In fact, he was able to work in Port Hawkesbury and Fort McMurray because his employer provided housing. Many employers aren't able to do that; in fact they can't do it.

I think the best way to help with poverty, single mothers or otherwise, is to enable work to happen in different areas of the country.

My interest is not in a national housing strategy, but a housing strategy that actually allows a tax credit to follow work in certain areas that are designated by the government, such as Fort McMurray, Newfoundland, and other places where there's going to be high demand, the Northwest Territories, the Yukon, etc.

I'm wondering if the Canadian Real Estate Association, or indeed others at the table, have ever looked at something like that: a housing strategy on the basis of a tax credit for high-demand areas for work, so that it would encourage the flow of human traffic from one area to another in the country for workers. Has anybody looked at that in the Canadian Real Estate Association, for instance? What do you think the long-term effect would be to designate areas, such as we do for economic zones in the north for tax credits, etc.?

[Gary Simonsen]

To the best of my knowledge, it's not something we've looked at. But certainly we would take your question under advisement, reflect on it, and we'd certainly be happy to get back to you.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

Thank you. I would appreciate it if you could do that with the chair directly. I think it's very important because of the nature of our economy and what's going to happen, and it certainly would give an advantage.

I will tell you this. In Fort McMurray, where I've lived for 45 years, I've seen the housing market go up and down, and right now you can't get a single family house for under $600,000, whereas in many parts of the country it's $150,000. I would suggest that this type of tax credit would help the poor and single mothers. It may not be short term but long term, because of course this would encourage people to move from one part of the country to another, where there is high employment and where there would be good wages, and at the same time it would free up houses where they live now, which doesn't have the demand. I do want to say that would happen. So if you could provide that, I would appreciate that.

I think the capital cost allowance recapture, the six months that I know have been proposed by some parties, has a lot of value and a lot of merit. I was wondering if you could comment any further on where you see it today and whether or not there have been any changes to the proposals that have been made in the past regarding that.

[Gary Simonsen]

Sure.

We've certainly modified our proposal, and it was to recognize the fiscal circumstances that are present now. Our prior proposal dealing with capital gains in general...we recognized there was a bottom-line impact on that. As such, we narrowed it down to looking at the depreciation aspect to try to adapt and promote something that was going to be fiscally as neutral as possible. That's the reason we've put forward this proposal.

[Brian Jean, Conservative, Fort McMurray—Athabasca, AB]

When you provide the proposal in relation to the housing strategy, and the possibility of that, would you also put your mind to this capital cost allowance, because it's the issue of rentals, it's not the issue of homes.

I'm also thinking of a designated zone. I know it's something new, and it's an anomaly, and maybe not that attractive to people in Toronto, but in places where there's a very low demand for housing generally, which are boom towns and resource towns, to go to that place there's triple or quadruple the amount of demand and people living in houses than there are in other places. I would like you to put your mind to that as well, if you could.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Jean.

We'll go to Mr. Hoback, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair.

I want to thank each and every one of you for coming out this morning and sharing your ideas with us. As we go through this process, it's always looking for different ideas from different parts of the country that really helps us solidify what we need for a budget for all Canadians. And there are some good ideas here today.

I'm going to start with Mr. St. Pierre on the tax loopholes. We've done a lot of work in closing tax loopholes. Do you think we need to be more aggressive in closing tax loopholes? Or have we been aggressive enough? Where do you feel we are on that?