Finance Committee on Oct. 4th, 2011

[The Chair, Conservative, James Rajotte]

Good morning, everyone. Thank you all for being here this morning. We are very pleased to be here in Moncton, New Brunswick. Thank you all for coming to present to the finance committee.

This is the 13th meeting of the Standing Committee on Finance. We are continuing our pre-budget consultations for 2011.

We have four organizations to present to us this morning: Every Woman's Centre, the Atlantic Provinces Community College Consortium, the Canadian Real Estate Association, and the Certified General Accountants Association of Canada.

You will each have up to five minutes for an opening statement, and then we'll have questions from all members of the committee.

Ms. Smith-MacDonald, could we please start with your opening statement?

[Louise Smith-MacDonald, Coordinator, Every Woman's Centre]

First of all, I'd like to say thank you for inviting me to present. I'm going to be talking off the brief that I had presented to the committee much earlier.

My name is Louise Smith-MacDonald, and I'm from Every Woman's Centre in Sydney. We're an organization that offers support services for women and adolescent girls who are living in low income.

Geographically, the area we serve is Cape Breton Island, and it is made up of a small urban area, a large rural area, and many coastal communities. The island has many social and economic issues, such as high unemployment, pegged at 17.7%. There's a lack of adequate and affordable housing, and of course a loss of traditional industries that have existed in Cape Breton for many years, not unlike the situation in any rural community, I suppose, in Canada. The total population of Cape Breton Island stands at 105,000, with 22% under the age of 19, 53% between the ages of 20 and 59, and 24% over the age of 60, and therefore we have an aging population.

The immigration rate is very small in Cape Breton. There were only 155 new immigrants between the years of 2001 and 2006. As for educational attainment, for the population aged 15 to 24, 79% have no certificate, diploma, or degree, although some have a high school certificate. For the population aged between 35 and 64 years of age, 44% have no certificates, diplomas, or degrees, so we have a very uneducated, in some ways, older population. In the total experienced labour force aged 15 years and over, only 2.66% of females are employed in non-traditional jobs, compared to the average of 5.22%, and in the retail sector, 58% are women.

These statistics show that we have an aging population who are not highly educated, and there are very low numbers of women working in non-traditional jobs, instead relying on retail positions, which are considered to be precarious employment.

I will move into our recommendations.

Recommendation 1 is to develop a national poverty reduction strategy with a long-term vision and measurable outcomes and timelines.

I'm sure this isn't the first time you've heard that. We feel a national poverty reduction strategy is the responsibility of the federal government, and therefore the leadership must come from the federal government. We are aware of the social, health, and justice consequences of poverty, but to put it simply, we cannot begin to address these issues until money is put in the pockets of families in order to secure adequate and safe housing, and to meet their basic needs. Work training, volunteerism, and health are not uppermost in the minds of those who do not know where their next meal will come from. Poverty is not the outcome of not working hard; in fact the opposite is true. How hard is it for a mother to provide food, clean clothes, and a safe and secure living space when resources are scarce? A guaranteed livable income would ensure that amounts paid would meet family needs at realistic rates, unlike the present system.

We have been asked to give the cost of our recommendations. This is an ominous task, for sure, for someone with my experience, I suppose. The National Council on Welfare, in its study of 2007, estimated the cost to be in the range of $23 billion, but we know that Canada spends billions of dollars on social programs currently, and still families, seniors, youth, and women continue to live in poverty.

Recommendation 2 is to create sustainable jobs and training.

Over the past few years there's been an emphasis on shovel-ready projects in an effort to create sustainable jobs for Canadians; unfortunately, most of these jobs did not include women. Speaking to my own local area, there was, and continues to be, road work and some construction, but as you've seen in the statistics presented earlier, only 2.66% of females in our area are employed in non-traditional work. Most women employed in these shovel-ready projects were used as flaggers. This is not sustainable work.

There should be a federal strategy to allow women to be part of the economic recovery in Canada. The strategy does not need to create any additional cost; in fact, it could save the government money. There are hundreds of programs now being offered, but it requires fitting into them.

Calls made for proposals are now designated before they come to community, instead of community being asked to have support for projects that they see necessary for their own area.

[The Chair, Conservative, James Rajotte]

You have about one minute remaining.

[Louise Smith-MacDonald]

Our third recommendation is to develop a national housing strategy. As referenced in the statistics above, 81% of homes in our area were built before 1986. This indicates an aging stock.

The revitalization of the housing market could be a great boon to the economy. Trades training programs and a program of government guarantees for loans that are directed at women would enable women to form cooperatives to build and repair homes in their communities. This could provide the opportunity for thousands of jobs across Canada.

I look forward to the other presentations and any discussions and questions the committee may have.

Thank you so much.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the Atlantic Provinces Community College Consortium, please.

[Dr. Brian McMillan, President, Holland College, Atlantic Provinces Community College Consortium]

Thank you very much. I'll get right to my speaking points.

We're obviously very pleased to be here today representing APCCC, which is a publicly funded consortium that comes together to identify common strategic goals and share resources and best practices, etc.

We have five community colleges that are members of this consortium, representing all of the Atlantic provinces. We have over 25,000 full-time students and we're in over 50 communities. I think that speaks to the notion of why we call them “community” colleges. We're in larger centres, such as Halifax, and we're also in small communities of 3,000 to 4,000, in places like Alberton, in Prince Edward Island, where we just recently built the new training facility.

Community colleges help to revitalize communities. This is how we do it. Number one, as you would expect, we provide a skilled labour force. We're a labour force developer. We're also a collaborator and partner with the private sector and with governments in policy and in helping to leverage our resources to reach the objectives of the respective organizations. We're an employer, a large one, and in fact in some ways we are actually in the business of training--that's how we view it. We're a purchaser of goods and services and therefore we are a community developer.

Whenever you get a college in a community, the economic spinoff from each one of those areas is substantive. Just to give you a sense of the economic impact, it's estimated that the community college consortium produces over $2.9 billion annually for the economy. The return on investment--and I wish my investment portfolio was doing this well--to taxpayers is 13% and to students 17%. We have spoken to our provincial governments about this being a wise investment of taxpayers' dollars.

Colleges, of course, are responsible for developing a skilled workforce and helping industry reach its objectives. In a recent study by the Canadian Federation of Independent Business, they said they need six college graduates for every university graduate. Not only is there a need for college credentials and training, but 90% of our graduates across the region are employed.

We're also called upon when new initiatives emerge in the community. For instance, on Prince Edward Island we've set up a bioscience consortium. The college was asked to design two new programs to support that industry. The same could be said in Newfoundland and Labrador in the oil and engineering field. The same could be said...and let's hope shipbuilding goes to Nova Scotia.

We're also key parts of a solution when an industry gets into trouble and they either need to retool or are financially struggling. Colleges often get asked to come in and do some upgrading and skills....

When we talk about our labour force, I'm sure all of you are aware of what the issues are. The challenges are daunting. We have a shrinking labour force. The ManpowerGroup reports that 29% of companies are looking for skilled workers.

The problem is that when new industries come to town, you can't just take those people who are unemployed and plunk them into an industry, because often they don't have the necessary skill sets. We also know that 70% of new jobs require some type of post-secondary credentials. One of the challenges we face in Atlantic Canada, which is not uncommon across the rest of the country, is in regard to our low literacy and numeracy levels: they are substantive, at up to 35% to 40% depending on the province.

What this all boils down to is that it's projected that by 2031 there will be 2.7 million vacancies for skilled workers. What's the solution? We've talked about and you've talked about immigration. We've talked about raising the overall rates of participation in PSE; 30% to 35% of students do not go on to post-secondary education. We need to have more outreach and more support services for what we call the underrepresented groups: aboriginals, persons with disabilities, and people with lower socio-economic status.

If you take a look at Statistics Canada and the four quartiles of levels of income, when you look at college representation you see that each one of those levels is equal across the bar about who attends colleges. If you look at universities, I think you know which way the scale will go. The third and fourth quartiles--in other words, persons with higher levels of income--tend to go to university.

The people who need the most support in order to be able to contribute to our economy are many of the ones who have come to the college system. We have large numbers of single parents--women in particular--who are trying to make a life for themselves and their families.

So what are the solutions? Well, one of the things that has happened, for which we're most grateful, is that KIP came along. With the recession, there can be a good news story. I know that Atlantic community colleges benefited from the KIP funding. It did help us take care of some of our wait lists, but I have to share with you that there is still a need for more bricks and mortar and for funding for capital equipment. Our programs are not lecture-based; they're hands-on programs. You must have the technology and you have to lead in the technology.

Barack Obama has said that if the U.S. or any economically developed country wants to compete, they have to be able to compete educationally. Those who train and develop the brightest will succeed. That, I think, is what we need to look at. Despite our receiving KIP funding across the region, you can see that there were 8,000 qualified candidates not going to the college system. These are people who meet the entrance requirements.

The other comment I'd like to make is that I think we need to put more energy into the underrepresented groups. There are significant literacy challenges. For many people, it's not that we don't know how to help them; we just need the resources to help them. Each college has a story to tell about somebody who was 32, who got laid off or whatever and who had taken a different path out of high school, but who suddenly came back, got their academic upgrading, and now has gone on to a career and is contributing.

The other area we need to work on is the area of innovation and productivity. We know that our productivity levels here are dropping. We need to address that, so we're looking for research funding.

Lastly, we're asking that there be a separate envelope for colleges in the transfer agreement in 2014.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the Canadian Real Estate Association.

[Gary Simonsen, Chief Executive Officer, Canadian Real Estate Association]

Thank you, Mr. Chair and committee members.

Let me start by saying that, like you, our members' work and personal lives are inseparable. They live where they work and they work where they live. They are in tune and engaged with their community. They work every day to make local neighbourhoods better places to live, work, and raise a family.

Acknowledging that fact, we have representatives of the local Moncton Real Estate Board and the New Brunswick Real Estate Association at this session. I just wanted to acknowledge their presence.

We understand the budgetary challenges facing the government at this time of global economic uncertainty and the need to drive Canada's recovery through job and economic growth. Moreover, we understand and respect the government's commitment to return to a balanced budget by 2014-15.

In this context, we have spent over a year developing policy proposals with our federal affairs committee, which works on behalf of 100 real estate boards and associations and over 100,000 realtors across the country.

I want to underline that throughout our policy development process, our members wanted to be realistic and respectful of the challenges facing our economy and political leaders. So, first and foremost, our proposals for the 2012 budget are fiscally prudent. They will accelerate our economy, create jobs, and make our communities better at little cost.

The first one, called community reinvestment, is to remove a significant disincentive to selling and reinvesting in rental and income properties. This impediment is holding back a chain reaction of economic, community, and environmental benefits. Many income property owners are reluctant to sell, because doing so would trigger the collection of previously claimed depreciation. This is technically known as capital cost allowance recapture. This reduces funds available for reinvestment and leaves insufficient equity after tax to acquire a property of similar or greater value.

Our proposed solution is simple and does not reinvent the wheel. Income property owners should be allowed to defer the collection of previously claimed depreciation when they sell and reinvest. Large developers already have a similar deferral mechanism. This simply levels the playing field. Over half of the individuals who would benefit from this policy change have net incomes below $50,000.

This is a main street proposal to generate economic and job growth. Income property transactions also create opportunities for tradespeople in renovations and redevelopment. It creates income for industries that mine, harvest, and manufacture construction materials, fees for professionals, as well as tax revenue for all levels of government. In fact the typical income property sale in three of Canada's largest cities generates $287,850 in spinoff benefits and more than one job for every two transactions.

Oftentimes, because of their age, properties held long term to avoid tax consequences are underutilized, energy inefficient, and rundown. Removing this disincentive to reinvestment would turn over properties and allow new investors to enter the market and owners of older properties to build their portfolios. In the process, buildings would be upgraded by their new owners and made more energy efficient through renovations and retrofits. Furthermore, redevelopment would create more rental housing spaces.

As mentioned earlier, we recognize the government's fiscal situation. Indeed, the cost of this proposal would be offset by the collection of other revenue, including capital gains tax from property sales, GST and HST, and income tax from spinoff activity. Furthermore, all deferred tax would be collected by the government in the future, when investors decide not to reinvest, or later through their estates.

We are currently working with a leading economist to pinpoint the exact budgetary impact of this proposal and will report the results to you when we receive them.

Our second proposal relates to home ownership. There is one government program above all others that helps make home ownership a reality, and that's the Home Buyers' Plan. The plan has assisted over two million Canadians since its introduction in 1992. By allowing Canadians to borrow up to $25,000 from their RRSP, the Home Buyers' Plan is effectively a repayable zero-interest loan. It allows Canadian families to save for both retirement and a home, eliminating the need to choose one over the other or greatly dilute both goals.

Unfortunately, inflation steadily erodes its purchasing power. This was recognized by the 2009 budget, which increased the withdrawal limit for the first time in the plan's history. To ensure that tomorrow's homebuyers receive the same value from the Home Buyers' Plan, it needs to be indexed to inflation. We propose indexing in increments similar to the way that tax-free savings accounts maintain their value.

Using Budget 2009 as a starting point, indexing in $2,500 increments would delay implementation until after balanced budget targets are achieved in 2014-15. Based on estimates contained in Budgets 2009 and 2010, the cost of this proposal in 2015 would be about $7.5 million. A further $2,500 adjustment in 2020 would also have a cost of $7.5 million.

We understand that the costing of this program is not a cost unto itself but rather a cost attributable to individuals who are assumed to contribute more to their RRSPs in the year of a home purchase in order to maximize their withdrawal under the Home Buyers' Plan. As a result, the plan has added benefit of encouraging long-term savings.

On a wider scale, the Home Buyers' Plan is a proven creator of jobs and economic growth. In 2009 more than 50,000 homes were purchased using the Home Buyers' Plan, which resulted in $2.1 billion in spinoff spending and more than 17,000 jobs.

Thank you in advance for your consideration. I look forward to your questions. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the Certified General Accountants Association of Canada.

[Denis St-Pierre, Chair of the Tax and Fiscal Policy Advisory Group, Certified General Accountants Association of Canada]

Mr. Chairman, members of the committee, thank you for the opportunity to take part in the pre-budget consultations leading up to budget 2012.

My name is Denis St-Pierre. I am a certified general accountant, and Chair of the Tax and Fiscal Policy Advisory Group of the Certified General Accountants Association of Canada, CGA-Canada. I am from New Brunswick and my work focuses on estate planning and tax strategies for the business sector.

We are pleased to appear again before the committee. I would like to begin by presenting our one and only recommendation for the next federal budget.

CGA Canada has one recommendation to put forward for the next federal budget: that the Government of Canada take immediate steps to simplify Canada's tax legislation and tax regime.

Although the federal government has been working to bring tax rates down in recent years, Canada's income tax system has continued to grow in volume and complexity. I have copies of the act, if you want to have proof of that, in both French and English.

Businesses and individuals are subjected to hundreds of various taxes from all levels of government, taxes that are unnecessarily complicated, difficult to understand, and even duplicative or contradictory from one jurisdiction to another, often making compliance cumbersome and labour intensive.

At the same time, more targeted tax relief measures have been introduced by the government. That may be of assistance to some, but it complicates Canada's elaborate tax regime even further. I'm talking about the bus passes, about the little credits that have been introduced.

Faced with a tight fiscal situation and the requisite to control public expenditures, the federal government will need to look for efficiencies and revenue-neutral or low-cost initiatives as it manages the economy. Taking concrete steps to address tax measures or policies that unnecessarily add complexity to the tax system is an obvious solution. In its submission to the finance committee, CGA-Canada proposed a number of steps the Government of Canada should take.

I would like to briefly reiterate these proposals: tackle the backlog of unlegislated tax proposals by introducing a technical tax bill this fall; implement a sunset provision for unlegislated tax proposals to bring greater clarity and certainty to tax legislation; avoid introducing any further targeted tax relief measures and examine the effectiveness of existing targeted tax relief measures; keep tax rates low to facilitate compliance and reduce the possibility of aggressive tax planning and more complicated legislative measures to close loopholes.

To collect taxes, strengthen enforcement efforts on existing tax rules instead of adding new rules and regulations; increase parliamentary scrutiny over federal tax expenditures to ensure they meet certain established principles such as simplicity, fairness, and efficiency; and seek advice from subject-matter experts by appointing a panel of independent experts to review Canada's tax system while ensuring that the House of Commons Standing Committee on Finance is involved in the process.

Now is the time to modernize Canada's tax regime. The benefits are crystal clear. A simple tax system increases transparency and reduces uncertainty and the likelihood of aggressive tax planning. It means higher compliance rates, lower compliance costs for taxpayers, less paperwork for business, and lower administrative costs for the government. It means a stronger system with a more secure tax base and predictable revenue. In fact, a simple transparent and fair tax system with a low internationally competitive tax rate encourages investment and job growth, both of which are integral to the well-being and sustained revival of the Canadian economy. Some of Canada's trading partners, like Australia, the United Kingdom, and the United States, are realizing that inefficient tax systems reduce their competitiveness and they're now taking steps to strengthen and streamline their tax regimes.

To help build a strong, competitive 21st century economy, we believe the federal government should set a clear course to streamline and modernize Canada's tax regime.

Mr. Chairman, thank you for your time. I would be pleased to respond to any comments or questions from the committee on CGA Canada's behalf concerning tax simplification. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We will now move to questions from members, beginning with Mr. Mai.

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

Thank you, Mr. Chair.

Thank you to the witnesses for coming today, and thank you for your submissions and your explanations.

First I'd like to quickly ask a question regarding poverty to Every Woman's Centre. We know that in the House of Commons and also in the Senate in 2009-10 there were studies and reports regarding measures to take in order to abolish poverty. I'd like to know if you have seen any improvement in terms of measures the government has taken within the last two or three years to address poverty.

[Louise Smith-MacDonald]

In our own area we have seen some reduction in poverty, which is the best thing we could hope for at this time. Some of the changes to personal income tax have been very helpful to women. We work very much with the provincial system so we can take advantage of some of the federal programs that have come out, but again, very often some of the federal programs that are introduced are targeted before we get at them. So if you have a project that will fit into the particular criteria--seniors, for example--then you can apply for this money. We have been very successful in accessing some of that money.

However, it doesn't always fulfill the needs of the community as much as it gives us some income, so everyone takes advantage of that, but sometimes we question the results. As I mentioned in my brief, a few years ago, because seniors were really being targeted, there were eight projects going on in our small community that were probably valued at close to a million dollars, and yet we were all doing the same thing. If there could be some flexibility to allow us to address particular community needs, that would be more helpful. But certainly there has been an effort.

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

Thank you very much.

I have a question for Mr. St-Pierre regarding certified general accountants.

I studied law myself, and the Income Tax Act was a nightmare for me. I think it is in the best interest of everyone here, the Standing Committee on Finance as well as the government, to simplify measures. I see you have given a few examples.

Could you give us a really broad, rough summary of the main points, without going into too much detail?

[Denis St-Pierre]

It would be hard to pinpoint exactly what the problem is. However, it is definitely important to agree on removing the proposed measures.

I urge everyone to have a look at the existing legislation after today's meeting. Look at both the French and English versions, and note just the parts in grey. I brought only the last version, but the past 20 have all been like this. If we flip through it, we can see that there is a lot of grey. All of the grey parts represent proposed measures, some of which go back as far as 2001. Thus, it can be very hard for those of us working or studying in the field to navigate our way through it. We sometimes have to study measures that may never be adopted. The government could simply eliminate those old measures, especially those that date back more than three years. Removing them would make things much simpler and more clear.

CGA-Canada is also requesting or suggesting that a committee be created. It is difficult for any one individual to pinpoint exactly what the problem is. Instead, a panel of tax experts should be established. I am convinced that if we were able to put a man on the moon in the 1960s, surely now, in 2011, we can find a way to cut this down, by at least half.

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

Thank you.

I have a question for the Atlantic Provinces Community College Consortium. We know right now that investing in infrastructure is something that can help create jobs and move things forward. It is part of your recommendation number one. Can you tell us what types of infrastructure investments you're asking for or targeting?

[Dr. Brian McMillan]

Thank you.

With regard to infrastructure, each of the colleges, not only in Atlantic Canada but nationally, has certain programs that are in greater demand, whether it's in health care or in some of the new emerging technologies--I've used the example of bioscience. It's college- and community-specific. But basically we need infrastructure to respond to the wait list of students who want to get into the workforce, students who we know will have jobs, because colleges have worked with our industry partners to identify what types of employees they need and what skill sets they need to have.

One of the things that makes colleges different--I'll compare this with my years of working at a university--is that each college program has an advisory committee. Whether it's architecture, civil engineering, or carpentry, each year we meet with these committees to discuss their needs and demands and to ask how we can change our course to respond to their needs. Tied in with that, though, is not only infrastructure but capital equipment; they will share with us in order to be competitive. Today, most of the work is done with computer-assisted equipment. We have women in welding programs, carpentry--

[The Chair, Conservative, James Rajotte]

I'll have to ask you to wrap up, please.

[Dr. Brian McMillan]

I apologize, Mr. Chair.

So we need equipment as well.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Ms. Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

I would like to begin with Mr. St-Pierre, if I could.

As you know, the government recently announced that it was conducting a strategic review and an assessment of its programs.

We believe that this is something that all organizations should do in order to find inefficiencies, to see what is working and what is not working. If any resources are being wasted, it is very important to identify that, so that the money can be used in programs or administrative practices that work.

I know you have commented on this matter in the past. I would like to know a little more about what you think of our plans to conduct a review. Do you think this is a good way to find wasteful spending, so that the money can instead be invested in effective programs?

[Denis St-Pierre]

I worked at Canada Revenue Agency for six years before moving to the private sector. I therefore saw certain inefficiencies first-hand. They exist in all organizations, whether private or at the federal level. I also worked in the area of internal audit, focusing on the economy, performance and so on. Certainly, within the government, there are areas that require some cuts, as in any business.

As an advisor, I would tell business owners to look closely at their expenses. In times of fiscal austerity, we need to examine and monitor spending. Trying to balance the budget and making the economy more efficient definitely makes sense, in our opinion, whether within the government or for clients in the private sector.

[Shelly Glover, Conservative, Saint Boniface, MB]

We decided to turn to experts to help us find these inefficiencies. Do you think this is a good idea?

[Denis St-Pierre]

It is hard for CGA-Canada to express an opinion on things like that. The government, in good faith, must have had good reason for doing so. I do not know the exact reason. We would really have to look at the numbers to know what the government is saving by using the services of an external third party instead of the Office of the Auditor General of Canada, for instance.

[Shelly Glover, Conservative, Saint Boniface, MB]

Perfect. Thank you.

I'm going to turn my attention to you, Mr. McMillan.

I would love to take you home with me: I have five children that I continue to push toward college. Unfortunately, they're not quite prepared at this point to switch directions.

You mentioned financial literacy as a huge priority. In fact, it was a priority in previous years, when we put together some experts to give us some ideas on how we might improve financial literacy for Canadians. When you mentioned it, I wondered what you were doing in the colleges to actually promote financial literacy amongst your students.