Finance Committee on Oct. 4th, 2011

[Denis St-Pierre]

First I'll comment on your comment about targeted tax measures. Some are good. CGA Canada is not against all of that. As a policy, RRSPs are good, for example, but they're targeted, so that's good to allow people to retire.

For corporate tax, I understand from my own experience that when a client has an increase of 2% in corporate taxes, for example, he still has the same financial projections he gave the bank two years ago. The rates are announced in advance and he makes his financial projections based on those rates. When there's no stability in the system and it changes all of a sudden, that person will still have the same payment on the business.

So what will he do? He will pass that 2% increase on to the customer. So at the end of the day, the taxpayer will pay, not the corporate entity, because it still has the same capital requirements. It's my personal experience that the taxpayer ends up paying the corporate tax increase anyway.

[Mark Adler, Conservative, York Centre, ON]

So corporations don't really pay taxes?

[Denis St-Pierre]

They don't pay taxes. It's unfortunate, but that's true.

[Wayne Marston, NDP, Hamilton East—Stoney Creek, ON]

Yes, it's unfortunate.

[Mark Adler, Conservative, York Centre, ON]

Again, you also indicated,with respect to the corporate tax rate, that Canada, given its leading stature in the global economy and in leading the G-8, is well positioned right now on the global scene to attract foreign investment and encourage economic development.

[Denis St-Pierre]

I think our own system that we have in place right now is what is attracting foreign investors: we have advantageous tax rates globally.

What is more difficult, though, is that if you have large corporations they will usually work in all provinces. I believe in 2008 a study was done by PricewaterhouseCoopers, if I'm not mistaken, which showed that if you had a place of business in all these provinces, you would have 295 taxes to comply with. So is that attractive in and of itself? No. I think that's where tax simplicity would be more attractive.

As a globally well-positioned country, yes, we are; on the taxation compliance side, maybe less.

[Mark Adler, Conservative, York Centre, ON]

Could you elaborate on that a bit?

[Denis St-Pierre]

Well, the mere number of 295 taxes to try to comply with...that would be something to dumbfound any accountant, right? Then, when any other taxes come in, the auditors from the CRA say, “Well, you should have known that: ignorance of the law is not....” Well, when you have 295 taxes to comply with, it's very difficult not to ignore at least one, so on that side I think we're not competitive.

[Mark Adler, Conservative, York Centre, ON]

Thank you.

My next question is for Mr. Simonsen. The government undertook steps earlier this year to support the housing market by making the maximum mortgage period 30 years and that sort of thing. At the time, the Canadian Real Estate Association said that these were “wise and prudent” measures. Could you elaborate on that? Could you also speak to whether further steps may be necessary on this front?

[Gary Simonsen]

I'll make two comments. In order to temper the marketplace and to ensure that consumers were acting in a prudent manner, I think it has had the desired effect. We've seen some slowdown in the overall activities, so it has had its desired effect. Certainly, in our projections for next year, we think it will be a very, very stable market, but we think it's important to maintain that stability and to not diminish the marketplace.

It has been a driver, certainly, for the Canadian economy, so we think the measures that were taken were prudent ones and have had the desired effect, and we would recommend staying the course.

[Mark Adler, Conservative, York Centre, ON]

Would you recommend going any further or...?

[Gary Simonsen]

No.

[Mark Adler, Conservative, York Centre, ON]

Okay. Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Adler.

Monsieur Giguère, s'il vous plaît, pour cinq minutes.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you, Mr. Chair. My first question is for Ms. Smith-MacDonald.

At present, the Canada Mortgage and Housing Corporation, a crown corporation under exclusively federal control, has a social housing component. At this time, that organization does not have any specific allocation plans or mortgage support for women living alone or single parents who would like to buy existing housing. Could the Canada Mortgage and Housing Corporation not make it easier for underprivileged women to access housing?

[Louise Smith-MacDonald]

It's my experience with single women that they have the most difficult time in purchasing housing. They may be able to get a mortgage, but then they don't have the extra money that's needed for the closing costs and things like that. They're always kind of chasing after that, because it's not incorporated in their mortgage.

So I do believe there's a role to be played--a fund that women can access. Women have proven time and time again that they meet their obligations, and can do so on very little resources, but they need that jump-up in order to access housing. I believe that would be a good move.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

To Mr. McMillan....

Right now, the Canadian government is wondering if it should introduce another infrastructure program. If such a program is brought in, in your case, could many buildings be built in your network of colleges or is there any equipment that could be purchased?

[Dr. Brian McMillan]

Yes, most definitely.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

Thank you very much.

Mr. Gary Simonsen,

your first recommendation presents a problem, I think. In terms of taxation, your recommendation does not work. You want to make recaptured depreciation tax-free while allowing the crystallization of $400,000 of capital gains deductions for a Canadian controlled private corporation. In fact, you are asking us to promote speculation.

That is how I see it. In terms of taxation, this furthers speculation. I think this is extremely dangerous, especially considering the housing market bubble in Vancouver.

[Gregory Klump, Chief Economist, Canadian Real Estate Association]

Perhaps I can comment first and address what you've claimed is the housing market bubble in Vancouver.

I think it's important to recognize that the prudent measures put in place by the government in terms of mortgage regulation reform have cooled the Vancouver market. I agree with the assessment of the finance minister, and of the Bank of Canada, that there is no housing market bubble in Canada. The Bank of Canada has been most concerned, in that if there were one, they would be looking most closely at Vancouver. Well, the Vancouver market is down 30% in terms of activity since the beginning of the year. Prices have also receded to the tune of almost 5% since the beginning of the year. So I would say that the housing market there is cooling.

In terms of the proposal to roll over the capital cost allowance, I don't think it would encourage speculation, especially since at this time the global economy is cooling and the Canadian economy is vulnerable to that. This is a time when it's unlikely that it would spur speculation. What it would do is cause a turnover in properties by those who are holding on to them because of the tax implications, without generating speculation.

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

[Alain Giguère, NDP, Marc-Aurèle-Fortin, QC]

My second question is for the accountants. I myself was a tax specialist in advanced taxation in a large accounting firm. If I am not mistaken, the current cost of tax expenditure programs is $100 billion. I mean all possible deductions. The Social Economy Research Chair at UQAM identified a series of expenditures that clearly demonstrate that we are in a state of fiscal inequities.

Recently, about a month ago, two entrepreneurs withdrew $200 million in capital and did not pay one red cent in taxes thanks to what is known as tax trust planning—

[The Chair, Conservative, James Rajotte]

Monsieur Giguère, we're going to have to come back to this in the next NDP round, unfortunately.

We'll go to Mr. Van Kesteren, please.

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

Thank you, Mr. Chair. Thank you all for appearing this morning.

I have a question for the Atlantic Provinces Community College Consortium. We had a quick chat. I'll share with the others what we talked about, and that was that the economic downturn that we witnessed in 2008 provided us with an opportunity to do something extraordinary. I remember serving with the chair in industry, and whenever there were requests from colleges or universities, we reminded them we were not involved in bricks and mortar. However, this opportunity was presented to us, so as a government we recognized that we needed to invest to help create jobs and stimulate the economy.

One of the decisions, as you said, was KIP. I know in my hometown of Chatham, we have two colleges, St. Clair College and Ridgetown, which is actually part of Guelph University. There were three major projects. One was done through another means, but the significance of those projects, the ramifications, I think, are used.

I agree with you wholeheartedly that we need to stimulate the economy and improve by educating our workforce.

You must have these statistics, but currently--I think this probably falls in line with a lot of the things that Ms. Smith-MacDonald was saying too about the need for education and training--do you identify certain areas so you can tell students they are crying for women in this area, or young men or whatever? Have you identified those areas and what is going to be right? It just seems to me to be common sense that if we need to help somebody who needs a job now, we train them for jobs that are needed right now, but if they're entering the workforce, there's good promise to suggest going into a particular field because in five years' time this is where it's going to be at.

Have you done that? Can you share with us some of those findings?

[Dr. Brian McMillan]

Each of the community colleges works at several levels. One is that we take a look at the federal priorities for economic development. Then when we do our strategic planning, each community college looks at the economic development strategy of the province, and each province has identified certain sectors. Our province has identified four, and we are providing training in those four areas, plus at a much more micro level we work with local business and industry.

So there is a good alignment. The issue we have is that as industry's needs change, we need to mobilize the workforce to get in sync with it. That's the challenge and that's where the gap is. You have people without jobs, and some of them are skilled but some of them aren't skilled. So that's where the colleges can step in.

If I may, I have one other quick comment, Mr. Chair. Infrastructure money was great, but one of the things we have to be sensitive to, and it was in one of our recommendations, is the CST, the transfer envelope. It's great to have new buildings, but we have to have the operating budget to support them. I think that's very important. In our second recommendation we ask that there be a separate envelope, just as with the health accord, where there will be accountability measures but there will be opportunities to see funds go to post-secondary, be directed so that we don't end up being misguided.