Finance Committee on Oct. 5th, 2011

[Shelly Glover, Conservative, Saint Boniface, MB]

Okay. Thank you.

I think I have 30 seconds.

[The Chair, Conservative, James Rajotte]

Yes.

[Shelly Glover, Conservative, Saint Boniface, MB]

If any other organizations have specific examples of investments made using the allowance I was talking about, it is very important that you share them with the committee. We can then assess the impact of the allowance and see how it can create jobs. In my view, the 600,000 jobs that have been created since the recession in July 2009 show that the measure has been positive.

If you have examples, the committee would like to know what they are. Thank you in advance.

[Marvin Rotrand]

We are going to send you something in writing, as per your request. We are in favour of this type of credit and we believe it is important to share the information with your colleagues.

[The Chair, Conservative, James Rajotte]

Okay.

Thank you, Mrs. Glover.

I just want to follow up on Madam Glover

and Ms. Azoulay. I would like to discuss your first recommendation. It was a measure in the 2007 budget.

The primary challenge for us as parliamentarians is to show the benefits of that measure

since 2007.

So I would just follow up with her on that.

I would like to thank you for participating in this morning's meeting. I would also like to thank you for your presentations and for answering our questions.

We are now going to proceed to the second panel. Thank you.

Colleagues, I will suspend the meeting for minute.

[The Chair, Conservative, James Rajotte]

Dear colleagues, we are now going to hear from our second panel of guests. We have representatives from six organizations. We will start with the Union des consommateurs.

Second is Bell Canada. Third, we have the Association of Universities and Colleges of Canada. Fourth is the Climate Action Network of Canada. And fifth, we have the Canadian Federation of Agriculture.

Lastly, we will hear from a representative from the Agence métropolitaine de transport.

Welcome to this committee. You each have five minutes for your presentations. The committee members will then ask their questions.

We are going to start with the Union des consommateurs.

[Élisabeth Gibeau, Social and Fiscal Policies Analyst, Union des consommateurs]

Good morning. Thank you for inviting us to share our views on the directions in the upcoming federal budget.

I will start by briefly introducing our organization. The Union des consommateurs is a federation made up of several family economics cooperative associations (ACEF), which are spread across Quebec and which give financial advice to people who have trouble making ends meet. So those people go to the associations to find out how to consolidate their budgets. The associations felt the need to create a federation in order to be able to handle files across the province, especially in terms of social and tax policies, in order to help Quebec consumers maintain a decent standard of living.

What brings me here today? You identified a number of issues in the instructions on how to write the brief. Our presentation will focus on the first issue. To achieve a sustained economic recovery, we believe it is important to put efforts into one priority: combatting inequality and poverty. Don't be surprised if this is where you find me.

We believe that the costs associated with poverty are enormous and, if nothing is done to improve the living conditions of people with low incomes, the human and financial consequences will only become more severe and harm all social and economic sectors. So this is of great importance to us.

We see that the most prosperous societies at the moment are those that have succeeded in reducing income disparities between their wealthiest and poorest taxpayers to the extent possible. In our view, effective redistribution of wealth is of paramount importance.

It seems to us that Canada is moving farther and farther away from that formula. The Conference Board released a study this summer, indicating that Canada came fourth among the 215 countries that were assessed based on the increase in income inequality. We believe this is a major setback since, not too long ago, we were able to boast about being one of the most egalitarian countries in the world.

We are very concerned about the record levels of debt among members of the public observed in recent years. We see this as the evidence that Canadians are finding it increasingly difficult to make ends meet without using some form of credit, in particular because of wage stagnation over the last 25 years.

We make the following recommendations. In order to guarantee a sustained economic recovery, we need to accomplish three things. First, access to employment insurance benefits should be improved so that more than half of the unemployed can be eligible. At the moment, less than half of the unemployed have access to employment insurance. Second, we recommend that existing social program funding, legislation and transfers be maintained. Third, we have to take action against the fierce tax competition currently underway at the international level, which is pushing Canada down the tax base list.

In terms of social program funding, legislation and transfers, a number of things are important to us, including maintaining the Canada Social Transfer. We also think it is very important to refrain from changing the Canada Health Act and anything related to taxes. So we need to try and make the taxation system more progressive. We now only have three tax brackets in Canada; the U.S. has six. We know that the more brackets there are, the less of the tax burden the middle class has to bear.

We have recently read in the papers that the government is toying with the idea of lowering corporate taxes even further in order to allow businesses to deduct the losses of their subsidiaries. That seems to us to be the wrong path to take, given that the Harper government has dropped the corporate tax rate on profits to 19% in 2008 and it is soon going to lower it to 15%.

[The Chair, Conservative, James Rajotte]

You have one minute left.

[Élisabeth Gibeau]

Perfect.

We can see that, starting in 2013, the federal treasury is going to deprive itself of $5 billion dollars annually. In our view, that is a huge amount and the government should not keep lowering corporate taxes.

Similarly, in terms of international tax competition, Canada has seen the largest tax reduction in all OECD member countries. Even the OECD has issued an alarm, saying that if we do not do something about it, we could be on the verge of a global tax crisis that could hurt economic activity.

The tax burden cannot be carried by labour and consumption alone. The upshot of inaction would be a loss of revenue for governments and a downward spiral in economic activity.

I will leave you with that.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from Bell Canada, please.

[Wayne Tunney, Senior Vice-President, Taxation, Bell Canada]

Good morning, members of the committee.

I'm Wayne Tunney, senior vice-president, taxation, at BCE and Bell Canada. Thank you for this opportunity to present Bell's views on what the Government of Canada can do to address the financial and economic well-being of Canada, as part of the next federal budget and, indeed, as part of important public policy decisions.

Bell is Canada's largest communications company. We employ 57,000 people. We provide stable and secure pensions to over 33,000 retired employees and their beneficiaries—and I understand from the discussion earlier this morning that one of them is with us today.

Each year we invest about $3 billion in capital expenditures, purchase approximately $7.5 billion worth of goods and services in Canada, and spend as much as $800 million annually in research and development.

For purposes of Budget 2012, Bell has three recommendations that we believe the Government of Canada should move on. These relatively minor changes are consistent with the government's commitment to fiscal responsibility and, if implemented, would encourage additional innovation, more investment, and critical economic growth in all areas of Canada, both urban and rural.

First, we recommend that the federal government accelerate the CCA rates for broadband network investments. Bell invests billions of dollars to enhance the speed, capacity, and reliability of our networks, but the business case for investing in broadband networks and the pace at which these investments can occur continue to pose challenges. There also remain serious concerns over the urban-rural digital divide.

To help address these challenges and concerns, the federal government should implement modest tax changes that will lead to increased private sector investments in next-generation networks for both rural and urban Canada. More specifically, Budget 2012 should include increases in the CCA rate to 50% for classes of assets most closely associated with broadband networks, and to 100% for those same assets where the investments are being made as part of Broadband Canada's rural initiative in areas identified as underserved .

Our second recommendation is also designed to increase investment in innovation. In our business, research and development is critical. It leads to new products and services, state-of-the-art networks, and the creation of high-quality jobs. In Canada, we have over 1,600 dedicated scientists and technicians who work for our company and are doing nothing but R and D annually.

For Bell and others, the federal government's scientific research and experimental development program, SR and ED, is crucial to our R and D efforts, but there's room for improvement. More specifically, a slight modification to the Income Tax Act would make certain hardware and software costs associated with controlled trials outside the lab, and initial integration tests of new applications, eligible for SR and ED income tax credits. The costs associated with these kinds of tests and trials are part of the developmental cycle. They are incurred to prove an initial hypothesis and to fully test a new product or service, and they help us overcome technical issues in advance of production and commercial delivery.

The third and final recommendation I will make today has what I hope is a familiar ring. It, too, is about supporting greater investment in innovation. Today we are witnessing first-hand the rapid transformation of wireless technology into an instrument of national competitiveness and productivity. This achievement is the direct result of billions of dollars of investment in infrastructure by the Canadian wireless industry and hundreds of millions of dollars invested annually in R and D and in network improvements and enhancements.

Moving forward, however, an essential ingredient is missing, and that ingredient is spectrum.

Members of the committee, the government has already announced that it plans to auction the 700 megahertz spectrum at some point in the future, and the 700 megahertz spectrum is in very limited supply. Given its technical characteristics, it's absolutely key to enabling national wireless carriers to build out next generation of 4G LTE networks in both urban and rural areas. At the same time, the 2,500 megahertz spectrum, which the government is also expected to make available, is well suited for wireless providers who focus only on urban and regional areas.

We strongly recommend that the government design the upcoming auction with no set-asides or caps. With the government conducting an open auction, wireless service providers with a commitment to serving all Canadians and a track record of investing in Canada and creating jobs in Canada, and of introducing technological innovations to all Canadians in all parts of the country, will have a fair opportunity to acquire 700 megahertz spectrum.

To conclude, with the modest improvements to tax incentives and the sound policy choices we are recommending, 2012 can be a catalyst for greater capital investment and innovation.

Thank you for your time today.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We will now hear from AUCC, please.

[Paul Davidson, President and Chief Executive Officer, Association of Universities and Colleges of Canada]

Good morning. I am happy to be here in Montreal, the very place where the AUCC was founded. Incidentally, we will be celebrating the 100^th anniversary of our association at the end of October.

Looking back, we see a century of growth, vitality and diversity. Looking to the future, we see how crucial education and quality research will be for a prosperous Canada.

Ladies and gentlemen, I really envy you. You've each earned the trust and confidence of voters in your communities, and for the first time in over a decade, you have a four-year mandate to achieve something extraordinary. This is something that members from all sides of the House can do together. It is an opportunity to build a better Canada.

Canada's universities recognize that we are facing a period of intense worldwide uncertainty. Universities are helping Canadians navigate through these challenging times. When the last downturn hit, the government moved quickly to create the knowledge infrastructure program, showing tremendous alignment in federal and provincial cooperation in an area of national priority. It has helped transform campuses across the country. From an idea to an announcement in six weeks and from an announcement to funding decisions in six months, it was an extraordinary event.

Next month, universities across the country will open their doors to showcase the upgraded, expanded and newly built facilities made possible through KIP. It is our way of showing Canadians the lasting value of smart stimulus. There will be more than 59 public events that will demonstrate how KIP is improving the quality of the research and the learning experience of Canadian students. We hope you will join us at those events on campuses across the country next month.

This year, Canada's universities welcomed the largest incoming class ever, because students and their parents recognize the value of a university degree. Through the last downturn, from 2008 to 2010, there were more than 300,000 net new jobs created for those with a university degree, compared to 430,000 jobs lost by those with no post-secondary education. We will need to continue to increase university participation even more to meet the needs of an aging society in which the number of retirees will double while the workforce will grow by just 8%.

Let me now turn to the 2012 budget. We recognize that the recovery remains fragile and that we will need to be flexible in the coming months.

The government is to be commended for sustaining investment in research, even during a downturn. These investments are yielding results for individuals and communities. In the past, this committee has asked me to elaborate on these results. I am pleased to say that today we are releasing new information to all members of Parliament about the value of research to Canada's prosperity.

For next year's budget, we have three major priorities.

The first is in the area of university research. Funding through the three federal granting councils and the Canada Foundation for Innovation not only supports new discoveries, products, and processes but also allows faculty to engage students in hands-on research. That gives students the analytical and innovative skills they need to thrive in today's knowledge-based economy.

The second is to enhance links to the private sector and to build a stronger innovation culture. We need to link university student and faculty more closely with private sector partners to build greater collaboration and networks. What's needed now is a new mechanism to help business engage new talent and to help highly qualified graduates connect with Canadian enterprises, with the help of a new funding mechanism for creating job experiences in the private sector for Master's and Ph.D. graduates.

Finally, we need to improve Canada's educational connectivity to the world. Last year at this committee, I spoke about our interest in India. Last November, Canada's universities committed $4 million of their own resources to promote student mobility and research collaboration with India. And there is more to be done. We are also very pleased that the Prime Minister has announced that the Governor General will lead an AUCC mission to Brazil in the spring of 2012.

Why do I keep coming back to the issue of educational connectivity? It is simply because of scope, scale, and urgency. Brazil has just announced a scholarship program that will send 75,000 of its students abroad. China has increased its enrollment by two million in two years, and India will surpass each of the G-8 countries in research productivity within the life of this government. As a country, we need to be able to seize these opportunities to connect with growing markets, especially when our competitors cannot. That is why our third priority is a significant global research fund, focused on priorities such as Brazil and India, to enable more students and faculty to participate in international collaborative research and to create the links that are essential to prosperity in the years ahead.

In conclusion, we are pleased to see that others have followed our recommendation to improve access to education and set young aboriginal Canadians up for success. This continues to be a burning national issue for us.

We need to make sure that this generation of students is the best educated and prepared to meet the challenges our country is facing. We believe that a research-enriched, globally engaged university experience within a culture of innovation is the best way for Canada to prosper as we navigate through a changing world.

Merci.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Davidson.

We'll hear now from Climate Action Network Canada, please.

[Graham Saul, Executive Director, Climate Action Network Canada]

Thank you very much.

My name is Graham Saul. I'm the executive director of Climate Action Network Canada, Réseau action climat Canada. Climate Action Network is a coalition of 75 Canadian organizations that are working together to push for action on climate change. It includes faith-based organizations such as the United Church of Canada, aboriginal representation such as the Assembly of First Nations, labour unions such as the Canadian Labour Congress, international development organizations such as Oxfam and, of course, a wide range of environmental groups such as WWF Canada and the Pembina Institute.

I'm here on behalf of the members of Climate Action Network to ask the finance committee to recommend cancelling over a billion dollars in subsidies to the oil, coal, and gas industries.

We have four reasons why we think you should consider doing this: first, from a climate change policy perspective, these subsidies take us exactly in the wrong direction; second, the oil industry does not need these subsidies; third, Canadians do not support these subsidies; and fourth, you are trying to balance the books, you're trying to save money, and we are offering a billion dollar solution. So let me quickly go through each one of these issues.

Regarding the first reason, every national science academy in the world, without exception, is telling us that burning oil, coal, and gas is releasing greenhouse gases and causing climate change and that if we don't take action, the implications are going to be catastrophic. So what we need to be doing is developing policies that encourage us to move away from our dependence on oil, coal, and gas, and ramp up the efficient use of renewable energy and energy conservation.

While this government has made improvements in the past few years, including the 2007 and 2011 reductions in fossil fuel subsidies, the overall direction of the budget has often been in the exact opposite direction of where we need to be going. For example, we have chosen to continue to provide more than a billion dollars in subsidies to the oil, coal, and gas industry, while phasing out the only major federal program designed to support renewable energy, the ecoENERGY for renewables project. So we're supposed to be going in this direction, and we're actually going in that direction from a climate change policy perspective.

Second, the oil industry does not need these subsidies. There may have been a time in the history of the development of the Canadian oil sector when there were fledgling industries that could benefit from significant support to improve their competitiveness and to grow and establish themselves. Those days are long gone. The oil industry in Canada is competitive, it is large, it is powerful. It does not need more than a billion dollars in subsidies every year to maintain its competitiveness and to continue to grow.

Third, Canadians do not support these subsidies. We have polled on this issue, and what we have found across the board is that whether they are likely Liberal voters, likely Conservative voters, likely NDP, Bloc, or Green voters, when asked, Canadians agree that we have better things to do with our resources than provide subsidies to some of the richest companies in the world.

Fourth, and finally, you are trying to balance the books, and we respect that. You are making difficult decisions, and we understand that. And you are trying to save money, and we are offering you a billion dollar solution on how you can do just that. So from our perspective, this is a win-win-win-win scenario.

We very much appreciate this opportunity to present to the committee. We would be happy to provide additional information on the exact nature of the subsidies. I'd refer you to a recent exhaustive study done by the Geneva office of the International Institute for Sustainable Development, as well as the recommendations of the Green Budget Coalition, which is prioritizing this issue in its intervention.

Thank you very much.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from the Canadian Federation of Agriculture.

[Ron Bonnett, President, Canadian Federation of Agriculture]

Thank you.

Thanks for the opportunity to present to you today. My name is Ron Bonnett. I'm actually a farmer but also the president of the Canadian Federation of Agriculture.

The CFA speaks on behalf of the farming industry to make sure that it becomes a viable and strong industry, not only for the farmers we represent but also for the communities we live in.

I think agriculture right now is uniquely positioned to be one of those success stories going forward. We're seeing rises in commodity prices. We're seeing demand increasing. Canadian agriculture is uniquely positioned to take advantage of the opportunities that are coming up worldwide. What we need is the government's support to make sure that we have a competitive environment, and a broad-based policy that really focuses in on the types of things agriculture needs.

I'm going to make a couple of general comments as well as some comments about some specific tax measures that we need to move forward. In general, right now we have a set of risk management tools in place. The Canadian government has worked with industry to put those in place. They have worked, in many cases, to help farmers through some of the rough periods. They include such things as some of the aid that went out because of drought and the wet conditions last year.

Those tools have helped us recover from disasters. A good example would be in the grains and oilseeds sector, which is doing very well right now. For the previous six years, a number of farmers would have been out of business, if it hadn't been for the supports that are available. We'd encourage the government to maintain the current funding for business risk management programs. However, we do recognize that there will likely be some changes that need to be made, because, in some sectors, the programs aren't working as well as they could. We would encourage the finance committee to ask Agriculture and Agri-Food Canada to work with stakeholders to develop that.

Specific tax measures that could be looked at in this year's budget should focus on the transfer of farms from one generation to another. We're seeing farmers aging and some young people wanting to come forward.

We have three specific recommendations. One is regarding the non-arm's-length sale of shares under section 84.1 of the Income Tax Act, which is used when one is transferring shares in a corporation to a family member, shares that are treated differently than if one is transferring those shares to a non-family member. Because it's a family member who is concerned, you can't take full advantage of the capital gains exemption. It's interesting that if my farm weren't a corporation and I transferred it directly to the kids, I could take advantage of it. If I transferred it to a corporation that's not related to me, I could take advantage of the capital gains exemption. But if I transferred it to my children who happen to have a farm corporation, then they would not be allowed to utilize those advantages. That's one specific example.

The other recommendation is in regard to deemed proceeds or capital gains under subsection 55(2) of the Income Tax Act. It's not uncommon now for a generation to transfer a farm to several siblings, and you can take advantage of capital gains issues and tax measures there. However, if those two children were to split that farm, they couldn't do that because they're related. So there are some changes that are needed to that.

The final specific recommendation is in regards to reporting requirements. There is regulatory change T5013, which used to allow you to avoid some of the filing requirements that other groups had, if you had fewer than six partners. The regulation was changed so that now all producers must file.

[The Chair, Conservative, James Rajotte]

You have one minute left.

[Ron Bonnett]

We would recommend extending that deadline.

The last general comment I would make would be around the issue of global competitiveness. We would encourage the government to really take a look at investments in research to help position Canadian agriculture at the forefront of the marketplace. We'd also encourage you to continue with the red tape reduction exercise that's been going on, because that can make a huge difference to the competitiveness of Canadian agriculture.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you for your presentation.

We'll now hear from...

the Agence métropolitaine de transport.

[Joël Gauthier, President and Chief Executive Officer, Agence métropolitaine de transport]

Thank you, Mr. Chair.

Good morning, members of committee. I'm Joël Gauthier, president and CEO of AMT, which is the diminutive of Agence métropolitaine de transport.

Good morning, everyone. Thank you for giving us the opportunity to make a presentation as part of your pre-budget consultations.

The Agence métropolitaine de transport (AMT) is the regional transport agency for the greater Montreal area. It takes care of planning, behaviour and development analyses, financial redistribution and the operation of metropolitan commuter rail and bus networks, as well as the construction of the metropolitan infrastructure.

The AMT is not one of a kind. Metrolinx, in the Toronto region, and TransLink, in the Vancouver region, are doing exactly the same thing as us.

We are here this morning to talk to you about investments in transportation, but also about transportation itself. The economic competitiveness of a country such as ours relies on a number of things. It can rely on its policies and taxation, but it also relies on the transportation system.

Freight transportation and public transit have a direct impact on the economic growth and the competitiveness of a country.

In the next few minutes, I am going to talk at length about the impact of traffic congestion on the productivity of a country. As I was telling you, transport is crucial for the development of the economy, for companies and for workers. It also affects people's quality of life.

In 2006, Transport Canada issued a study revealing that the cost of road congestion stood at some $3.7 billion a year in Canada. The data are based on 2002 numbers, meaning 2002 dollars.

For the Montreal area alone, the total cost of traffic congestion is $1.4 billion. Economic costs are recurrent costs. That is based on 2006 data. As you well know, the situation in the Montreal region has not improved since 2006, quite the contrary.

Based on Metrolinx or GO Transit data, it is safe to assume that the situation is roughly the same in the greater Toronto area. We feel that they are in a similar gridlock. In Toronto, the downtown area is between the 401 and Lake Ontario. As you know, traffic congestion is also very real in Vancouver, Calgary, Ottawa, Halifax, and Edmonton, might I add.

There are specific needs. To overcome traffic congestion, we have to offer people alternatives and those alternatives have to be competitive.

Look at the success we have had with the commuter rail system over the past 15 years in the Montreal area. We believe that, if we provide Canadians with public transit alternatives using efficient infrastructure, people are going to use public transit.

The key to increasing the use of public transit is to be competitive in terms of travel time from point A to point B. We must compete against automobiles and provide frequent service with a degree of comfort.

We want to see whether you think Canada should have a national public transport strategy or plan. Canada is the only G8 country that doesn't have a strategy or a plan.

We are also going to suggest setting up an independent fund for that purpose. There is no such fund. There is infrastructure funding, but the money can be used for roads and sewage systems.

Finally, we would like to talk to you about an independent fund dedicated to the development of clean energy for transportation. We are specifically referring to electrifying buses. This is the way of the future. China is already off and running.

Those are the three topics we would like to discuss with you.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll start with Mr. Mai.

You have five minutes.

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

I'd first like to thank the witnesses for being here today and for taking the time to send briefs and explain their position.

I'm also pleased that the committee has come to Montreal to see the condition of the roads. We passed the Turcot interchange when we arrived from the airport. My colleagues could see for themselves what our challenges are.

My questions are for the AMT representative. Yes, there's an issue with the Champlain Bridge, which is a national asset. I would like to know your vision, not only on the national transportation plan, but also on the fact that we must invest.

What could Canada gain from investing in renewable energies in the long term?

[Joël Gauthier]

Thank you for your question. Obviously, increased flow, whether on the Champlain Bridge or elsewhere in the network, has an economic impact, and that's not just limited to Canada. The situation in Toronto, in particular, is still more desperate than in Montreal when it comes to the economic costs of traffic congestion.

I didn't address the environmental impact earlier, since we are limited to five minutes, but they are there. In Quebec, the transportation sector is responsible for 38% of greenhouse gas emissions. For the Montreal region alone, 47% of greenhouse gas emissions come from the transportation sector. Are there things we need to do to reduce these rates? Obviously. Each time we use public transportation, we reduce these rates. One bus is equal to 50 cars that we take off the roads.

As for electric transportation, the Deux-Montagnes commuter train line serves the Plateau-Mont-Royal and Saint-Laurent districts. It's the only electric commuter train line in Canada, and it produces no greenhouse gases, while transporting 70,000 people a day.

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

Thank you.

My next question is for the Union des consommateurs representative. The government is talking about tax cuts. The government has said several times that a tax cut for big business would benefit consumers because, in the end, it's not the company that pays, but the people.

Do you think this contributes to the inequality in the distribution of wealth between the rich and the poor?