Finance Committee on Oct. 5th, 2011

[Élisabeth Gibeau]

Are you talking about the low taxation of businesses?

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

Yes, among others.

[Élisabeth Gibeau]

Clearly, because we see from year to year that the reduction of the tax base is supported by the businesses. This means that to balance the government budget, money needs to come from other people and, right now, the money is coming from workers, individuals. By looking at the levels of the current tax scale, we see that this rests mainly on the shoulders of the middle class, which is the main support for the fiscal burden right now. It's only going to get worse. We think that this is in no way a direction to go in.

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

I have a quick question for, or maybe I could get a comment from, the Climate Action Network Canada.

We've been pushing for the abolition of subsidies to big oil because we also feel these do not help the economy.

Why are these subsidies still in place? Why are we still subsidizing the fossil fuel industry?

[Graham Saul]

I'm hoping that these particular subsidies are an anachronism of tax policy designed during a period when there was a sense that the oil industry was a more fledgling industry than it is today and needed the support to develop a critical mass to grow and establish itself.

A more critical interpretation would be that the overall energy direction of the government is to facilitate the rapid expansion of the oil industry, irrespective of the implications of that for our ability to do our fair share on climate change.

Depending on how you look at it, we think there's an opportunity for the government to move in the right direction and save money by reducing subsidies to an industry that does not require them, as well as to make a substantial move in the right direction in terms of climate change and clean energy, sending a strong signal that the government does take the issue of climate change seriously.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Thank you, Mr. Mai.

We'll go to Ms. McLeod, please.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thank you, Mr. Chair.

And thank you to all the witnesses here today.

I think we covered very diverse topics, and it's always very complicated to get questions and answers in five minutes.

Because it's come up a couple of times, I want to briefly mention the Red Tape Reduction Commission. I think it's going to be very important and I'm actually very privileged to sit on that commission.

I think the CFIB feels that about $30 billion is used up in unnecessary red tape, through all levels of government.

We've released what we're heard at the commission. But the next part is going to be the most critical, and that's what do we need to do about it? We're looking forward to that process going along in parallel to the budget process.

I have a couple of quick questions, and my first would be to the Association of Universities and Colleges. The ability to commercialize or move new technologies into the market is critical. You were talking about your second recommendation. Could you elaborate a bit more on how you envision it happening?

[Paul Davidson]

Thank you.

This is something that other countries do quite well. It's something that Canada can do better. We look forward to the release of the review of federal R and D spending in the next two weeks, which we think will buttress the arguments made by the Science, Technology and Innovation Council report last June. It showed that universities were doing an exceptional job in producing highly qualified talent, but that the business sector did not connect to that talent very well. So how do we make that bridge?

Other nations simply provide short-term internships of six to eight months for master's and Ph.D. students to work with private sector enterprises to make sure that the students get the early, real-life experience of working in an enterprise that needs to produce wealth; and secondly, that business can see the quality of the master's and Ph.D. students available in Canada.

I would add that despite our increases in enrolment in the country, we produce far fewer master's and Ph.D. students than competitors like the U.S., the U.K., or Germany. So the Council of Chief Executives, the Chamber of Commerce, and the Innovation Council have all been saying that we need to increase the number of graduate students and that we need to make sure those links exist to create a stronger Canada.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

My next question is for Bell Canada. Can you talk about what would happen if your first recommendation were implemented? First, how much would it cost, and second, what would be the impact or the results?

[Wayne Tunney]

In 2010 we spent $1.4 billion to expand our wireline network and $300 million to expand our wireless network. Like every company, we generate a bunch of money and we then have commitments to spend that money, for example, to pay salaries and pensions. In 2009 we paid an extra $750 million to fund the deficit in Bell's pension plan, and paid another $500 million last year. We pay dividends to our shareholders, which is expected, of course, because we have 750 million shares. We then allocate a certain amount of money every year, obviously, to spend on our capital improvements.

In my view, the best way to understand what a greater tax deduction is, meaning a deduction that lets you write off more quickly for tax purposes the money you spend to expand your network.... I'm on the CICA tax policy committee, and we met with Finance, as we do every year. We're aware that to go in and ask for certain things when the government is fighting a deficit, it ain't gonna happen. So this year when we were requesting certain items that we thought were critically important, such as the item you're talking about—which is a timing difference—rather than writing off an amount that goes into class 46 at 30%, let's write it off at 50%. That means, obviously, that there would not be a greater deduction two years down the road, because you've already deducted it.

[The Vice-Chair, NDP, Hoang Mai]

You have 30 seconds.

[Wayne Tunney]

What that means is that when we save money, because our tax bill goes down, we have more cash to expand. The analogy would be the following. Let's assume it costs us $100 million to run a high-speed rail line between Toronto and Montreal—albeit, it obviously costs significantly more than that. But if we spend $5 million a year, it's going to take 20 years to build that rail line. If we spend $20 million a year, it's going to take five years. So to the extent that we can get a tax saving in the years when we're trying to expand our networks, it means that we can do it a lot more quickly. And because of the deferral aspect, we'll pay more tax when we don't have the deduction later on.

[The Vice-Chair, NDP, Hoang Mai]

Thank you very much. You time is up.

Mr. Trudeau.

[Justin Trudeau, Liberal, Papineau, QC]

Thank you.

As the Liberal Party spokesperson on youth, postsecondary education and sports, I cannot pass up the opportunity to speak to Mr. Davidson about barriers to education and education funding.

One of the things we keep hearing is that even though enrolments are up, the barriers to many students achieving undergraduate education—and, even further, master's and other graduate degrees—are increasing.

I'm interested in seeing the opposition a little bit. You're concerned about expanding and improving the relations with other countries in terms of research. Obviously that passes through international students in that, at the same time, we're using our international students as a source of financing because they pay higher fees than other students.

How does the AUCC see a resolution of that minor contradiction, that we're using our international students as a source of fees yet we need to have more and better relations with the international community of students and universities?

[Paul Davidson]

First of all, in a global context, Canada is seen as offering excellent quality education at an affordable price, in a safe, secure, and welcoming community. We have a competitive advantage in this, and we can grow that further.

Second, we've got capacity in many parts of the country to bring international students to Canada, so they can not only study and return to their country of origin but can also become Canadian citizens. It's a very effective way of attracting highly skilled newcomers to the country. At Thompson Rivers University, at Saint-Boniface, at the University of Winnipeg, it is really making a difference in those areas.

You're right that international students pay a higher fee. By international standards, it's competitive and affordable.

I also want to talk about the educational experience that those students bring for all Canadians. Internationalizing the classroom gives every student the opportunity to meet somebody from another country, with another language, with another set of experiences, and that's going to be powerfully important as we strive to open up new markets in India, China, Brazil, and elsewhere.

[Justin Trudeau, Liberal, Papineau, QC]

You mentioned briefly that an improvement to the path to citizenship would be an interesting measure. Is there enough done now, or would you like to see improvements in that?

[Paul Davidson]

There have been important changes in the last two years, including allowing international students to work while they're studying and enabling them to stay on past graduation for a period of time.

It used to be that if you indicated you wanted to study in Canada and you said you wanted to stay in Canada, it would be a mark against you in the visa application process. Now it's a mark in your favour. There are other things that universities are doing with their local chambers of commerce to welcome those international students. I'll point to Brock University's work with the chamber of commerce in the Niagara region to help international students create businesses in their first and second years while they're in Canada, so that by the time they graduate they'll have an investment in Canada they want to preserve and grow.

[Justin Trudeau, Liberal, Papineau, QC]

One other aspect you talked about was increasing links, particularly around research, between universities and the private sector. One of my concerns in regard to that is the whole debate about the merits of pure research versus applied research. Where does the UCC stand in trying to resolve that conflict?

[Paul Davidson]

We think that pure, fundamental research is critically important. We also see the value of applied research. If you look at the diversity of Canada's universities, some put emphasis on one area, others put emphasis on another.

I'll give a very local example. This afternoon I'm going with my son, Michael Davidson, to ÉTS, école de technologie supérieure, where there are 4,000 students, 2,400 of whom have co-op placements. Moreover, 75% of that institute's research budget comes from small and medium enterprises. It's a fantastic place. If you have time in your visit to Montreal, or on another visit, you should check out the linkages that are happening there. ÉTS is re-investing in the downtown core of Montreal, attracting new entrepreneurs, high-tech talent, using digital infrastructure to make sure we have a new economy in the heart of downtown Montreal.

[The Chair, Conservative, James Rajotte]

You have 30 seconds left.

[Justin Trudeau, Liberal, Papineau, QC]

I have a quick question for BCE. One of the realities is that 80% of us are living in cities here in Canada, but we obviously still have vast spaces and some very remote and rural communities. Are we doing enough as a society and as a government to encourage companies such as yours to reach out for 100% digital coverage?

[The Chair, Conservative, James Rajotte]

Give a very brief response, please.

[Wayne Tunney]

We can do more. That's where we believe the spectrum auction that's coming up will make a significant difference.

I don't understand spectrum more than many people in this room do, I suspect, but it was best explained to me that with 700 spectrum, if you have one transmission pole, it can go out with the little lines for five kilometres, while the 2500 spectrum can only go out one kilometre. When you think of the non-national carriers, when they come in, clearly they're going to make money in Toronto, Calgary, and Montreal. They don't worry about North Hatley, or whatever. Because we have the responsibility to provide for urban development, that 700 spectrum is critical because it will go out—and we care about going out beyond. Therefore, to exclude us, the national carriers, from being able to bid on 100% of it—because they will keep a certain part for these other carriers—is, in our view, not helpful to achieve what you're talking about.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Madam Glover, please.

[Shelly Glover, Conservative, Saint Boniface, MB]

Thank you, Mr. Chair.

Welcome to all of our wonderful witnesses.

I have to say, Michael, you are the youngest observer of these committee meetings we've had. So welcome to you, and congratulations for winning the prize for youngest fellow to come.

I'm going to continue in the same vein, if you wouldn't mind, Mr. Davidson, with regard to research and development. Some have been very critical of our government's record on research and development. But in fact, since we were elected in January 2006, we have a track record that is stronger than any previous government. We actually rank first in terms of expenditures on research and development in the higher education sector as a share of the economy.

My question to you is this. What is your assessment of the government's record, and particularly of the measures and action plan that we put forward, measures that might have helped students to succeed?