Finance Committee on Oct. 5th, 2011

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

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

It's too short for my next question.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. McLeod.

Mr. Trudeau, you have five minutes. Please go ahead.

[Justin Trudeau, Liberal, Papineau, QC]

Thank you, Mr. Chair. Welcome to Montreal. It's good to have you here.

Since Ms. Kozhaya talked about this, my first question concerns corporate taxes. The corporate tax cuts were implemented by the Liberal government during a period of budgetary surplus, and it did make us very competitive.

Do the CSN and the FTQ feel that corporate tax cuts—which did help, as the Conseil du patronat du Québec said—in a deficit situation have prompted companies to start hiring again, to create more jobs?

[Pierre Patry]

That may have been the case, but that's not what we have seen. Tax cuts have not resulted in increased employment. However, I do want to clarify one thing: we are not against targeted measures that would actually encourage job creation. Research and development has been discussed. We also agree that additional tax credits for research and development could be effective in terms of employment. Similarly, the accelerated depreciation of equipment is not necessarily a bad measure, especially during a recession, in terms of job creation. However, during a recession, we do by far prefer targeted measures to ones that cut corporate taxes but don't necessarily affect job creation, since companies that don't generate profits don't pay taxes anyway.

I also want to point out that tax cuts do not help increase companies' productivity. In reality, the main factors for increasing productivity are education—actually, cuts to higher education can eventually affect productivity—and investments in equipment. So we need to do a lot more in terms of those factors than in terms of corporate tax cuts.

[Justin Trudeau, Liberal, Papineau, QC]

Thank you very much, Mr. Patry.

[Yvon Bolduc]

I want to add that, at times, a shortage of skilled workers may coincide with a very high unemployment rate. In terms of that, I think we need to focus on training and enable the unemployed or those going through difficult times to get back on track by providing them with training that would lead to more meaningful jobs. I think that's very important for Canada's future.

[Justin Trudeau, Liberal, Papineau, QC]

Thank you very much.

I would like to talk a bit about employment insurance.

Ms. Azoulay, from Manufacturiers et Exportateurs du Québec, talks about lightening the burden imposed on the payroll. The Conseil du patronat says—and this is key—that we have to ensure that the funding of the employment insurance system respects employers' capacity to pay. As of January 1, 2012, we will face an increase of 14¢ per $100 in wages for employers, and 10¢ for employees.

Do you think that measure will make it possible to hire more workers, increase the number of jobs, or will it actually have the opposite effect?

[Audrey Azoulay]

I want to start with a general comment about payroll taxes.

Payroll taxes are a lot lower under the federal fiscal framework than they are under the provincial one. It's true that payroll taxes are something of a sensitive issue in Quebec, where they're terribly high. It's a flat and rigid tax, which doesn't take into consideration company profits. Therefore, it stands to reason that, every time payroll taxes are increased, regressive taxes are increased. They're even more regressive for small companies, obviously. We feel that any kind of a payroll tax cut—we suggest tax credits for training—is a very positive measure.

In Europe, a lot of emphasis is being placed on payroll taxes. Yet, almost all European Union member countries are currently looking into what's referred to as a social value-added tax or VAT. It consists in transferring payroll taxes to a consumption tax. All tax experts agree on the efficiency of such a measure. I think the idea is fairly widespread: we need to stop taxing human capital. That's pretty basic in terms of economic growth. During a labour shortage, human capital needs to be accumulated and trained, and wages need to be raised. It all ties in together.

[Justin Trudeau, Liberal, Papineau, QC]

So this $1.2-billion tax on employment is not necessarily a good thing.

Would anyone from the Conseil du patronat like to comment?

[The Chair, Conservative, James Rajotte]

Please keep your answer very short.

[Norma Kozhaya]

Increasing payroll taxes is indeed undesirable. That's not what helps create jobs or increase wages. The employment insurance deficit is a real problem. We need to look into it and come up with a solution.

We think that the government should also consider making a greater contribution to the Employment Insurance Fund. We shouldn't forget about the surpluses used in the past.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Jean, please.

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

Merci beaucoup.

Thank you very much for coming today. I hail from northern Alberta, the oil sands country, and it's a pleasure to be here. I often visit Montreal and I very much enjoy it.

I think all members and guests here today would agree that when you manage an economy as large as Canada's, you must look at having both a long-term vision and a short-term vision. Indeed, I would suggest that the short-term vision was the $45 billion in the economic action plan and the other stimulative measures that our government put forward in 2006 and since that time.

The FCM, the Federation of Canadian Municipalities, identified a $123 billion deficit at that time. Of course, they encouraged the $45 billion being leveraged between the provinces and municipalities, to get somewhere in the neighbourhood of $123 billion. All of that stimulus money, by the way, hasn't been spent yet. In fact, much of it hasn't finished, and much of it hasn't been paid, but it is in the process now. Of course, that will give us a short-term boost in jobs, as well as a long-term increase in the quality of life.

I think that's very important, as are the tax cuts. I don't know if anybody read the Montreal Gazette this morning, but we have now received from Forbes magazine the number one ranking in the world for business investment. If you read the article, it clearly indicates that is the result of our having the lowest taxes in the G-8 and G-20. So I would suggest that the long-term outlook is going to give us a lot of jobs in the future.

My remarks here are really more of a speech, it appears, but I will advise all members here who don't recognize it.... You're invited to my home too. I've lived there for 45 years, since the time there were 1,500 people in Fort McMurray. Nonetheless, what I will advise members of is the infrastructure deficit that still exist across the country. I don't think there's any greater infrastructure deficit than in my home. If you want to know how long we wait in lineups, it's three to four hours to go 30 kilometres. We have the most dangerous highway in the country right now, Highway 63, which takes some people from this area, some people from across Canada, very often--in fact, monthly.

So I know what infrastructure deficits are, I can assure you. I think this government is doing a very good job in relation to business investment and infrastructure. We actually put $150 million into the twinning of that highway, which hasn't been done yet, but I'm hoping it will be done very soon.

I do want to premise my question by indicating that I--and all Albertans, I think--recognize that Quebec funded the west for many years. In fact, up until the middle of the last century, we needed Quebec to support us. They did so, and we appreciate that, because your economy was so rich with manufacturing. But today, 26% or 27% of the TSX, for instance, is from oil sand companies. We employ somewhere in the neighbourhood of 5,000 Quebeckers, 120,000 people across the country—and that number is going to rise to over 200,000.

We have a dilemma in northern Alberta and a dilemma in Canada, in that there are people from outside this country who continue to fearmonger about the oil sands being environmentally unfriendly. As a person who's lived there my whole life and raised my children there, I can assure you that is not the case. Less than 1% of the boreal forest is disturbed, and 100% of that forest is going to be reclaimed. In fact, just a little while ago, the founder of Greenpeace indicated that the reclaimed land was going to be better than the original land.

The question I have for you, seeing that we are a large payer of the bills across the country right now.... And we have no problem doing that, as together, we're clearly stronger united than separated—all of us. But how do we deal with these fearmongers who are receiving profits individually and as organizations, profits that are clearly dependent on their fearmongering and spreading of untruths? You may wonder why I'm asking this question, but clearly, as a country, we need to keep the oil sands going in order to fund projects across the country, such as new bridges, and repairs, to deal with the infrastructure deficit.

How do we deal with that as a country and make sure we take steps to stop them?

[The Chair, Conservative, James Rajotte]

There are about 40 seconds, so we should maybe have one person address that.

Monsieur Rotrand.

[Marvin Rotrand]

Thank you, Monsieur Jean. I understand you have a preoccupation with some of the debate in the United States and elsewhere about the future of the oil sands. I'm going to turn your question around a little bit.

I was struck by what Ms. McLeod said in terms of her concern about deficits, but I see investments in public transit like a doctor would see good cholesterol and bad cholesterol. When you create jobs, you're also creating demand for public transit and putting more pressure on transit, which is actually the solution to keeping the economy fluid. So the investments in public transit are actually the good cholesterol and should be seen apart in your thinking from other investments that may have an impact on the deficit.

I've often said that it's unfair to target current government as being insensitive to public transit. It's just not the case. I go every year to Ottawa as part of ACTU's lobby days and we talk to members of all the parties. There's a common concern among all four parties represented in Parliament about how we are going to improve transit to make Canada economically competitive. We all have the same line, we just talk in different ways about how we want to do it.

What I say is that you're producing the gas, the gas tax is a way to fund us. You might want to consider the indexation of the gas tax as a way to help us and help yourself.

[The Chair, Conservative, James Rajotte]

Thank you very much.

We'll go to Mr. Marston please.

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

Thank you, Mr. Chair.

First of all, I want to say to my friends in the FTQ that René Roy, one of your past presidents, was a good friend of mine. I bargained with him and the communication workers years ago. I experienced first hand the Quebec solidarity fund, because I worked for Bell Canada when it got out of installation repair for a short time. You put together the package that developed Entourage, which saved about 1,500 to 1,800 jobs at Bell Canada.

One of the things we've heard a number of people at this committee talking about, especially in the very first days of the committee, is that it isn't the time for the federal government to withdraw from investment, because we have a hike in indebtedness among Canadians. We have some serious concerns in the business community, and legitimate concerns, if they're hanging on to their cash because they're afraid of a bank crunch.

I'm hearing today from several of you about investment in infrastructure and green technologies. We're sitting with a 7.3% unemployment rate, or about 11% if you include those who have quit trying. In the last panel we had yesterday, we had people from the education sector, that is, the community colleges. Today you mentioned people who are unemployed as well. There has to be a method of bridging....

One of my more direct questions would be whether you think it's reasonable to ask the federal government to postpone the date of balancing its books by a year or so, to invest right now, because we're seeing volatility in our markets. This has been going on for a long time, and the repercussions of it are going to be quite horrendous in the long term. I'd like your response to that if, you would, please.

[Yvon Bolduc]

Thank you for your question and your positive comments about the Fonds de solidarité FTQ. As I said earlier, the first thing employers should do is staff positions and hire people for skilled jobs. However, there is a high unemployment rate. Therefore, we must find a way to move those workers into skilled jobs.

In addition, considering the recent developments in the global economy, there is some cause for concern. Will demand remain as high as it has been? Will emerging countries remain the powerhouses they have been over the last two years? Demand in the U.S. is rather low.

What can we do to maintain a healthy economy? We must make short-term investments, while keeping an eye on the long-term situation. We have to focus on innovation and productivity, and ensure that our companies make investments. To do that, we must create programs to facilitate investments in company productivity enhancement.

Our dollar is strong and our economy is healthy, but we have to find new markets. We have to find new ways to market products and encourage transferring unemployed workers to higher quality jobs.

[The Chair, Conservative, James Rajotte]

You have one minute, Mr. Marston.

And Mr. Patry....

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

If he'd like to respond, that's fine.

[Pierre Patry]

Let's not forget that in late 2008, Canada had to have a political crisis before the government decided to put forward an economic stimulus plan, which Canadians and every opposition party had been calling for.

We cannot wait for a recession to hit before taking action. There are plenty of troubling signs around the world. In the U.S. and in Europe, people are calling on the government to take immediate action. Fortunately, Canada is on solid economic footing. No one wants to see Canada turn into Greece, Italy or Portugal. With a net debt to GDP ratio of 35%, as compared with 75% or 100% in most developed countries, we do have room to take short-term measures. We need to stay on track for the long term, but if we don't take action in the short term, we will all pay the price down the road. Canada does indeed have the ability to respond.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Marston.

We'll go to Mr. Adler, please.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Chair.

It's great to be here in Montreal.

I want to thank all of the witnesses for appearing here today. My question is for the Conseil du patronat du Québec.

My colleague, Mr. Jean, alluded to the Forbes article yesterday, and I'm just going to quote from that:

Canada ranks No. 1 in our annual look at the Best Countries for Business. While the U.S. is paralyzed by fears of a double-dip recession and Europe struggles with sovereign debt issues, Canada's economy has held up better than most. ....Canada skirted the banking meltdown that plagued the U.S. and Europe. ....Canada is the only country that ranks in the top 20 in the 10 metrics that we considered to determine the Best Countries for Business.

Clearly, Canada has been doing something right over the last five years. I want you to comment on that.

I also want you to comment on some of the suggestions that we need to raise taxes, that when it comes to the economic action plan we've been following for the last number of years, the whole baby should be thrown out with the bath water, and we should choose another course, a course of high taxes and government spending.

Based on your earlier comments, would you think that is a good thing or a bad thing?

[Norma Kozhaya]

We believe that the income tax reduction plan for both corporations and individuals is definitely the right approach to take. I am certain that is what has helped make Canada the place to invest and kept its economy so much healthier than all the other countries around the world—or most of them, at least—in the face of this recession. We must build on these positive measures in order to achieve sustained growth, economic and otherwise, in the long run.

Many employers and businesses in Canada that have moved into other countries, that have made investments and met with stakeholders, have said the same thing about Canada's ability to weather this storm—because it has weathered this recession. We have truly set the bar. Clearly, we have a solid banking system and our fiscal house is in relatively good shape. The right steps were taken, and we must build on that advantage.

Raising taxes, in our view, is never conducive to improved economic growth, more employment, better productivity or higher investments—quite the opposite. We need to find ways to stay competitive, and creating a competitive tax and regulatory environment is one way to make that happen. We are fortunate to have a country, an economy, that has taken that approach. It's the right thing to do. Once again, I want to state that maintaining tight control of public spending is the right thing to do.

Naturally, some decisions need to be made, and some transfers to the provinces are essential. So far, there has been no mention of cutting transfer payments to the provinces. On the contrary, health and education transfers should continue at the levels planned. That is a good thing for the provinces.

However, reducing the tax burden on corporations and individuals is, once again.... We must not forget individuals. Incentives to work need to be in place, and workers need to be rewarded, not penalized, for their efforts. This is especially important because not only is Canada's skilled labour force getting older, but it is also shrinking and a shortage is on the horizon, as I have said. Skilled workers are also in demand around the world, so Canada needs to appeal to both workers and businesses.