Finance Committee on Oct. 5th, 2011

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Adler.

Mr. Giguère, you have the floor for five minutes.

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

Good morning.

I've noticed that research and development issues are the particular focus today. I've learned that Bell Canada wants the cost of material for a long-term use, meaning first for testing purposes, then for commercialization, be recognized. I also learned that the universities want to be able to use R&D tax credits for other purposes, like student funding.

I'm making a generalization. Any outlay on research and development is an outlay for future economic growth. This was the general idea underlying the creation of this program, and it remains just as relevant. Canada has fallen behind in research and development, which is currently costing us jobs in the manufacturing industry.

As for the university sector, Mr. Léo-Paul Lauzon, a professor in taxation, showed that credits given for education savings plans in no way lead to an increase in access to the university sector. However, these $2.5 billion are not a tax shelter. If you really want the money, there is $2.5 billion currently being thrown out the window. It's a clear, clean, obvious and mathematical demonstration. It does not lead to an increase in the number of students.

I'll make a general statement about agriculture. When I was born, there were three billion people on the earth. Now there are six, and when I die, there will probably be 11. The oceans have been exhausted. There's been a desertification. We're going to have to face famines caused by the total lack of food, probably in our lifetime. I think I reflect the opinion of all committee members when I say that we will be fairly favourable to any request for support from the agriculture sector to handle these brewing global challenges.

Now I have a general question for the representative of the Union des consommateurs. You spoke to us about tax inequities. Could you expand on the solutions that you are advocating to counter not only the tax inequities between businesses and individuals, but also those between the individuals themselves?

I'll give you the rest of my time.

[Élisabeth Gibeau]

Thank you for this opportunity.

Yes, we have several requests in that area. For example, I was speaking earlier about increasing the number of tax brackets for individuals. It would also be a good idea to increase the basic tax exemption, considering the real costs of the livelihoods of taxpayers. We also ask that commodity taxes be modulated based on the nature of the goods purchased. A luxury tax should eventually be introduced for certain goods and the tax decreased on certain others. For example, we are asking that the PST be abolished on essential goods and services, including electricity, fuels, telephone service, children's clothing, educational supplies, food products and health aids. We are also venturing into what is commonly called the Tobin tax, a tax on international financial transactions. So, we would like Canada to support steps in this direction, for better tax equity.

So that's a range of more concrete suggestions that we have made on taxation.

[The Chair, Conservative, James Rajotte]

You have a minute left.

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

Thank you, that's very kind, Mr. Chair. It doesn't happen to me very often.

May I give my remaining minute to Ms. Boutin-Sweet, who would then have six?

It's very kind; I appreciate it.

[The Chair, Conservative, James Rajotte]

Of course.

[Marjolaine Boutin-Sweet, NDP, Hochelaga, QC]

Thank you. We'll continue with Ms. Gibeau. No, instead I'll keep her for later. Instead, I'd like to address the Canadian Federation of Agriculture.

In the document you presented, you mentioned something about reducing the transaction price. It states: "… facilitating the transfer of the family farm to the next generation and deferring the income tax on the transfer and, therefore, reducing the transaction price required by the parent for their retirement."

Could you please give us more information about that?

[Ron Bonnett]

Yes, and a lot of that is hinging on getting tax rules that will allow parents to take advantage of the tax rules that are in place. But there are some technical barriers to that.

I'd also like to take a minute to respond to the comments that were made about meeting the demands for food in the future.

One of the things we have to take a look at is, first, giving the proper price signals to producers. Then, if there's a good chance for profit, that solves a lot of the issues. Farmers will make the investments. Farmers will transfer those farms to the next generation. Investment in research is important, so that we can increase productivity. We also need to take a look at innovation and how we can build innovation. And then the other thing is really taking a look at the government role in regulation, especially with new technology.

I'm fairly confident that, if we get the proper price signals and investments in research and innovation, it's not going to be a difficult challenge to meet that demand of the growing population. If we look at what we've done in the last number of years—adoption of new research, new technology, new techniques—we see that productivity has gone through the roof. There's the ability to do that if we make the proper investments going forward. As we do that, we build the profitability on farms, making it more possible for the next generation to take over those farms.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Just to our witnesses, we do have two colleagues who have to go to an announcement that's being made in Montreal—which will be fairly prominent, as we will see later on.

We're going to go to Mr. Van Kesteren for five minutes, please.

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

Thank you, Chair.

Thank you all for appearing.

Mr. Bonnett, I was thinking for a while that all of these city folk weren't going to ask you any questions, but man, you've just been inundated.

You were absolutely right when you talked about production. I remember that when I was a boy, 80 bushels an acre was good in southwestern Ontario. Now we live in corn country, probably the best corn country in the country, and are looking at 240 bushels an acre—and 300 is the next step.

I came back from Africa. We forget that there are areas of the world that have the potential to do the same thing, and they're only just beginning to see maybe 30 or 40 bushels. I think there are great things ahead.

Anyway, I wanted to touch really briefly on your second recommendation on taxation. I spoke to the Christian Farmers Federation of Ontario, I think it was. I said to them, “I'm not going to talk, because we've really had a good year”—and there I was talking about grains and seeds in my neck of the woods.

But I want to lay the challenge out for succession. And I think you're right about succession, but I've got to ask you this. Why are farmers any different from my three sons, who would like to take over my dealership some day? That's the problem we face. Why would we want to play on the one? And don't tell me about the average farmer being 59 years old. I know that. But why should there be any difference?

Be brief, because I have a few more.

[Ron Bonnett]

I think some of the proposals we are suggesting aren't making any difference. The tax measures we're talking about are removing the inequities that are there because somebody happens to be a relative or a family member. The issue with transferring a farm to a corporation is that if the corporation happens to be owned by somebody who isn't a relative, there's not a problem. You can take advantage of the capital gains. But because they happen to be related, you're at a disadvantage.

We recognize that most farms are transferred from one generation to the next within families, and we just wanted to make sure there's clarity there.

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

I applaud you for that. I agree with you 100% that we need to do that. I'm not being that specific, but we need to work together and figure out a way to do it, because there are more reasons. We don't have time for that right now.

But the other thing I wanted to talk about.... I just read this morning—it's almost humorous—that they're talking about a reduction in average bushels. I think it was 30 bushels out our way, and beans were down 10 bushels, but only because we had such a bumper crop. Fortunately, our grains and oils are going on eight cylinders. We've got some challenges, though, with beef and pork.

In my neck of the woods, too, we have the largest collection of greenhouses; and south of us, the border is where we have access to 200 million people in one day's drive. That's critical.

Here's the point I want to make. How important is it to you—I'm thinking now of the beef and pork guys—that we start to open up new markets? As we said before, there is a limit to growth in the United States, which is starting to stagnate. Overproduction was the problem we experienced with pork. How important is it to open up new markets to sell to Americans?

[Ron Bonnett]

I think opening new markets is a critical focus that we must have, but we also must make sure they're markets that can afford to buy our products. There are markets out there where people don't necessarily have disposable income. But with regard to the work that's being done in trying to re-open the talks with Korea and in taking a look at Japan, I think those are high-value economies great potential. So those are the types of things we should be focusing on.

The other area where we need to be focus, particularly on the trade side, is the rules and regulations. Here I refer to establishing international rules for things like low-level tolerance of genetically modified organisms; making regulations around new technology; and finding ways to harmonize pesticide and herbicide use so that our producers aren't at a disadvantage to somebody in another country.

A whole series of things has to be put together to give us profitable access to some of these foreign markets.

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

How much time do I have left, Chair?

[The Chair, Conservative, James Rajotte]

Thirty seconds.

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

I'll be very quick.

Mr. Gauthier, you talked about alternative fuels. We've found out that Quebec has huge reserves of natural gas. How important do you think it is to switch some of our buses and trucks? Robert Transport, for instance, in this province, has bought 180 natural gas trucks. How important would it be to develop those?

[The Chair, Conservative, James Rajotte]

Mr. Gauthier, be very brief.

[Joël Gauthier]

I think it's fundamental, and we're behind. We see hydrogen buses in the States. If we can expand our sources of energy, it will be in the best interests of the country. We wish to expand it.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Van Kesteren.

Madame Boutin-Sweet, pour cinq minutes.

[Marjolaine Boutin-Sweet, NDP, Hochelaga, QC]

Thank you, Mr. Chair. Thank you everyone. This is very enlightening.

My question is for Ms. Gibeau.

I took a look at the conclusion of your document. I saw that there were many topics you would like to talk about, but you couldn't. So I'd like to give you the opportunity to speak about one of them.

You already got ahead of me in one of your other answers. In your document, you mentioned "other areas where the government could make cuts". You go on to say:

For example, it might … cut the subsidies granted to pharmaceutical companies now that it has been shown that for several years that industry has not honoured its promises to reinvest 10% of its profits in R&D.

First, I'd like you to speak to us about this. Then I'd like you to continue with the possible reduction of drug costs.

[Élisabeth Gibeau]

Okay. The two topics are related.

I just said that we pay 30% more in Canada for our drugs than the average of the OECD countries. In Quebec, it's 8% more compared with the rest of Canada. So this is a real issue that needs to be a priority. Industrial policies that were put in place are partly to blame.

I spoke to you about the Patented Medicine Prices Review Board, which is a federal agency responsible for ensuring that the cost of brand name drugs isn't excessive. So we have set benchmarks, meaning that prices had to be set based on the median price in effect in seven comparable countries. Of these countries, there are the four that sell drugs at the highest prices in the world, which artificially inflates the introductory price of drugs we authorize in Canada. But researchers have shown that if we instead based it on 11 countries, including the four countries that sell the drugs at the highest prices, we would reduce the price of our drugs by 11% right away. So there is room there for very concrete actions.

Why was the choice made at the time to artificially inflate the cost of our medications? It was because of agreements that were made with the pharmaceutical industry. In exchange, the pharmaceutical industry agreed to invest 10% of its revenues in research and development. But we saw that this wasn't at all what it did. The investments didn't materialize. I think that the government should review these policies and measure them in terms of the results they gave and the costs they incurred for the Canadian and Quebec population. It's an example. The cost of drugs in Canada and Quebec is a major priority issue for us.

[Marjolaine Boutin-Sweet, NDP, Hochelaga, QC]

Thank you.

I'd like to go back to my question about farmers.

I'm not sure you understood exactly what I meant by my question on reducing the transaction price required by parents for their retirement. I'm thinking here about poverty among seniors. The fact that the transaction price is being affected when you're transferring the farm from father to son or daughter, for example, could that affect the level of poverty among seniors?

[Ron Bonnett]

It would affect the amount of money the parents had to reinvest in their retirement plans. Yes, it is directly related if they can't afford to make that transfer and take advantage of all the tax tools that are there. Then they don't have the ability to retire with a decent lifestyle. So there is a relationship.

[Marjolaine Boutin-Sweet, NDP, Hochelaga, QC]

Thank you.

[The Chair, Conservative, James Rajotte]

You have one minute left.