Finance Committee on Oct. 18th, 2011

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Thank you, Ms. Nash.

We'll go to Mrs. McLeod, please.

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

Thank you, Mr. Chair.

I'd also like to thank all the presenters.

I'm going to start by directing my questions to Mr. Hayos. I think we've noted a couple of times that people who perhaps have the biggest vested interest in a complicated tax system are telling us to simplify it. We've heard that again from a number of different folks. I appreciate those comments.

I'm going to give you what is perhaps a two-part question. Typically if government makes changes, you hear some significant criticism. We perhaps have programs that have run for 33 years and have never been reflected on. As you're aware, we're undergoing a review right now in terms of government expenditures and we're looking at where we can perhaps fine-tune things. I'd certainly like your comments in terms of the expenditure review process.

You've also heard that perhaps we shouldn't be doing any cutbacks, but right now what we have, of course, is a sovereign debt crisis, and really, we're trying to grapple with that. If you have any more general comments in that area, I'd really appreciate hearing your thoughts.

[Gabe Hayos]

I'll just repeat a comment on the government's program on expenditure reduction. First, I agree that they should be doing that generally. The fact that they are doing it sort of across the board is maybe a bit of the easy approach. To some extent, I would have appreciated a more targeted expenditure reduction. That would be my comment on the first one.

On the sovereign debt issue, I'm not sure how to address that because I'm not sure it specifically fits into any.... It's a broader economic issue, so I don't know that I have a comment for you—not in a minute, anyway.

[Voices]

Oh, oh!

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

Okay. Thank you.

For my next questions, I'm going to go to Ms. Fralick.

You talked about targeting money for public health. My background is within the public health system. I know that the provinces and the health authorities actually have targeted the budgets they have in terms of how much they want spent on population measures. You've talked about $1.1 billion. Do you have an existing figure in terms of what the health authorities or provinces are currently targeting towards these initiatives?

[Pamela Fralick]

If you're looking for a consensus or a discussion that has already taken place to come up with a different figure, no. The support is there for the Naylor report and the divvying up, if you will, of the funds within his recommendations.

Because we're here talking at the federal level, there is a wonderful example through the federal government: the primary health care transition fund, in which $780 million was put into a federally driven--but shared with the provinces--initiative that is generally viewed as one of the most successful ventures in a long time.

So could we not do something like that, but target it more specifically to...?

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

I worked within population health and I knew that they targeted, so I would be very curious if we currently have, across the country, close to the targeted amount that you were talking about.

My other quick question--and I absolutely agree--is on the critical importance of the electronic health records, what we're doing and where we're going. Certainly, through Canada Health Infoway, we've put significant dollars into that. Is there any recent summary in terms of the success of what has been happening? I think there's some frustration that in spite of the considerable dollars that have gone into that program, and the importance of it, our uptake is not nearly where it should be. Do you have any quick comments on it?

[Pamela Fralick]

Because there have been a few glitches along the way and we've put in an awful lot of money, it's a really tricky subject, isn't it? My recent conversations with Richard Alvarez, the CEO at Canada Health Infoway...and I have seen some reports, but I don't have them in front of me, and we'd be more than happy to provide you with that information. They are indicating success. I saw something very recently coming out of Ontario, which, as we know, had maybe the biggest challenge of all, or at any rate the most public challenge. They are starting to produce some results that are being viewed positively.

We could certainly get that information for you going forward.

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

Okay? Thank you, Ms. McLeod.

We'll go to Mr. Brison, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Mr. Chair.

Thank you to each of you for your interventions and valuable input this morning.

I'd like to start with the whole issue of taxation, Mr. Hayos. We've heard from the CGA organizations about the need for tax reform or a comprehensive study of our tax system in Canada. There hasn't been a really comprehensive study of tax reform or the tax system since 1971 with the Carter commission, and the economy has changed dramatically since then.

You talked about tax simplification. There's been a trend in recent years for boutique tax credits for different types of activities that individual Canadians may participate in. If you look at different types of personal tax credits in Canada, there are a lot of costs associated with these. Just in this current budget, three of the tax credits add up to around $300 million per year. Do you think broadly that we'd be better off to—instead of going into these boutique tax credits for specific types of behaviours or activities that families or individuals are participating in—just cut personal income taxes and perhaps focus on lower- and middle-income tax cuts instead of the sort of niche boutique tax credits?

[Gabe Hayos]

The CICA has been quite public about that, and you couldn't have stated it better. We believe that would add a significant amount of simplification. Frankly, the evidence we have shows that most of the people who could benefit from those credits don't even understand them or can take advantage of them, so I would agree fully.

[Scott Brison, Liberal, Kings—Hants, NS]

They generally would be doing the activity in any case.

[Gabe Hayos]

Exactly, so it's not really encouraging any increase. We just think that a general rate reduction, tax reduction, for the people you mentioned is exactly the approach that should be taken.

[Scott Brison, Liberal, Kings—Hants, NS]

Prior to 1971, Canada didn't have a capital gains tax. We had an inheritance tax. There have been proposals over the years to create a rollover provision for capital gains tax that, as long as you invested within six months, you wouldn't have to pay capital gains tax until, ultimately, the divestiture of the investment. During that period, you could invest in several cycles, in different asset classes. Do you think in general we should look at possible reform of our capital gains tax system to encourage more investment and capital accumulation and also to help Canadian individuals and businesses strengthen the productivity of the country?

[Gabe Hayos]

I think that's probably something that requires a bit more study. There are a number of provisions in the Income Tax Act that actually do allow for rollovers, some between generations and some in the public sector. I think there are number of implications with what you propose. I think it's something that's worth looking at, but I think it requires further study.

[Scott Brison, Liberal, Kings—Hants, NS]

Mr. Pollard, it's good to have you back at our committee. Your organization, your members, pay out a lot in payroll taxes. Last January, the government increased payroll taxes, about $600 million was the take. Next year, it's scheduled to be a $1.2 billion increase in January. Do you feel that during these times of high unemployment and the challenges that employers face in trying to expand hiring, it would be prudent for the government to freeze payroll taxes where they are now and not to increase them in January?

[Tony Pollard]

I think we would definitely respond positively to that, Mr. Brison, and in fact I think most other sectors would as well. We've seen over the course of the last two or three years the great reductions in numbers of people working in sectors right across the board. We lost about 120,000 employees since 2008. Anything that we can do to be able to facilitate the re-engagement of those people and to enhance our profitability, which right now is very flat—we lost about $4 billion in the downturn—would be very welcome news for us.

[Scott Brison, Liberal, Kings—Hants, NS]

You employ a lot of young people, and your members employ a lot of young people, and youth unemployment is around 15% now in Canada, so that would make a difference.

Mr. Lord, on the—

[The Chair, Conservative, James Rajotte]

Sorry, you've got 10 seconds, Mr. Brison.

[Scott Brison, Liberal, Kings—Hants, NS]

We can have another discussion, Mr. Lord, sometime, about the costs of wireless spectrum licences.

[The Chair, Conservative, James Rajotte]

Thank you.

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

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

Thank you, Mr. Chair.

Thank you, witnesses, for appearing this morning.

Mr. Moist, I have to tell you that I think you hit it right out of the park in your executive summary when you talked about how to “achieve sustained economic recovery in Canada” and also to “create quality...”. I take some issue with that, though, and if I could, I'll just suggest making a little correction there to say “that the government create a climate where quality sustainable jobs can be created” and “ensure relatively low rates of taxation, and achieve a balanced budget”.

Congratulations, sir. I think you're absolutely right.

Mr. Lord, you have had a distinguished career. You're a former premier of New Brunswick. I want to ask you, however, because the opposition is quite critical of the government's position of lowering corporate taxes and the importance of that, if you could just give us your feelings. I've read that a recent study says you expect to fill 100,000 new positions in the IT sector. If you could just tell us how important the position is that the government is taking to keep corporate tax lower and tell us if you would agree with that...maybe you could just enlighten the group on it.

[Bernard Lord]

Thank you very much for the question.

It's certainly my pleasure to answer this question. I think that for every sector of the economy it's important to make sure we eliminate barriers for growth. At the same time, I think it's important that we do not penalize those who succeed, simply to subsidize other sectors. We need to realize that our economy is changing. You will see sectors that will grow and you'll see sectors that will not grow. Some may actually reduce in size. That's actually okay. It's okay that some sectors grow and others may not, and for that, often we look at governments and we ask governments, “Can you tax somebody more so you can subsidize somebody else?”

I certainly feel personally—and it is the position of the CWTA—that we're better off with lower corporate taxes, and lower taxes in general, to sustain economic activity, to create more jobs, and to create a climate for investment and for growth, where we invest in strategic infrastructure but we don't simply subsidize sectors. That's what will enable more growth and more job creation, and that's in the end what enables us to pay for the social programs we want, whether they're health care, education, or senior care, whatever we need.

But in all this discussion, I think one thing that we have to keep in mind, whether we talk about corporate taxes or personal taxes, is that we can't ask our kids to pay for us. Passing on a debt and a deficit to our kids just because there's something we want today is just not the right approach.

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

Thank you.

Maybe I could go to the Canadian Construction Association. The recent budget of 2011 announced that we would legislate a permanent annual investment of $2 billion in a gas fund to municipalities. This obviously has been welcomed by groups from the municipalities. Do you agree with this measure? Do you feel that this has helped your industry?

[Nadine Miller]

Yes. The Canadian Construction Association absolutely supports dedicated funding to help pay for the cost of renewal of our infrastructure in Canada. We think that's one measure. There are other measures that we would like considered as well.

As I mentioned, our industry is the biggest creator of stimulus in the economy, as has been found throughout the world. So if governments, in their provincial transfers to the municipalities, could look at increasing additional amounts in those transfers in addition to the gas tax.... In the States, they're looking at ways that states can raise more money to help with that infrastructure renewal. A lot of our infrastructure is the responsibility of the municipal level, and they don't have ways to raise additional money, typically, outside of property tax. It has created some real hardships at the municipal level.

So the dedicated tax is absolutely a great measure, but we need it indexed, as we said, and any other way that we can look at increasing funding for infrastructure.... The government committed in the budget to work with all levels of government for developing a permanent, long-term, sustainable infrastructure plan, which is for water treatment plants for communities, for infrastructure for the fibre optic field...I mean, it's every area. We've been told that natural resources in Canada are going to grow--