Finance Committee on Oct. 25th, 2011

[The Chair, Conservative, James Rajotte]

I call this meeting to order.

Good morning, everyone. Welcome to Whitehorse, Yukon.

It's a pleasure to be here. It's my first time, as it is for many committee members. It's wonderful to be here in the territories.

We are continuing on pre-budget consultation 2011.

There are three organizations here with us this morning. We have the Tourism Industry Association of the Yukon, the Prospectors and Developers Association of Canada, and the Yukon Chamber of Commerce to present to us.

Each of you will have five minutes for an opening statement.

We will begin with the Tourism Industry Association of the Yukon, please.

[Krista Prochazka, Executive Director, Tourism Industry Association of the Yukon]

Good morning, ladies and gentlemen.

My name is Krista Prochazka, and I am the executive director of the Tourism Industry Association of the Yukon. Thank you for allowing me to appear before you today.

As you are aware, tourism is an important contributor to Canada's economy. Tourism is a pillar industry in the Yukon, accounting for up to 7.2% of our GDP and nearly $200 million in private sector revenues. It is one of the largest private sector employers in the territory, with more than 25% of Yukon businesses reporting revenue from tourism. It has been and continues to be an important industry in our territory.

International tourism is globally one of the fastest-growing industries in the world. Canada is blessed with breathtaking landscapes, world-class attractions, and an incredibly rich heritage and culture. The Canadian brand is number one internationally, but international air travel to Canada has been on the decline for a number of years and domestic overnight travel has been relatively stagnant. Between 2002 and 2010, Canada in fact dropped from sixth in international tourism arrivals to fifteenth, a drop of about four million visitors. We are only one of two countries to drop out of the top ten and the only one to lose in visitations.

A key impediment to reversing this trend is Canada's current aviation cost structure. This structure taxes us out of contention for international visitors and discourages Canadians from exploring their own country. As someone from the Windsor-Detroit border can attest, it drives Canadians south of the border for flights. Together this contributes to a $14 billion trade deficit.

Canada is a “fly-to” destination and price competitiveness is vital to attracting visitors. This is even truer in Canada's north. Yukon is the smallest jurisdiction and Whitehorse is the smallest community in North America to receive direct access from Europe. For all northern communities, our quality of life, economic competitiveness, and viability as a choice tourism destination are directly tied to the cost and accessibility of air access.

Under the current cost structure, the taxes and fees imposed on our airline tickets placed Canada 125th out of 138 countries ranked. When combined, airport ground rents, the air traveller security charge, navigation charges, payments to municipalities, and aviation fuel taxes can add upwards of $160 to the cost of an overseas ticket. Increasingly, airport improvement fees are also added.

Our airports are economic engines that spur growth not only in tourism but in virtually every industry. If Canada is going to regain its position as a top international destination and benefit from the fastest growing industry in the world, we must become competitive again. As such, our recommendation to the committee is for a prompt and comprehensive review of the aviation cost structure in Canada, with a view to achieving a fair and competitive tax and regulatory regime that will allow us to compete on a level playing field with the rest of the world.

We would as well like to recommend to the committee that the federal government revisit the funding model for the Canadian Tourism Commission, with the objective of providing a competitive and stable base for effectively marketing Canada internationally.

The CTC competes for an international tourism market worth $3 billion a day and yet their core funding has dropped year over year for most of the last decade. At $72 million, it's 27% less than they received in 2001. By comparison, the new marketing organization in the United States will operate with an estimated budget of over $200 million.

Like many Canadian jurisdictions, the Yukon relies on our partnership with the CTC to leverage our resources in international markets. The decline in core funding to the CTC not only erodes their capacity, it also inhibits our ability to enter into new and emerging markets and to remain active in crucial markets such as the United States.

Marketing dollars are an investment. Investing in tourism marketing creates a payback to the economy and the government many times over. The return on these dollars is exceptional. In the Yukon, for every marketing dollar spent, 27 new dollars enter the territory. Other countries recognize this and are making large investments, leaving Canada 20th in the world for national tourism organization funding. In this highly competitive marketplace, Canada cannot expect to succeed by relying on its natural endowments and cultural attractions.

While the Canadian brand is currently number one, this cannot continue without competitive and sustainable funding. By providing a competitive and stable base for the CTC, Canada and all of its regions can continue to build a successful tourism marketing commission and can benefit from the tremendous economic potential of international tourism.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the Prospectors and Developers Association of Canada.

[Tara Christie, Chair, Finance and Taxation Committee, Prospectors and Developers Association of Canada]

Thank you.

Good morning, Mr. Chair and committee members. My name is Tara Christie. I serve on the board of directors of the Prospectors and Developers Association of Canada. I'm also the chair of the finance and taxation committee of the PDAC. I'm the president of a private business, Gimlex Gold Mines, which is based in Dawson City here in the Yukon. I'm also a director of various other public and private companies operating in the mining and exploration business.

I'm here with Philip Bousquet, the PDAC's senior program adviser. We're here to talk to you about the mining and exploration industry.

First of all, welcome to the Yukon. As a Yukoner, I thank you for coming here and also thank you for inviting us to appear before you. I grew up in the mining and exploration business, and despite my father's best advice I continued in the business.

I'm proud to report that mineral exploration is thriving here in the Yukon, with estimates showing that our activity is up from $150 million, which was spent in 2010, to around $300 million this year. That's a significant increase for the Yukon. Both here and across Canada, mineral exploration and the mining business is the lifeblood of small rural communities, particularly those that don't have other industries to sustain them.

Throughout the recession that we experienced, exploration and mining companies have continued to invest in Canadian projects, creating jobs and new businesses that support the mining industry. Many of these businesses are aboriginal owned and operated and employ aboriginal and first nations employees. This leads to new opportunities throughout the country.

Our mining industry is a story of success and a fundamental driver of Canada's economy, employing over 306,000 people and accounting for 3.5% of Canada's GDP. The industry also pays $5.5 billion in government taxes and royalties.

Mineral exploration is the important first step in the mining cycle and Canada has a number of features that attract investment. We have great geology. We have a skilled and knowledgeable workforce. We have new training initiatives that bring people into the industry. And importantly, we have a competitive tax system that includes flow-through share financing and the mineral exploration tax credit, the METC. Both of these are unique to Canada. This is important, as exploration companies have no production revenue. They rely on investors who are willing to support the high-risk activities of exploration and know that with a lot of effort and some good fortune, projects can succeed and become new mines.

We compete in Canada with other countries for exploration dollars. Many companies have projects both in Canada and elsewhere in the world. The money goes to the best projects. The benefits of flow-through shares is that the money raised can only be spent in Canada. It's a program that allows many projects to continue when markets are unstable and money's hard to get.

Since 2000, the flow-through share program has been supplemented by the METC, the mineral exploration tax credit, which provides a 15% tax credit on top of the flow-through share deduction. During this period, since 2000, Canada has moved into and has retained its position as the top destination for exploration dollars, with between 16% and 19% of the global exploration expenditures being spent in Canada. In an average year the mineral exploration tax credit investors provide companies with $400 million in new financing. And this is spent on grassroots exploration in Canada. The money is spent here, ensuring that if a mine is discovered, the jobs and other economic opportunities benefit Canadians directly.

I'm going to turn it over to Philip to talk about our association.

[Philip Bousquet, Senior Program Director, Prospectors and Developers Association of Canada]

Thank you, Tara.

Our association, representing 8,000 members, individual and corporate, exists to protect and promote mineral exploration and to ensure a robust mining industry in Canada.

Our recommendations to this committee are the following.

First, make the current mineral exploration tax credit a permanent feature of the federal tax policy. The credit has been a great success; however, it must be renewed each year in order to continue. It is due to expire on March 31, 2012.

Second, we support continued investment in geoscience. The work of the Geological Survey of Canada, as well as provincial and territorial surveys, has been fundamental to a detailed understanding of the land and resources. Programs such as geo-mapping for energy and minerals encourages new investment and job creation.

Our final recommendation is to promote good social responsibility and environmental practices by clarifying the interpretation of tax rules that govern the eligibility of community consultation and environmental compliance costs.

To conclude, mineral exploration and mining is fundamental to Canada's economic growth and we are world leaders in this industry. The recommendations we ask this committee to consider will help to ensure that exploration dollars continue to be spent in Canada.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll now hear from the Yukon Chamber of Commerce, please.

[Sandra Babcock, President, Yukon Chamber of Commerce]

Good morning.

My name is Sandy Babcock, and I'm the president of the Yukon Chamber of Commerce.

I apologize for my tardiness this morning. We have this great, exciting conference starting today, and my phone has not stopped ringing. My apologies.

It is with deepest appreciation that we come before the committee to express our views for consideration in your pre-budget consultations. It's particularly encouraging that you've come to Whitehorse to listen to us speak and give us this opportunity.

The Yukon Chamber of Commerce is the umbrella organization of all Yukon community chambers of commerce, effectively representing over 800 businesses in the territory.

In the fall of 2010 the Yukon government released a report on business and the economy in the territory. They identified that there are over 3,000 businesses in the territory. However, 51% are home-based businesses. I think that gives you some indication of the size of the business community we operate in.

We represent business through the areas of legislation, regulation, infrastructure development, and business and economic development.

As you are aware, the Yukon is one of the very few jurisdictions in Canada that has no net debt and enjoys a healthy financial position. Without federal programs and initiatives, such as Building Canada, and infrastructure and stimulus funding that have greatly benefited the Yukon, this would not be the case.

We support the federal government's commitment to balance its books by 2015-16, while staying the course on promised corporate tax reductions. Through the vision and commitment of Prime Minister Stephen Harper, the north is a priority not only for the federal government but also for corporate Canada.

General Electric recently released a report called “The Business Case for Investing in Canada’s Remote Communities”. This identified many of the gaps and opportunities across Canada's north. The report identifies and supports three of the top priorities of the Yukon Chamber of Commerce.

Priority number one is investment in a comprehensive economic development strategy. The Government of Canada has developed a northern strategy, and this strategy has raised awareness and commitment to developing Canada's north. The absence of a comprehensive economic development strategy for the Yukon is seen by us to be detrimental in the execution of the northern strategy.

Our recommendation is that the federal government support and participate in the development of a comprehensive economic development strategy in partnership with the private sector, Yukon government, and Yukon first nations.

Our second priority is investment in infrastructure. The Yukon is a small jurisdiction with limited financial resources; however, our infrastructure needs are large. With the huge demand for resources in the highly active tourism and mining sectors, we have new needs, and the importance of infrastructure cannot be stressed enough.

Our first recommendation in that area would be that the federal government invest in providing the Yukon with the ability to develop a clean and reliable energy strategy that addresses generation and transmission to support economic development. The Yukon is currently a stand-alone transmission system. When our power goes out, life as we know it in the business world comes to a halt. You cannot do business without power. The impact on small business is horrific in terms of computer issues. When the power goes out suddenly, a lot of expense has to be provided by the private sector, out of their funding, to make repairs.

Our next recommendation is that the government invest in broadband infrastructure projects that support economic development. Our broadband telecommunications system is again a stand-alone system. When the system goes down, commerce cannot happen. Debit machines do not operate. Credit card transactions are not available. Stores have to close down until the power goes on. We probably enjoy at least 10 to 12 major power outages per year, which really has a significant impact on our ability to conduct business.

It is these investments that we feel will contribute to the economic sustainability of the Yukon, resulting in us being a net contributor to Canada's economy.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much for your presentation.

We'll begin with questions from members.

Ms. Nash, for a five-minute round, please.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you.

Thank you, Yukoners, for your hospitality. It's great to be here, even though we're here so briefly.

Let me first begin very quickly with Ms. Babcock for the chamber. When was the last time an overall economic strategy was developed for the Yukon? Can you give us a sense of where your plans originated?

[Sandra Babcock]

We're not aware there has ever been one.

There has been a strategy for the Yukon, but it's with the Yukon government. They have an internal strategy. There is, however, no Yukon-wide detailed strategy for the territory.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Can you give us a sense of what the unemployment rate is like up here? I know a lot of the jobs obviously involve the mining sector, the tourism sector, and the public sector, but is there much unemployment out there?

[Sandra Babcock]

No, there isn't. I believe the September statistics indicate the unemployment rate is 5.1%, so we enjoy a very comfortable.... However, that does bring new challenges in terms of finding and hiring the people we need to fill the jobs that are available now.

[Peggy Nash, NDP, Parkdale—High Park, ON]

I have one last question. You raised a number of interesting issues. And something that the New Democratic Party has been raising is the importance of infrastructure investment, whether it is water and sewage, bridges, broadband, first nations housing, or whatever it is--that now there is an opportunity with low interest rates to invest in the key infrastructure investments so that when the economy is growing we can take advantage of this economic generator. Is that something that makes sense?

[Sandra Babcock]

Absolutely. I only highlighted the energy and the broadband telecommunications. However, we are challenged with affordable housing and housing that's affordable, which are two different things; one is social and one is general housing. Those are very large issues in the territory due to our increasing population. I believe we're enjoying a net in-migration of about 10% per year, so that's quite substantial for the territory to absorb. Housing, of course, is a huge issue. I know there are northern housing dollars out there to address some of the issues, but it really doesn't address the land development issue and the issue of housing that's affordable.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Yes, it's a good time to invest now.

How much time do I have, Mr. Chair?

[The Chair, Conservative, James Rajotte]

You have two and a half minutes.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Excellent.

To Ms. Prochazka, we've heard this before, that we're falling in terms of tourism arrivals. We have a great story to tell about Canada, and especially here in the Yukon, that people around the world would probably love to come hear. I support your call for review of the cost for air transportation. Do you think we could be doing a better job of marketing Canada to the world? It seems like we've got a great story to tell--our arts, our wilderness. How do you see us doing a better job as a country?

[Krista Prochazka]

I think we do absolutely have an incredible story to tell, and I think we've seen some really effective and incredible marketing campaigns coming out of the CTC and out of individual jurisdictions across Canada in recent years. What we don't have is consistent, sustainable funding currently at a level that would allow both the CTC and their partners--because virtually every jurisdiction in Canada buys into partnering with the CTC somewhere in the world--to plan ahead and to be really strategic and to enter some of these really significant growth markets.

One of the big things with the markets that are growing rapidly is we need to really build destination awareness with them. And you need a certain amount of money to keep our presence among countries that are just investing.

[Peggy Nash, NDP, Parkdale—High Park, ON]

I'm sorry, I'm going to interrupt you, because I only have 30 seconds.

To our colleagues from the Prospectors and Developers Association of Canada, this is obviously a huge part of the northern economy, and it's difficult, challenging work. Can you tell us, aside from gold and silver, what are some of the key mineral exploration targets that you have here, and some of the plans you have going forward?

[The Chair, Conservative, James Rajotte]

I know we'll probably come back to this in a later round, but could you briefly address that?

[Tara Christie]

The Yukon has three operating mines now. We have a silver and lead mine in Mayo, which just opened up this year. We have an operating copper mine near Carmacks, and we also have a lead-zinc mine down in the southern Yukon. Yukon went from having no producing hard-rock mines to having three this year, which is a tremendous success story. Certainly precious metals and base metals are potentially in the Yukon.

[The Chair, Conservative, James Rajotte]

Thank you, Ms. Nash.

We'll go to Mr.--

Is there a problem with the translation? Let's just test the system, Monsieur Giguère.

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

There is no French translation of what I am saying in English. A lot is missing. It will be easier if I listen in English.

I'm listening to the English.

[The Chair, Conservative, James Rajotte]

We'll go to Mr. Leef, please, for a five-minute round.

[Ryan Leef, Conservative, Yukon, YT]

Thank you all for coming.

The first question is tourism-based. I think most people across Canada are surprised--I spread the word now in Ottawa--that the Yukon benefits from direct flights from Frankfurt, Germany, to Whitehorse, from I think Zurich this year to Whitehorse, and in fact I can get to Frankfurt faster than I can get to Ottawa.

Canada invests in maintaining the international designation of the Whitehorse airport. Can you just tell us briefly how important that kind of thing is to maintain for a small market like the Yukon and the importance of continuing the international airport designations?