Evidence of meeting #62 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was work.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Karen Swol  Director, Program Management, Rail Safety, Department of Transport
Dean Beyea  Director, International Trade Policy Division, Department of Finance
Olivier Nicoloff  Director, Democracy, Commonwealth and Francophonie Division, Department of Foreign Affairs and International Trade
Colleen Barnes  Executive Director, Domestic Policy Directorate, Canadian Food Inspection Agency
Nancy Leigh  Manager, Governance Secretariat, Canada School of Public Service
Jane Pearse  Director, Financial Institutions Division, Financial Sector Policy Branch, Department of Finance
Suzanne Brisebois  Director General, Policy and Operations, Parole Board of Canada, Public Safety Canada
Louise Laflamme  Chief, Marine Policy and Regulatory Affairs, Department of Transport
Lenore Duff  Senior Director, Strategic Policy and Legislative Reform, Department of Human Resources and Skills Development
Lawrence Hanson  Director General, Strategic Policy Directorate, Department of the Environment
Pamela Miller  Director General, Telecommunications Policy Branch, Department of Industry
Allan MacGillivray  Special Advisor to the Director General, Telecommunications Policy, Department of Industry
Alwyn Child  Director General, Program Development and Guidance Directorate, Department of Human Resources and Skills Development
Mireille Laroche  Director General, Employment Insurance Policy, Department of Human Resources and Skills Development
Mark Hodgson  Senior Policy Analyst, Labour Markets, Employment and Learning, Department of Finance
Patrick Halley  Chief, Tariffs and Market Acess, International Trade and Finance, Department of Finance
Vivian Krause  As an Individual
Mark Blumberg  Lawyer and Partner, Blumberg Segal LLP
Dan Kelly  Senior Vice-President, Legislative Affairs, Canadian Federation of Independent Business
Dennis Howlett  Coordinator, Canadians for Tax Fairness
Jamie Ellerton  Executive Director, EthicalOil.org
Blair Rutter  Grain Growers of Canada
Marcel Lauzière  President and Chief Executive Officer, Imagine Canada
Tom King  Co-Chair, Finance and Taxation Committee, Prospectors and Developers Association of Canada
Sandra Harder  Director General, Strategic Policy and Planning, Department of Citizenship and Immigration
Cam Carruthers  Director, Program Integrity Division, Human Resources and Skills Development Canada
David Manicom  Immigration Program Manager (New Delhi), Area Director (South Asia), Department of Citizenship and Immigration

7:30 p.m.


The Chair Conservative James Rajotte

Thank you very much, Ms. Krause.

We'll go to Mr. Blumberg. Welcome back to the committee.

7:30 p.m.

Mark Blumberg Lawyer and Partner, Blumberg Segal LLP

Thank you very much.

My name is Mark Blumberg. I'm a lawyer and partner at the law firm of Blumberg Segal LLP in Toronto. I'm an editor of our firm's website, GlobalPhilanthropy.ca, which deals with legal and ethical issues facing Canadian charities.

As I testified on May 8, the charity and non-profit sector in Canada plays a vital role in this country. The committee is currently reviewing the 2012 budget, which has various provisions affecting the regulation of charities. I am most interested in those provisions dealing with transparency.

In my view, the most important provision in the budget is that which gives CRA the ability to suspend a charity's receipting privileges if the charity files an incomplete annual return. This provision and related education will emphasize the importance of charities' completing the T3010 annual return as accurately as possible. It will provide CRA with greater tools when a charity is being deceptive in its filing, such as if a charity were to have millions of dollars in fundraising expenditures but would put down zero in fundraising costs.

The budget adds some transparency requirements on political activities, especially when funded from foreign sources. I would point out that charities currently disclose quite a bit, and this would just be adding to what is currently disclosed. Currently, charities disclose the amount of foreign income received; the name of any foreign donor giving over $10,000, which is disclosed to CRA but is confidential information; whether the charity has carried out political activities; and how much is spent by the charity on political activities. The additional transparency exclusively related to political activities will not affect the ability of Canadian charities to conduct allowable political activities. In fact, much of the information that will be captured on the T3010 is already available from public sources such as the U.S. Form 990 filings and websites of the Canadian charities.

There has been recent coverage of political activities and cross-border philanthropy. It's important to recognize that, while charities are forbidden from being involved in partisan political activities, they play an important role in policy and political discussion. Registered charities can engage in allowable political activities as long as they are non-partisan, related to their legal objects, and limited resources are used, which generally means less than 10% of resources.

We are pleased that the 2012 budget did not include restrictions on political activities by Canadian charities or impediments to foreign charities and individuals supporting Canadian charities. We've written about charities and how they report their political activities, and we would argue that there is significant room for improvement in reporting on the T3010 questions already being asked, not to mention additional questions that may be added.

CRA will have additional resources to do outreach and education to help charities understand the rules. They'll probably conduct more audits on charities, and some of those audits will involve political activities. Many charities incorrectly assume that they're not allowed to do any political activities. I think after a few years of education by CRA they will come to be more knowledgeable and understand that charities can, and in many cases, should be involved in political activities. They just have to do it within the rules that are set out for them.

It's important that there is improved transparency in the charitable and non-profit sector. Canadians, especially donors, are asking for it. I would reiterate that I made a couple of proposals with respect to section 241 of the Income Tax Act to try to improve transparency. Specifically, the first idea was to allow the CRA to disclose serious non-compliance with legal requirements by registered charities and other qualified donees prior to revocation. Currently, CRA has to wait until after the revocation to let people know that, for example, a charity has been involved in a $600 million scheme. They can't say anything about it until after the revocation.

The second idea was to allow the CRA to disclose information contained in the non-profit organization's information returns, which many non-profits already have to file every year, but which CRA is forbidden by section 241 to disclose. These are short forms filed by many non-profits that set out their name, their revenue, and things like that. Whereas charities have to provide quite a bit of information on the T3010, we are not able to know, and CRA is not able to tell us, who these non-profits are and what their revenues are.

So those were two suggestions that I made with respect to changing section 241, and there's no cost to changing it. It's a matter of removing the shackles on CRA and allowing it to put out information on those two points.

I think that greater transparency will reduce the abuse of non-profits and registered charities, increase the chance that those who abuse charities are discovered quickly, and increase public confidence in the sector, which is vital for fundraising and increasing donations.

Thank you very much for having me here at the committee.

7:35 p.m.


The Chair Conservative James Rajotte

Thank you for your opening statement.

We'll now here from Mr. Kelly, please.

7:35 p.m.

Dan Kelly Senior Vice-President, Legislative Affairs, Canadian Federation of Independent Business

Thanks very much to the committee.

I did provide a short deck of some slides about the 2012 budget for your attention.

I want to say at the very beginning that we are very grateful to government for finally moving on marketing freedom for Canadian wheat and barley growers. Our members are very pleased about that. Survey after survey of our western grain and barley growers showed that this was something they had wanted for a long time. We're grateful that it has finally come to be.

In fact at meeting on Vancouver Island this weekend, some of our representatives, who were out there calling on our Alberta members, told us that they didn't believe this would happen before they died, but they are very happy that it has.

I want to say from the outset that there are a number of small business-related concerns right now. Many of them have been touched on in the budget. An awful lot more work needed to be done on several of them.

The good news is that there is starting to be a greater degree of optimism among small and medium-sized businesses, and that optimism is turning into hiring. We have started to see a bit of a break. More of our members are looking to hire employees than to let go of employees, and that is a really positive outcome that has just occurred in the last couple of months.

Still on the top of our members' agenda are the total tax burden, government regulation, employment insurance, the shortage of labour—again, growing very quickly. The 2012 federal budget did contain progress on eight of the top twelve issues that we had recommended.

The biggest measure we had suggested was to make progress on renewal of the EI hiring credit. We're very pleased that has occurred. That has been very positively received by our members, and I believe it is related to the higher degree of optimism among small and medium-sized firms at this point in time.

When we asked our members during the recession what was most helpful to them, they felt that the freezing of EI premiums was the single measure the government took that did help them out.

We've seen more recent changes on employment insurance, and while not directly related to the budget, it has directionally gone in ways that our members do favour. Minister Flaherty's comments that there are no bad jobs other than being unemployed have resonated very well with our membership.

The real proof is going to be in the implementation of some of these new provisions, and that is what concerns us. Right now with respect to EI, you're not supposed to get benefits if you quit or you're fired, but everyone knows you can go into the EI office with a good sob story that the boss was mean to you and have benefits reinstated in about two minutes. It does concern us that some of the new changes that have been put in place are actually going to have a direct impact.

I do want to raise concern, though, that these changes have been made through regulation. It took quite some time for these changes to come to the public, and it's something I would suggest is better debated with the full knowledge of where the government is headed. We're pleased to see that the information is finally out for us to make decisions on.

With respect to employment insurance, 22% of our members told us they feel they're competing against EI for workers, and 16% of our members said they have been asked by employees to lay them off so they can collect employment insurance. The need for change is very clear.

The shortage of labour among small and medium-sized businesses is growing in every Canadian province. This has been characterized as a western Canadian issue, and it's not. After Saskatchewan, the second highest level of concern about the shortage of labour is in Newfoundland and Labrador. That's coming from thousands of small and medium-sized business owners.

7:40 p.m.


The Chair Conservative James Rajotte

You have one minute, Mr. Kelly.

7:40 p.m.

Senior Vice-President, Legislative Affairs, Canadian Federation of Independent Business

Dan Kelly

Okay. There have been some recent changes to the temporary foreign worker program, which was referenced in the budget itself. Most of the changes are positive. We like the direction they're heading in, but most of the changes do apply to immigrants with higher skills. They do not apply to those who are in the more modest skill set, in entry-level positions, those in semi-skilled professions, and in the trades.

We really do feel that for the temporary foreign worker changes to be effective they need to apply to all temporary foreign workers. We are hoping that the permanent skilled immigrant program can be expanded to mimic more of the benefits of the temporary foreign worker program—things like allowing temporary foreign workers to stay in Canada through the Canadian class. It's a great decision. Again, it cuts out those who are in the lower-skilled categories, which is something we feel needs to be addressed.

With respect to OAS changes, we have brand new survey data from our members. Again, directionally our members support it. A quarter of our members do oppose the OAS changes, but our members strongly feel these changes need to apply to public service employees so that public service pensions mimic the new retirement age set out in OAS.

I'd be happy to take any other questions.

7:40 p.m.


The Chair Conservative James Rajotte

Thank you very much, Mr. Kelly.

We'll now hear from Mr. Howlett, please.

7:40 p.m.

Dennis Howlett Coordinator, Canadians for Tax Fairness

I'm the coordinator of Canadians for Tax Fairness. I thank you for the opportunity to share our concerns regarding this omnibus budget bill.

Since I have very limited time, I'll address just two points: one, the need for a revenue-side solution to the deficit problem; and two, the need for government policy to support increased lobbying and political engagement by charities, not curtailing it as Bill C-38 is possibly going to do.

The first point, we need fairer taxes to increase revenue, reduce the deficit, and close the income gap. Austerity is the wrong prescription for an ailing economy. Cutbacks in government spending and layoffs of large numbers of public servants jeopardizes the weak economic recovery.

The main reason for the government deficit is not runaway government spending but ill-advised tax cuts. Thanks in part to corporate tax cuts that have lowered the federal corporate tax rate from 21% in 2006 to 15% today, non-financial Canadian corporations are now sitting on about $500 billion of surplus cash. They are not investing for the most part in job creating expansion because there is weak consumer demand for their goods and services. What they need more than tax cuts are policies that would boost consumer spending. Increasing unemployment, as this budget is expected to do by up to 70,000 full-time jobs if you include both the public and private sectors over the next three years, will not help to boost consumer demand.

The underlying weakness of consumer spending is due in large part to the growing gap between rich and poor. Wealth has become far too concentrated in the top 10% or even 1%, and middle- and lower-income Canadians have seen their income stagnate or decline. The rich, the very rich, can't spend as much as ordinary Canadians because there are very few of them.

What would help our economy, and business in particular, would be policies to redistribute wealth. One of the most effective ways to do that would be to make taxes fairer.

Canadians for Tax Fairness contributed to the alternative federal budget 2012, which included a tax fairness plan that proposed: increasing tax rates on top incomes; reversing the race to the bottom with corporate tax cuts; eliminating unfair tax preferences, and closing tax loopholes and access to tax havens; applying financial activities or transaction taxes; introducing an inheritance tax on large estates; and starting to introduce smart and progressive green taxes.

These tax measures and elimination of subsidies to oil companies could raise an additional $50 billion a year that could go toward reducing the deficit and implementing new programs, such as pharmacare, child care, climate change action, and a poverty reduction plan.

This budget bill has hardly any new revenue measures at all. It is unfair to try to balance the budget by spending cuts alone, which will adversely affect middle- and lower-income Canadians. We need a more balanced approach that would include revenue-side solutions as well.

The second point is to encourage public policy engagement by charitable organizations. I'm surprised and outraged by the attack on the rights—and I would add the responsibility—of charitable organizations to engage in advocacy on public policy issues. The real problem is that we have far too few charitable organizations contributing to public policy dialogue.

As the Canada Revenue Agency noted in their 2003 policy statement on political activities of registered charities:

Beyond service delivery, their expertise is also a vital source of information for governments to help guide policy decisions. It is therefore essential that charities continue to offer their direct knowledge of social issues to public policy debates.

The $5 million allocation in the budget for special audits by CRA, to see if charities are adhering to the 10% limit on advocacy, and additional restrictions in reporting rules for charitable foundations contained in Bill C-38 are sending the wrong message—that government doesn't want to hear from non-government organizations, especially if they disagree with government on environment, gender equality, or poverty issues.

I would have thought that many Conservatives who subscribe to the principles of liberty and limiting the power of big government would have wanted to expand democracy and citizen engagement, not curtail it.

7:45 p.m.


The Chair Conservative James Rajotte

Okay, we're over time, Mr. Howlett, if you could just wrap up briefly.

7:45 p.m.

Coordinator, Canadians for Tax Fairness

Dennis Howlett

I would recommend that all of the clauses of Bill C-38 that seek to curb political engagement of charitable organizations be removed.

Thank you.

7:45 p.m.


The Chair Conservative James Rajotte

Thank you for your presentation. We will now hear from Mr. Ellerton, please.

7:45 p.m.

Jamie Ellerton Executive Director, EthicalOil.org

Good evening, Mr. Chairman.

Thank you to the members for having me here today.

My name is Jamie Ellerton. I am the executive director of EthicalOil.org. We are a Canadian non-profit organization that advocates for ethical oil from Canada's oil sands and other western liberal democracies. Ethical oil is produced in countries with high environmental standards that are peaceful nations, where workers are treated and compensated fairly, and have respect for human rights. Conflict regimes, by contrast, oppress their citizens, operate in secret with no accountability, and have little, if any, regard for the environment. What we do is important, but I do not claim that it is charity. It is political, and it is simply not on the same moral plane as true charitable endeavours.

Government accords charities the privilege in exchange for the charitable work they do. The benefits that come with that privilege are quite generous and result in foregone revenue to the government. In Canada there is not a consensus on ethical oil, and promoting one side in a political debate is not charity. I will quote from the Canada Revenue Agency:

...in order to assess the public benefit of a political purpose, a court would have to take sides in a political debate. In Canada, political issues are for Parliament to decide....

Now, stop for a moment and imagine. If arguing one side of an issue were a charitable act, then arguing the other side would be a charitable act too. Let me read you such an example. The example is deer hunting. It comes from Canada Revenue Agency's policy statement CPS-022, about political activities. I quote:

The main reason why the courts rule out political purposes for charities is a result of the requirement that a purpose is only charitable if it generates a public benefit. A political purpose, such as seeking a ban on deer hunting, requires a charity to enter into a debate about whether such a ban is good, rather than providing or working towards an accepted public benefit.

If you have to debate whether or not something is charitable, it is not. Mr. Chairman, that policy statement was published in 2003 under Prime Minister Chrétien. This is not a matter of partisanship. It's about the neutral application of tax laws. Politics should never enter into it.

In 1989 Revenue Canada revoked Greenpeace's charitable status because it engaged in prohibited activity. Greenpeace then set up another charity called the Greenpeace Canada Charitable Foundation, which also saw its charitable status revoked in 1998. It had nothing to do with the PC or Liberal governments of the day. It was the CRA doing its job in enforcing the Income Tax Act.

Given this history, why are we discussing this today? The Government of Canada wants to make sure charities are following the rules they agreed to when they applied for charitable status, a classification that gives them generous benefits such as tax-free status and the ability to offer donors deductible receipts.

Mr. Chairman, Ethical Oil has noticed increased political and partisan activities of several organizations that we believe are in violation of charities law for their political and partisan activity. To that end, we have written several complaints to the Canada Revenue Agency detailing how we believe various Canadian charities are violating the law. Whether it's a representative of the David Suzuki Foundation appearing in a TV advertisement for a political party, or Environmental Defence making 50,000 phone calls in one electoral district to attack one member of Parliament, we do not believe this work to be charitable.

Concerns have been raised that this legislation attacks free speech. I do not believe this to be true. No charities doing charitable work have anything to fear from Bill C-38. Charities that are complying with the law today will continue to be if Bill C-38 is passed. What the bill actually does is this. For those organizations that have been given the privilege of charitable status, which includes a generous subsidy from Canadian taxpayers, it requires registered charities to provide greater transparency into their activities in exchange for that privilege.

That is why Ethical Oil supports the initiatives contained in Bill C-38 and hopes to see its passage through Parliament.

Thank you, Mr. Chair.

7:50 p.m.


The Chair Conservative James Rajotte

Thank you very much, Mr. Ellerton, for your presentation.

We will now hear from Mr. Rutter, from the Grain Growers of Canada.

7:50 p.m.

Blair Rutter Grain Growers of Canada

Thank you, committee members, for this opportunity to appear before you today.

My name is Blair Rutter. I am the Executive Director of the Western Canadian Wheat Growers Association, one of 14 organizations that belong to Grain Growers of Canada. I'm here today representing the Grain Growers whose members represent tens of thousands of successful farmers from coast to coast. When the budget was introduced earlier this year, the Grain Growers were pleased to see that expanding trade remained a high priority. Improving access to markets is vital to ensuring growth and prosperity in our sector.

The implementation of marketing freedom for wheat and barley will also grow the profitability of our sector. We are eagerly anticipating an open market on August 1. This move has already sparked private investment in further value-added grain processing and research. The open market success of our canola, pulse, and oat industries gives us reason to be optimistic that we will see similar success stories in wheat and barley.

Grain Growers supports the budget provision that extends the deferred payment tax provision to all Canadian farmers, not only those in the Canadian Wheat Board area. This provision allows farmers a modest ability to smooth out the year-to-year fluctuations in their incomes.

The Grain Growers were also pleased to see the modernization of food safety regulations at CFIA, the Canadian Food Inspection Agency, and Health Canada. We support efforts to reduce regulations and simplify the process by which new products can come to market. We encourage you to continue down this path, especially with respect to the registration of new crop varieties.

To take full advantage of the increased opportunities in agriculture, we ask your committee to address the following issues.

First, we need to continue our emphasis on research and innovation. We were disappointed in some of the cutbacks to agriculture announced in the budget. While we support the change in focus toward early-stage variety development, the 10% cut in core funding of agriculture did affect some front-line research positions. If costs are to be trimmed, it should be in administration and not research staff. In particular, the Grain Growers are concerned that the program relating to important spray technology might be eliminated. This valuable research has reduced farmer input costs and improved our stewardship of the environment. We ask your committee to ensure that funding for this program remains in place.

Second, our sector is dependent on a reliable rail transportation sector. We urge all parliamentarians to support back-to-work legislation and restore rail service so that farmers do not bear the cost of lost sales and ships in harbours waiting for grain. We also ask the government to introduce legislation this fall that will address long-standing rail service issues.

Finally, the Grain Growers are seeking the modernization of the Canada Grain Act. The budget makes a special allotment for continued funding of the Canadian Grain Commission at present levels, and we thank the government for this stopgap measure. Making some of its services optional and allowing third-party service providers will lower costs to farmers and ensure the commission is well positioned to meet the future needs of our industry.

Again, thank you for the opportunity to share our views.

7:50 p.m.


The Chair Conservative James Rajotte

Thank you very much, Mr. Rutter.

Mr. Lauzière, you may make your presentation, please.

7:55 p.m.

Marcel Lauzière President and Chief Executive Officer, Imagine Canada

Mr. Chair, thank you for the invitation to appear before the Standing Committee on Finance this evening.

I am the President and Chief Executive Officer of Imagine Canada, an umbrella organization for charitable organizations in Canada. Our primary mission is to work to strengthen charities so they can, in turn, better serve Canadians and communities, here and elsewhere in the world.

The federal budget announced new disclosure measures for political activity by charities. Essentially, three things will happen. First, there will be some new questions on the T3010 form, the form that charities have to send off to CRA annually around political activity. Secondly, foundations will now be required to report differently on the 10% for political activity, and finally, there will be what CRA calls “intermediate sanctions” that may be applied in the case of inaccurate reporting.

I have to say I'm very pleased that these measures in no way change the 10% rule for political activity, a rule that has been in place for many years and that has been working well. Charities can still do political activity, as defined by the Canada Revenue Agency, just as before. The changes are in how we will need to report on these activities. The changes are related to new forms of disclosure.

Now with regard to the practical impact of these changes, we will have to see what the questions are, and as you know, the devil is always in the details. But we will be in a better position to comment on specifics once we've seen that information.

We have had some communication with the Canada Revenue Agency, and those discussions have been productive. Our hope is that the reporting burden will be kept to a minimum. We have to recognize the fact that the new measures will add to the reporting and administrative burden of charities, which means adding to compliance and overhead costs. Canadians want us to keep these costs as low as possible. Indeed, during the hearings on charitable giving, members of this committee commented on the need to keep administrative costs as low as possible. So it is imperative that the burden be kept reasonable and that the costs not outweigh any public policy benefit.

That being said, our real concern regarding political activity is the recent public language used by some ministers and some senators that has been, in fact, inflammatory. It is creating real uncertainty and concern within the broad charitable sector in Canada. Many have told us that they are worried about engaging in public policy at all. This goes well beyond the environmental charities. I'm talking about charities involving social services, in poverty alleviation, in social housing, in the arts, in health, in services for people with disabilities, and I could go on.

Whether intended or not, this debate and the language used are impacting the entire sector. Indeed, some ministers and senators appear to have questioned whether charities should play any role in public policy. I'm hearing that a number of volunteer board members from across Canada are expressing worry as to whether they can participate in public policy at all, as they have done for many years, including appearing in front of parliamentary committees such as this one.

Mr. Chair, as you know—and I know you appreciate—charities have a long and proud tradition of working with governments at all levels on crucial policy issues. This has served us well as a country, and it has been valued by Canadians and by governments for very good reasons. Charities work at the coal face of some of the most intractable social, environmental, economic, and cultural issues, dealing directly with individuals and communities. Because they work on the ground, they bring a knowledge base that is crucial, and I would say, complementary to the knowledge that governments bring, and that's a good thing. It often creates debate and questioning, but that's not a bad thing either. Good public policy comes from bringing to the table a variety of different perspectives based on different experiences. As a country, we've benefited from this perspective. I can't imagine why we would want to put this in jeopardy.

Charities and the millions of Canadians who continue to support their work want this positive and productive engagement with the government to continue. Who can argue against what governments and charities have achieved together: smoke-free workplaces, unthinkable 20 years ago; measures to fight drinking and driving—and we're seeing the real success of those—the national child benefit that has had a big impact on child poverty in Canada; the Canada-U.S. acid rain treaty; the Registered Disability Savings Plan, put forward by this government; and more recently, the maternal and infant health strategy that now is being championed by the Canadian government.

What all of these achievements have in common is that none of them would have been possible without the leadership of so many charities and the people that support them, and none of this would have been possible without a strong relationship and partnership between charities and governments.

7:55 p.m.


The Chair Conservative James Rajotte

One minute.

7:55 p.m.

President and Chief Executive Officer, Imagine Canada

Marcel Lauzière

The very public language used in recent weeks is creating a chill, and that is really difficult for charities across the country. My hope is that with a national conversation now we will begin to celebrate the work of charities in a way that will make us all proud.

In closing, let me say that, contrary to some statements made, charities in Canada are actually committed to transparency and disclosure. Just recently, Imagine Canada launched, with the support of the charitable sector, a new world-leading standards and accreditation program that's being embraced—a program that will ensure that Canadians continue to have trust and confidence. Working with the Canada Revenue Agency, we just launched CharityFocus, a citizen-focused, one-stop portal for information on all 85,000 charities, providing Canadians with a wealth of easily accessible financial and other information about every charity in Canada. I think this is the type of engagement that will benefit all Canadians.


8 p.m.


The Chair Conservative James Rajotte

Okay, merci beaucoup.

Our final presenter will be Mr. King, please. Thank you for being patient. We look forward to your presentation.

8 p.m.

Tom King Co-Chair, Finance and Taxation Committee, Prospectors and Developers Association of Canada

Thank you.

Good evening, Mr. Chair and committee members. I thank you for the invitation to appear before this committee and to offer comments on part 1 of Bill C-38 on behalf of the Prospectors and Developers Association. I am co-chair of the association's finance and tax committee, and an associate partner, tax, at KPMG LLP.

The Prospectors and Developers Association of Canada, with more than 10,000 members, both individual and corporate, exists to protect and promote mineral exploration and development and to ensure a robust mining industry in Canada. The Canadian mining industry is a great success story and a fundamental driver of Canada's economy. In 2010 the mining industry employed 308,000 people, contributed $36 billion to the national GDP, and paid $5.5 billion to governments in taxes and royalties. The mineral exploration and mining sector is the lifeblood of many rural and remote communities throughout Canada, and is the largest private sector employer of aboriginals in Canada.

Canada's mining industry plans to invest $136 billion in projects over the next decade on new domestic projects and on the expansion of existing ones. Canada is recognized as a leader in mineral exploration, development, financing, mining, and related technologies, services, and activities. In 2011 we led all countries with 18% of the world's mineral exploration spending. Australia is second at 13%.

The TSX/TSX Venture Exchange is number one in equity capital raised for mining and number one in listed mining companies with 58% of the world's total. At the end of 2011, 43%, or 1,646, of the 3,837 companies listed on the TSX/TSXV exchange were from the mining sector. In comparison, the number of mining companies listed on the Australian stock exchange is 700, and on the New York Stock Exchange and AMEX it's only 141.

Mineral exploration is the essential first step in the mining cycle, and Canada has a number of features that attract investment. We have good geology, a skilled workforce with new training initiatives, and a competitive tax system that includes flow-through share financing and the mineral exploration tax credit, the METC, both of which are unique to Canada.

The METC is important for mineral exploration financing. PDAC's members are primarily small and medium-sized enterprises that rely on equity financing to support early-stage, higher-risk exploration activities. In our pre-budget submissions and consultations, the PDAC recommended the continuation of the METC, asking that it be made permanent in order to provide greater certainty to investors and exploration companies. The METC and flow-through share financing continue to serve a critical role, as they allow junior companies to raise needed capital, keep investment in Canada, and sustain grassroots exploration activity.

The fragile state of the global economy is having a negative impact on company share prices and their ability to raise high-risk financing. Further, project costs are rising as a result of exploration, development, and production taking place in more complex ore bodies and deeper-lying deposits with lower grades and at more remote locations. Without sufficient investor support, companies will carry out less exploration, causing an impact on service companies and individuals, particularly those in rural, northern, and aboriginal communities. As costs rise, financing becomes more critical.

With respect to exploration and equity financing, flow-through shares and the mineral exploration tax credit offer individual Canadian investors an additional incentive to support the higher-risk ventures.

8 p.m.


The Chair Conservative James Rajotte

You have about one minute, Mr. King.

8 p.m.

Co-Chair, Finance and Taxation Committee, Prospectors and Developers Association of Canada

Tom King

Thank you.

Initiated in 2000 for a five-year period, the METC was reintroduced in 2006 and subsequently renewed for two years. It has since been extended on a yearly basis. We were pleased to see the mineral exploration tax credit included in the March 29 federal budget. Bill C-38 would extend the tax credit for an additional year to flow-through share agreements entered into before April 2013.

It is important to note that the METC can only be earned on grassroots exploration conducted in Canada, incurred within a defined time period, and renounced under flow-through share agreements entered into within defined time limits. It should also be remembered that any METC claims are subject to taxation in the year subsequent to the taxation year in which they are claimed. Thus the after-tax saving is closer to 7.5% to 8% versus the actual 15% of the credit.

In conclusion, I'd like to thank this committee for giving our association the opportunity to speak today. We would be happy to answer your questions.

8:05 p.m.


The Chair Conservative James Rajotte

Thank you very much, Mr. King, for your opening presentation.

We'll have questions from members. I'll just remind members, we have five-minute time limits, very tight. If you could direct your questions very specifically, it would help.

We'll start with Ms. Nash, please.

8:05 p.m.


Peggy Nash NDP Parkdale—High Park, ON

Thank you very much.

My time is short, so I'll try to be brief and succinct in my questions.

Ms. Krause, you have made some serious—I don't know if you'd call them allegations, but you've raised some serious concerns with respect to foreign money in Canadian charities skewing the public debate. Is that a fair assessment of what you're saying?

I'd just like to ask you if you have any concrete evidence that you'd like to put before the committee today.

May 28th, 2012 / 8:05 p.m.

As an Individual

Vivian Krause

Sure. The reason I've said that I feel the public debate is being skewed is that some groups are saying that they want all voices to be heard, when in fact they're funding only voices that are all of the same position. In the case of the Enbridge pipeline, for example, groups are saying that they want everybody to be heard, but they're funding only the people who are against it. So it's like putting the finger on the scale and tipping it.