Finance Committee on Oct. 16th, 2012

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

How do we go about addressing this issue? We've talked about universal benefits. We've talked about payroll taxes and income tax. Even if we discuss these things further, they are probably the least important aspect of this problem.

[Prof. Luc Godbout]

In this case, that's right.

I will give you two unsatisfactory solutions that are to be avoided. We should not try to deal with the implicit tax problem by eliminating tax benefits. People would be poorer but there wouldn't be this problem of implicit tax. That is not the solution.

Transforming it into a universal program available to everyone is not the solution either because that would be extremely expensive.

Among the richest people, there is a psychological threshold of 50% that they won't cross. In the same way, there needs to be this psychological threshold among the poorest people. There needs to be some kind of agreement between the government and the citizen that states that for each additional $1 earned, losses in the form of taxes and fewer tax benefits will not exceed 50¢.

It's much easier said than done because there are two levels of government and a myriad of programs that aren't necessarily consistent with one another.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I have approximately one minute left.

Mr. Gomez, I listened to your presentation and I've read it as well. You underlined the issue of infrastructure in Toronto. I think we agree that there's an infrastructure deficit in Canada. When I was the official opposition's industry critic, I spoke with industry representatives quite often. They were asking for corporate tax cuts and that's what the Conservatives gave them.

The industry representatives also wanted the government to invest in infrastructure. The corporate tax cuts resulted in Canadian companies sitting on $500 billion in cash reserves. We can't have it both ways, so which one would you choose? Tax cuts or an infrastructure investment program to deal with that deficit and make us more competitive with emerging countries, for example?

[The Vice-Chair, NDP, Peggy Nash]

Mr. Gomez, you have 15 seconds to respond.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

You can answer that question later if you wish.

[Juan Gomez]

We think it needs to be a balanced approach. We think investments in infrastructure will pay huge benefits in the long term and also in the short term. We would see that as a priority for the government. Ensuring in the overall balance of spending that it is done wisely, obviously, this next budget needs to make infrastructure a serious priority and must allocate the necessary resources to it.

[The Vice-Chair, NDP, Peggy Nash]

Thank you very much.

Mr. Godbout, our apologies. I'm told that we're about to receive your presentation.

We're going to break to go to the vote. I'm reminding the members and the witnesses that we will come back after the vote to finish our meeting. I think Mr. Rajotte will be back by then.

The meeting is suspended.

[The Chair, Conservative, James Rajotte]

I call this meeting back to order. This is the 77th meeting of the Standing Committee on Finance. We are resuming our pre-budget consultations.

I want to thank the witnesses very much for their patience in waiting for the votes to be finished. I have a number of colleagues who wish to ask questions. If any of you would combine your time, I think the witnesses and others would see that as very appreciated, but obviously we will go in the order that I have here. I understand we are starting with Mr. Adler.

Mr. Adler, this is your round.

[Mark Adler, Conservative, York Centre, ON]

Thank you, Chair.

I want to thank all of the witnesses for being here today. This was a very informative session.

I'd like to begin my questioning with Mr. Gomez.

I'm going to ask you a couple of quick questions.

You indicated during the course of your presentation that you have 10,000 members in the Toronto Board of Trade. Is that correct?

[Juan Gomez]

That's correct, yes.

[Mark Adler, Conservative, York Centre, ON]

Thank you.

Of those 10,000 members, did any one of them indicate to you, implore you, that when you were coming up here to make representation to the finance committee today, you were to ask the government to impose a $21 billion carbon tax? Did any one of them?

[Juan Gomez]

That was not presented to us in our consultation.

[Mark Adler, Conservative, York Centre, ON]

Thank you very much.

Mr. Rothschild, I really enjoyed your presentation. You use the empirical evidence well. You presented your facts, the case for strategic partnerships, brilliantly. I was very impressed with the presentation, so thank you. I think it has a lot of potential for us here on the government side.

There was an article last year in The Economist, on the front page, talking about the magic of diasporas. Canada is well positioned as a country of immigrants, with large ethnocultural communities that could take advantage of exactly what you were talking about in terms of strategic partnerships with other countries. Could you elaborate on that and the position of Canada in the world in terms of its potential for doing so?

[Henri Rothschild]

Thanks very much, Mr. Adler.

I can on two counts. One is partnership with India and with China. Canada is not alone in having large segments of our population with origins in India and China. Other countries, such the United States, countries in Europe, and Australia, have that. One of the things I did not specify is in our programs with India, China, Brazil, and Israel is that we work with counterparts in those countries, so on a daily basis we work with an organization in India that's similar to ours and with an organization in China that's similar to ours.

One of the things that they have noticed is the degree to which Canadians of Indian and Chinese background are positioned in what I will call the innovation system of Canada, whether it's in academia, in companies, or in government institutes of technology. Without being corny about it, I will say that the meritocracy that characterizes the Canadian system has enabled a much faster tracking of capable, talented, educated individuals with origins from those countries.

Nothing reflects that more than the numbers I commented on regarding China. We had 500 expressions of interest. An expression of interest isn't a phone call; it's an actual application. We had a research project and a binational team defined, and the Canadian principal investigator in 68% of our applications is a Canadian of Chinese origin. When I say that, I mean 10 years or less in Canada, which means that they came here basically to pursue education, to connect with Canadian universities, and then stayed on either as doctoral students or PDFs and then became entrepreneurs. Similar numbers exist with Indo-Canadian communities.

This is a huge comparative advantage for Canada because it enables us.... First of all, they have maintained contact, which is true of all people with that level of education. Your community is in essence your discipline, your technological, scientific, and engineering discipline. This enables us to build partnerships with fast-growing technology development centres in India and China that others cannot do as well as we do.

It's very important because, again looking at China, one could argue that the really important news coming out of China is it has a dedicated commitment to being a science superpower by the year 2025 and is acting accordingly.

[The Chair, Conservative, James Rajotte]

You have 30 seconds.

[Henri Rothschild]

The numbers in terms of science productivity are very high. For us to engage China, we need to engage across that platform.

[Mark Adler, Conservative, York Centre, ON]

I see that particularly in the riding that I represent, York Centre. We have the largest number of Russian-speaking people of any riding in the country, and there is a lot of business going back and forth.

I want to ask you one more thing. The Minister of Finance, in the last budget, said he was going to be refreshing the global commerce strategy. This is a perfect fit for that, is it not, in your estimation?

[The Chair, Conservative, James Rajotte]

Please answer very quickly.

[Henri Rothschild]

We think that an integrated commerce strategy or integrated trade policy or refreshed global commerce strategy all say the same thing. It means that technology, trade, and other aspects of international commerce have to be dealt with together as one package.

As I indicated before, technology partnerships now lead to trade, and we have a lot of case studies that give evidence to that.

[Mark Adler, Conservative, York Centre, ON]

And trade means jobs.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Brison, please.

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

Thanks to each of you for your interventions today.

I'll start off with Mr. Rothschild.

I'm a big fan of the book Start-up Nation, which I think is better than almost any other thing I've read. It really summarizes some of the successes in Israel.

What more can we be doing, in terms of investments, in strengthening alliances between Canadian research, Canadian entrepreneurs, and Canadian and Israeli universities? Mr. Alho may want to say something about it as well.

[Henri Rothschild]

Well, without appearing too self-serving, the kinds of programs I described are something we should do a lot more of, for a couple of obvious reasons. What I mean by that is to promote collaborative research between researchers where the objective of the research is commercialization.

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

You told us the dollar figure that Israel is spending. What should be the appropriate dollar figure for Canada?

[Henri Rothschild]

I mentioned $20 million a year, as opposed to $5 million a year, for the four countries.

Where does that number come from? It comes from the number of applications we receive that are of high quality and that would enable us to make huge returns to the Canadian economy based on the results of those partnerships.

That doesn't mean we couldn't productively spend more, but on the basis of what we've seen so far, we don't think more than $20 million is justified at this time. However, that amount, given the leverages we've already experienced, would be defensible, as far as what I would call good investment practices and good management of the public treasury are concerned.