Evidence of meeting #89 for Finance in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was changes.
A video is available from Parliament.
4:50 p.m.
Conservative
Shelly Glover Conservative Saint Boniface, MB
That's fine.
Madame Presseault, we've met before on tax measures, on how important it was for this government to address tax loopholes. In the bill, we addressed tax loopholes.
4:50 p.m.
Conservative
Shelly Glover Conservative Saint Boniface, MB
Do you have any comments about the tax loopholes changes we're making?
4:50 p.m.
Vice-President, Government and Regulatory Affairs, Certified General Accountants Association of Canada
Well, there are a number of measures. I'd like to address the gaps, the pieces of legislation that are not in the bill. They are what we've been looking at as the grey areas. Those have not been legislated and we will welcome the technical tax bill when it comes forward. I think that's going to be an important one.
The Auditor General talked about 400 unlegislated tax measures. We still have to address that backlog.
4:50 p.m.
Conservative
4:50 p.m.
Vice-President, Government and Regulatory Affairs, Certified General Accountants Association of Canada
Yes, we've taken notice that the ways and means motion has been tabled.
I do want to say something about PRPPs.
4:50 p.m.
Vice-President, Government and Regulatory Affairs, Certified General Accountants Association of Canada
Very briefly, we do support the introduction. It's going to start filling that big, wide gap between public and private pension plans, but certainly we are supportive of PRPPs. Now we have to get provinces to adopt the legislation. We have to get employers choosing and offering PRPPs as well.
4:50 p.m.
Conservative
The Chair Conservative James Rajotte
Thank you, Ms. Glover.
I'm going to finish with the final round.
Perhaps I'll follow up with Mr. Cudmore. In your opening statement, you talked about the fact that you worked with the NRC's IRAP. Do you see IRAP as a good federal program?
4:50 p.m.
President, TSGI-Chartered Accountants
Yes, IRAP is a wonderful program. It's one of the best ones I've seen with the National Research Council. It's unfortunate that it doesn't have more funding.
4:50 p.m.
Conservative
The Chair Conservative James Rajotte
Funding was announced in budget 2012. I assume you see that as a welcome investment in terms of the budgetary funding.
4:55 p.m.
Conservative
The Chair Conservative James Rajotte
Do you see that as welcome in terms of the funding increase in budget 2012?
4:55 p.m.
President, TSGI-Chartered Accountants
Yes, that is a very good thing. I think that IRAP, of course, only helps small and medium-sized corporations, not large ones, but it's very positive, yes.
4:55 p.m.
Conservative
The Chair Conservative James Rajotte
Mr. Lavoie, would you agree that the NRC's IRAP is a good program?
4:55 p.m.
Director of Policy, Manufacturing Competitiveness and Innovation, Canadian Manufacturers and Exporters
Yes, we do agree. It's not accessible for companies with more than 500 employees, but it's good for what it is designed to do.
4:55 p.m.
Conservative
The Chair Conservative James Rajotte
That's certainly what I hear universally from businesses.
I want to read a couple of statements from the budget document with respect to the findings of the Jenkins panel which found:
Relative to peer countries, Canada has an over-reliance on tax incentives in the mix of federal support for business research and development compared to direct expenditures that support innovative firms and public-private research collaborations.
The budget document set out the key recommendations of the Jenkins report, one of which is:
Shift resources from indirect support through the Scientific Research and Experimental Development (SR&ED) tax incentive program to direct forms of support, including the Industrial Research Assistance Program.
The budget document went on to state:
Economic Action Plan 2012 begins to deliver on this commitment, announcing $1.1 billion over five years for direct research and development support and making available $500 million for venture capital.
The logic here is fairly clear. We have a program. The single largest federal program supporting business R and D in Canada is the SR and ED program. It provided over $3.6 billion of taxpayer funds in 2011. The rationale is to move some of that taxpayer support to more direct funding programs like IRAP.
As both of you gentlemen know, governments have to make decisions in terms of opportunity costs. We can't fund everything. Money doesn't grow on trees in Ottawa. We have to make decisions. The decision was made to move some of that very generous taxpayer support for R and D from indirect support like SR and ED into direct programs like IRAP.
Do you disagree with that overall approach? Give me your reaction as an organization and as an individual.
We'll start with Mr. Cudmore and then go to Mr. Lavoie.
4:55 p.m.
President, TSGI-Chartered Accountants
I think another report that should be looked at is the MacIntosh report. Professor Jeffrey MacIntosh wrote it in March of this year in commentary to the Jenkins report. One of the things he talked about was whether or not direct investment was really the way to go. His studies would indicate that even very sophisticated investors have a very difficult time in getting it right and picking the right winners. Whenever governments play the position of making direct investments, they are investors, and I don't think we have much hope of them ever making as good decisions as the market will make.
4:55 p.m.
Conservative
The Chair Conservative James Rajotte
Is your view that, of the two choices, you would keep the funding with SR and ED and not increase funding for IRAP? You can't do both.
4:55 p.m.
President, TSGI-Chartered Accountants
The IRAP funding that you did was only $115 million of new money. That's very little of the $1.5 billion you took—
4:55 p.m.
Conservative
The Chair Conservative James Rajotte
A part of over $1 billion of funding plus $500 million for venture capital.
4:55 p.m.
President, TSGI-Chartered Accountants
I think we have to see whether that's an effective way of dealing with it. Again you're asking the government to be an investor. Governments have never proven themselves to be particularly adept investors in any type of private enterprise.
4:55 p.m.
Director of Policy, Manufacturing Competitiveness and Innovation, Canadian Manufacturers and Exporters
My first observation is it is true there may be a greater imbalance between direct and indirect support in Canada. What I don't have is evidence that a more balanced approach would necessarily have more business R and D expenditures in Canada.
My second observation is that part of this imbalance was actually created in 2006 when we got rid of a program called technology partnerships Canada, which was providing $350 million a year in direct R and D support. There have been a lot of problems with this program, including the picking winners issue. The Auditor General has made several reports about it and we decided to get rid of it. Part of this imbalance was created right there.
We kept some of it under SADI, but there's still a gap. I want to be cautious here because there's going to be 2,600 companies impacted by the ITC rate reduction and I don't think any direct support mechanism is going to be accessible for these 2,600 companies.
4:55 p.m.
Conservative
The Chair Conservative James Rajotte
My time is running out here. Regarding the $3.6 billion of taxpayer assistance in 2011, you mentioned you are going to submit a list of companies and their concerns in terms of funding they may lose. Could we as a committee have a list of all innovations that have occurred as a result of this very large federal taxpayer investment?