Finance Committee on Nov. 21st, 2013

[The Chair, Conservative, James Rajotte]

I call this meeting to order. This is meeting number nine of the Standing Committee on Finance.

I want to welcome our guests, who are appearing today pursuant to Standing Order 83.1 on our pre-budget consultations 2013.

We have one motion to deal with as a committee. I understand we are going to deal with it very quickly. It's a motion by Mr. Hoback.

Colleagues, we dealt with this in the last session. You should have it in front of you.

I'm going to go to Mr. Hoback very briefly, and then to Ms. Nash.

Mr. Hoback, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Mr. Chair.

This is more of a formality, colleagues. I was under the impression that this would automatically come back into the committee, but with prorogation it was parked, so we have to bring it forward again.

I don't expect a lot of debate. It was passed quite easily before. You've heard the arguments for and against the need to do the study and what is involved in it. Nothing has changed, as far as that goes.

I think that's fair enough, Mr. Chair.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Hoback.

Ms. Nash, please.

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

Mr. Chair, can you clarify what the timeframe of our study would be? How many meetings are we looking at, including voting on the motion? How much time would it take?

[The Chair, Conservative, James Rajotte]

My understanding, with respect to the number of meetings, and Mr. Hoback can correct me, is that three to four would be required for this study. The thought would be, and we can change it, that we would start with this study in the new year and then we would move to the study proposed by you on youth underemployment. That is the plan at this point. I don't know how many meetings would be allocated for that.

Does that answer your question?

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

Yes.

[The Chair, Conservative, James Rajotte]

Mr. Hoback, is that okay?

[Randy Hoback, Conservative, Prince Albert, SK]

Yes. If we can do it in three, fine. If it has to be four, let's see about that, but I think three would probably be close.

[The Chair, Conservative, James Rajotte]

Thank you.

Monsieur Caron.

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

Would that include a meeting with officials and the clause-by-clause consideration?

[The Chair, Conservative, James Rajotte]

There is no clause-by-clause examination. It's a study of—

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

Oh, it's just a motion. Okay.

[The Chair, Conservative, James Rajotte]

It's a study of mobile payments.

My understanding is that Mr. Hoback would propose something like actually seeing mobile payments in action, perhaps a site visit, if you want to call it that, and then two or three meetings.

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

I didn't mean to say clause-by-clause consideration. I was referring to the consideration of the report.

[The Chair, Conservative, James Rajotte]

Why don't we say four meetings including consideration of a report? Is that okay?

[Randy Hoback, Conservative, Prince Albert, SK]

That's fair. I don't see it going to more than four meetings. I think that if we were to have one good meeting to go through the technology and then bring in witnesses for the next meeting or two and then we would be done in the fourth meeting is probably more than fair.

[The Chair, Conservative, James Rajotte]

Thank you.

Can I call the vote, then?

(Motion agreed to [See Minutes of Proceedings])

It's unanimous.

Thank you very much, colleagues, for dealing with this so quickly.

We'll now move back to our witnesses. Again, welcome to our committee meeting this morning regarding pre-budget consultations.

We have six people presenting. First of all, from the Canadian Association of Petroleum Producers, we have Mr. Alex Ferguson. We have the president of the Canadian Construction Association, Mr. Michael Atkinson. From the Canadian Manufacturers & Exporters we have Monsieur Martin Lavoie. From the Quebec Employers' Council, we have Ms. Norma Kozhaya. From Northam Brands Ltd., we have Jayson Columbus.

Finally, we have Julie Labrecque from the Regroupement des jeunes chambres de commerce du Québec.

Welcome to the committee.

You will each have a maximum of five minutes for an opening statement.

We'll begin with Mr. Ferguson, please.

[Alex Ferguson, Vice-President, Policy and Environment, Canadian Association of Petroleum Producers]

Good morning, Mr. Chairman, and members of the committee.

As mentioned, my name is Alex Ferguson. I work with the Canadian Association of Petroleum Producers. As you probably know, our members collectively find and develop over 90% of Canada's petroleum resources.

Thank you for inviting us to participate in this panel on maximizing employment opportunities for Canadians. In our August submission to the committee, we provided comments and recommendations on increasing access to new export markets, continuing regulatory reforms, ensuring a competitive business tax structure, and promoting the growth of a Canadian skilled workforce. The supplementary brief we are providing today details how some of these recommendations can help maximize employment opportunities for Canadians. I will highlight a few of these in short comments this morning.

The upstream oil and gas sector is one of Canada's largest industries. Annual revenues total about $100 billion. The industry is Canada's largest private sector investor with over $60 billion a year spent on exploring and developing Canada's vast resources. About a quarter of the value of the shares traded on the TSX is related to oil and gas.

More than half a million Canadians are directly employed by this industry. While our success in contributing to national economic growth and generating jobs has been significant, we need to expand our horizons beyond our single export customer. Opportunities exist to tap into growing Asian markets for both oil and gas. Without access to these markets, Canada will be left behind while other countries take advantage.

We are blessed with an overabundance of supplies in this country and in North America, but if we can't get to new markets, we'll have let the opportunity for Canadian economic growth and job creation slip through our fingers.

The finance committee recognized the importance of diversifying Canada's export markets in its report last year. You recommended that “the federal government expeditiously encourage and support the development of infrastructure in relation to liquefied natural gas exports”.

The same sentiment is just as true for encouraging exports of our oil, of which we have the third largest reserves in the world to new markets. Opening new markets for Canadian oil and gas is key to helping maximize employment opportunities for Canadians. Once we know we have a growing market for our products, we need to ensure there is available investment capital and a skilled workforce to make that growth happen. Continuing to reduce investment uncertainty and increase the focus on balanced decision-making will help increase Canada's global competitiveness. The federal government can ensure the timely implementation of key regulatory initiatives, including regulations, and better implementation of the Species at Risk Act, the Fisheries Act, climate policy, and air quality initiatives.

The government also needs to ensure that the business tax structure is competitive and that investment capital is treated equitably across sectors. In particular, last year CAPP recommended that LNG, liquefied natural gas, export facilities be fairly recognized as manufacturing and processing for tax purposes. This remains our view.

Over the next decade this industry expects to create upwards of over 150,000 new direct jobs. This growth can't happen without the necessary skilled employees. In addition to the positive steps already taken in the Canada job grant program, the federal government can continue to strengthen essential skills development and training and education programs, tighten the link between post-secondary education and needed workforce skills, reduce the barriers that keep Canadians from being able to seek employment across the country in their area of expertise, and continue the EI system reforms that allow better links between employers and jobseekers.

Even with this Canadians first focus, Canada will need to rely on workforce supplies from abroad. Strengthened and clear programs both for permanent immigration and through a robust temporary foreign worker program are necessary for Canada to benefit from that talented labour available abroad.

These are my opening remarks on how to maximize employment opportunities for Canadians through gaining access to new markets, continuing regulatory reforms, ensuring a competitive business tax structure, and strengthening skills development, as well as through immigration and an effective, robust, temporary foreign worker program.

With that, Mr. Chairman and committee members, I look forward to your questions and an interesting discussion.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Ferguson.

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

[Michael Atkinson, President, Canadian Construction Association]

Mr. Chair, I wish to first of all thank the committee members for providing the Canadian Construction Association with the opportunity to appear before you in connection with your annual pre-budget consultations.

The Canadian Construction Association, as some of you know, represents some 20,000 member firms from coast to coast to coast in Canada, active in the non-residential sector of the construction industry. We build Canada's public infrastructure. We build many of Mr. Ferguson's members' facilities.

Since the theme for today's session is maximizing employment opportunities for Canadians, my comments will focus specifically on three recommendations we believe will help to achieve this goal. While I do not have a supplementary submission for you, I would be pleased to provide the committee with any follow-up information you may wish arising from my presentation.

As I said, our focus is on three specific measures. They are as follows: one, the need for a construction mobility tax credit; two, improvements and enhancements to the current federal apprenticeship job creation tax credit; and three, a change to the current capital allowance treatment of mobile diesel-powered construction equipment to better align depreciation rates with the useful service of the equipment and to bring such tax measures in line with those in the United States.

First of all, with respect to the mobility tax credit, while I appreciate there is a private member's bill before Parliament dealing with this matter currently, our approach to this issue is entirely non-partisan. We support the concept, and have supported the concept for several years now, regardless of the ultimate mechanism chosen by Parliament for its implementation.

Labour mobility is something that is critical to the construction industry, indeed critical to Mr. Ferguson's members' projects, which are often in very remote areas. Unlike the workforces of many other industries which are attached to a given location, the construction industry's workforce must be mobile in order to follow the work wherever it may be. If we have a mining project in northern British Columbia, we can't move the mine to downtown Toronto.

While it is true that employers will generally cover the expenses associated with sending their employees to relocate temporarily to work at distant or remote work sites, that is not the case for unemployed tradespeople seeking work in more hot markets than their home markets.

Construction workers are used to leaving their homes and families to work at distant sites for periods of time. A 2007 study conducted by the Construction Sector Council found that 70% of surveyed tradespeople travelled to find work at least once in their careers. Canada's Building Trades Unions have research that suggests the average mobile construction worker spends approximately $3,500 of his or her own money to temporarily relocate.

The sector council study I mentioned also found that the cost of temporary relocation is one of the biggest impediments to labour force mobility in the construction industry. We need a construction workforce that is mobile if we are going to meet the tremendous demand our industry is seeing from the resource-based sector, with some 600 resource-based projects to proceed in the next 10 years, worth over $650 billion, many of which are in remote parts of our country. For this reason, we are championing the concept of a mobility tax credit.

Second is the apprenticeship job creation tax credit. We applaud the federal government for the introduction of various support programs designed to encourage apprenticeship training across the country. I want to focus on the apprenticeship job creation tax credit, because it's really the only federal incentive for employers to actually engage apprentices, in this case first-year and second-year apprentices.

The apprenticeship job creation tax credit was lauded by our members when it was first introduced. We believed it would help incentivize smaller firms with fewer resources to become more directly engaged in apprenticeship training. The credit provides an employer incentive to hire first-year and second-year Red Seal trade apprentices through an annual non-refundable tax credit equal to a maximum of $2,000 of eligible salaries and wages per apprentice.

However, a 2007 Canada Revenue Agency ruling effectively removed any incentive by treating the tax credit as government assistance and wage subsidies and requiring it to be included in the taxpayer's income the following year. So if you take the tax credit one year, you have to bring that amount back in.

[The Chair, Conservative, James Rajotte]

You have one minute.

[Michael Atkinson]

Finally, I'll turn to capital cost allowances, CCAs. In Canada, class 38 purchases, which are basically mobile construction equipment, have a 30% declining balance, which means you can't effectively write off your machinery for almost 13 years.

What we'd like to see is an accelerated CCA for that equipment equivalent to what happens in the United States where they have a 25% straight line depreciation. We believe that would not only increase productivity enhancements by encouraging firms to buy newer equipment but also help the environment, because the new diesel-powered engines have better emission controls on them. We think it's a win-win across the board.

I will stop there, Mr. Chair. I look forward to questions.

Thank you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Atkinson.

Mr. Lavoie, you may start.

[Martin Lavoie, Director, Manufacturing Competitiveness and Innovation Policy, Canadian Manufacturers and Exporters]

Good morning, Mr. Chair and hon. members. Thank you for inviting my organization and I to discuss our priorities for the next federal budget. I will start my presentation in French and switch to English afterwards.

I represent Canadian Manufacturers & Exporters, Canada's largest business association. We represent almost 10,000 companies across the country. Our sector accounts for more than 88% of all Canadian exports and 75% of all research and development spending in the private sector in Canada.

Today, I will make six recommendations that can be grouped in four major categories.

The first category is support for research and development activities. Our first recommendation has to do with research and development tax credits that are not used by medium and large businesses in Canada. The scientific research and experimental development program provides large industrial companies with non-refundable tax credits that can be carried over to subsequent years while waiting for a more profitable outcome.

The 2,600 medium and large businesses that are using the tax credit have carried over almost $7 billion in unused tax credits since 2001. In keeping with the current government's intentions to make more direct investments in research and development for businesses, we recommend that a program be set up to exchange unused tax credits for government contributions and to support capital investment that is used for research and development purposes. Those contributions would therefore be an alternative to the complete elimination of capital expenditures for the scientific research and experimental development tax credits that were announced in budget 2012 and that will be in effect starting next year.

The second recommendation has to do with the direct funding for research and development. We strongly support the creation of the support fund for the advanced manufacturing sector in southern Ontario. We firmly believe that all the other regional economic development organizations in the country should adopt similar programs for the advanced manufacturing sector.

Our next recommendation is about large-scale capital investment attraction. CME suggests the creation of a national fund to boost new investments in capital for the manufacturing sector. This new capital investment fund would target projects that would demonstrate an ability to increase manufacturing and processing output in Canada.

The sorts of projects that could be eligible for such direct funding would include the building of new production facilities, the expansion of current facilities, revamping existing operations, or the upgrading of machinery and equipment,

Our fourth recommendation is related to machines and equipment. It's something that my colleagues have talked about.

The accelerated capital cost allowance for machinery and equipment has been in place since 2007, and is set to expire in 2015. We strongly recommend that the ACCA become a permanent feature of the Canadian tax system, recognizing the importance of capital expenditures for the future of our sector and for increased productivity in the Canadian economy.

We also strongly encourage the federal government to review all the classes of assets and to align them with the U.S. depreciation rules in order to provide a level playing field in the fiscal treatment of business investments.

Our next recommendation is with respect to commercialization of new products in Canada. We recommend the adoption of a patent box model. A patent box is a tax incentive that provides relief from corporate tax on income generated from certain types of qualifying intellectual property, such as patents. Relief can be given as a reduced tax rate on revenues generated by the sales of products that were invented and commercialized in Canada. Countries such as the United Kingdom, Belgium, and the Netherlands have already implemented similar systems successfully.

[The Chair, Conservative, James Rajotte]

You have one minute left.