Finance Committee on Sept. 20th, 2017

[Charlotte Bell, President and Chief Executive Officer, Tourism Industry Association of Canada]

Thank you.

Good evening, Mr. Chair and honourable members of the committee.

On behalf of the Tourism Industry Association of Canada, I'd like to thank you for the opportunity to speak to you today about how the government and our industry can work together to enhance the competitiveness of Canadian tourism and increase opportunities for businesses and Canadians working in the tourism sector.

Our pre-budget submission includes recommendations that we believe will lead to a stronger and more competitive tourism industry, one that will be able to fulfill the new tourism vision's goals for the industry that were set out by the Minister of Small Business and Tourism, a vision that we applaud the minister for putting forward, and that includes working towards our common goal of re-entering the top 10 most visited countries in the world.

In order to get there, we feel that more has to be done to enhance Canada's competitiveness within the global tourism marketplace. We've provided recommendations in areas ranging from immigration reform and cost competitiveness to continued support for tourism marketing.

Today, I'll first address issues raised by the committee.

People are the cornerstone of the tourism industry. Tourism employs 1.7 million Canadians, most under the age of 35. While tourism is a large provider of jobs for Canadians, and for Canadian youth in particular, many businesses and communities that rely on tourism are struggling to attract and retain employees. While this is a significant issue in resort and remote communities, even urban areas like Niagara Falls report that, despite high regional unemployment rates, significant labour shortages exist in those regions. We're making every effort to attract more tourists. Let's ensure we have the resources to serve them well.

There are steps the government can take to bridge this gap. Foremost is legitimizing tourism and service sector jobs by removing “high-skilled” and “low-skilled” categorizations for businesses and job seekers trying to access federal programs. There's a perception that tourism jobs are low quality and low paying. This is simply not the case. The reality is that hourly wages are frequently higher than minimum wages, with additional benefits such as housing included in many offers, and there are myriad examples of top executives in this sector who started in entry-level positions and quickly worked their way to very successful careers.

We've been told that Canada has many young unemployed people and that we should just hire those people to fill those vacancies, but mobility and housing shortages in certain areas are real barriers, in addition to negative perceptions about those jobs. We've been told that places such as Banff are beautiful and that all young Canadians should want to work there and in such beautiful places. That's true enough, but this doesn't drive a significant amount of labour to those areas where housing and mobility continue to be issues.

Studies repeatedly show that relocation is a low priority for Canadians, especially in urban areas, and there are few government incentives to encourage relocation. This is an area where specific programs to address those issues would help. We need to encourage young people to experience Canada and its regions through work programs in sectors experiencing labour shortages.

We had seen some reprieve with allowances for seasonal workers, but these temporary measures have not helped long-term employment issues. It would be advantageous for business owners to be able to access a reliable source of labour, and providing a path to citizenship for experienced foreign workers residing in Canada would also help.

Other than employment, we want to reiterate from our last appearance at the finance committee the importance of cost competitiveness to our business. Canada is a popular destination, but the cost of travel to and within the country remains high. In today's increasingly competitive travel marketplace, taxes, levies, and fees on tourism products inflate the price of tourism goods to international buyers, and Canada competes with the world to attract visitors. According to the World Economic Forum travel competitiveness report, Canada ranks 97th out of 141 countries in terms of cost competitiveness.

Tourism is a top economic driver for the Canadian economy. In addition to proactive policy measures and increased marketing budgets, we've seen Canada's brand and visitation numbers increase substantially over the past couple of years. This said, our favourable currency has also helped to make Canada more attractive to visitors. As the dollar continues to rise, our ability to maintain and grow those numbers will be challenged. As such, we urge the government to take measures to address cost-competitive issues.

We have made several recommendations in our submission that address both the committee's specific question, as well as how to strengthen Canada's overall competitiveness on the international stage.

Thank you for your time and I look forward to your questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Ms. Bell.

We'll be turning then to questions. I think we'll drop to five-minute rounds. That way we can get eight questioners on.

Go ahead, Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Welcome, everybody, and thank you for your presentations.

I'd just like to start off with the Appraisal Institute. Looking at B-20 and B-21 and extending that to non-federally regulated mortgage lending, would that curtail consumers or individuals from obtaining housing, in any way, and would it slow down housing demand in Canada?

[Keith Lancastle]

It's our belief that levelling the playing field is part of having a balanced marketplace. Certainly, what we are seeing now is people pursuing loans through non-federally regulated lenders, often at terms that are certainly not competitive. We're concerned about those potentially higher-risk borrowers coming into the market and having that exacerbate and accelerate demand. We believe that levelling the playing field is in the best, long-term interest of the marketplace.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

I just want to add that I do agree with the financial literacy component of your brief. I think this applies across the board for all Canadians and not just seniors or new home buyers. I think financial literacy has to be a part of it. I know the Ontario provincial government has mandated it in the education curriculum now for high school students, which I applaud, so I do agree with you.

I'll move on to the Home Builders' Association. Kevin, how are you? Welcome. We've chatted several times.

On the rental side, that's obviously very important for everyone because the home ownership rate in Canada is about 68%. Many folks don't own their home; they rent. On the purpose-built rental, you had two recommendations. How big a bump would we have, in terms of these recommendations you've put in place for rental building?

[Kevin Lee]

I'm sorry. I didn't hear the question. How big of a bump...?

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

If these measures were put in place, how much would this assist entrepreneurs or developers in building rental buildings?

[Kevin Lee]

We don't have statistical analysis, in terms of how big the bump will be. However, we do know there has been an increase in the desire to build purpose-built rental, but that these measures that aren't in place yet are preventing it. The opportunity to move into the rental market would be greatly enhanced by being able to do that.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

The final thing is the parity of esteem factor. I often joke around with the residents and the stakeholders I have that, if I weren't in this career, I'd open my own business and become a stonemason or a bricklayer because I could probably do quite well, since there aren't many out there and the ones who are out there are retiring.

I think we've put a lot of money in our budget on the labour side, about $85 million for apprenticeships. Is there anything else we can be doing—and I think it is maybe just changing a mindset on the parity of esteem—to encourage young folks to look at the trades as a career in which one could actually do well financially?

[Kevin Lee]

I think that you just expressed exactly the type of messaging we need to get out to all Canadians, especially to young people in schools and parents, in particular, who see university as the only route to success and trades as a secondary option. Obviously, university is a good route to success, but so too is going into the skilled trades with the opportunity to be successful, both in terms of income when one starts out and then later on potentially being successful and owning your own business.

National communications at the federal level help to support that messaging that this is a great option for your future. We just need to communicate that going to a community college or an institute, to get your skilled trade requirements so you can have a good career, is a great opportunity.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Mr. Masterson, in the chemical industry, whether it's down in Texas, whether it's centred in ethylene production or polypropylene production.... I covered that industry in New York for years on the corporate finance side, so I remember all the mergers of Union Carbide and Ecocan and Dow Chemical and all that kind of stuff. It was very value added.

How important is the permanence of the accelerated capital cost depreciation? The U.S. has it in place. We don't, but it's in there right now.

[Bob Masterson]

It's now at the stage where it is very important, because we've had, I believe, three years. If you think of the types of investments you've talked about in the chemistry sector, you're seven years from thinking about it; there is the final investment decision, building, commissioning, and reaching commercial operation, and if you can't guarantee that this measure is there, you can't build that into your business case. Three years ago we were okay with 10 years. We're now getting near the point where what's remaining of that 10-year window is not enough.

But the second factor is also important, which is looking at the eligibility class. Class 43 right now in Canada is just machinery and equipment. In the United States, it's a much broader coverage. It includes site preparation, roads, curbs, and supporting infrastructure for machinery and equipment. Basically, everything that's invested, except for the permanent buildings on the site, is eligible for the capital cost allowance.

[The Vice-Chair, Conservative, Pierre Poilievre]

Now we turn to Mr. Richards.

[Blake Richards, Conservative, Banff—Airdrie, AB]

Thank you, Mr. Chair.

Thank you to all of you for being here, and thank you for your presentations. Certainly, I do have some questions.

I'll start with you, Charlotte. Given that tourism is so important in my riding, and it's certainly something that I've worked closely on with your industry, I want to start with you.

I know one of the questions you were asked was about competitiveness for businesses and some of the things that would be considered there. When we look at the proposals we've seen from the Liberal government in terms of the small business tax changes, I have a serious concern about competitiveness for Canadian businesses, our economy in general, and the health of our communities in terms of the contributions that small businesses make, not only to the economy but also to local sports teams and charities. Those need to be considered fully and properly before making such massive and major changes.

I know that for tourism, small businesses play an important role. In fact, about 10% of small and medium-sized businesses in Canada are in the tourism sector, so that's obviously very significant. I wonder if maybe you could comment on what kind of impact you think those tax changes will have on the tourism industry. Do you think there would be a negative impact?

Also, given that these consultations took place over the summer, in the tourism high season, I'm sure many tourism operators haven't had the opportunity yet to really fully digest and consider them. Do you think there's been sufficient time given to consult with the tourism industry on these changes, or should there be an extended period of time for consultation on that?

[Charlotte Bell]

There's no doubt we've been looking at these proposals and trying to assess what the impact might be on our membership. We are hearing back from our members. A number of them have questions. Some of them are unsure whether they are impacted by the changes. Others are asking questions about, for instance, how family-run businesses would be taxed when they are passed along to their children. There are questions about the reasonable test and treatment of past income, so generally, on the same types of issues that you're hearing about from other sectors.

We are still working through what these impacts are going to mean for this industry. In fact, the consultation period occurred during the high season, so it is a little bit challenging for our members to focus on these issues at this time. That said, I have been able to reach out and receive feedback from a number of people.

We have reached out to the minister's office and have asked for some clarity on these issues. We're working through all of these issues with the minister's office, and feel that at least we are being heard and hopefully we can get some comfort on some of this.

[Blake Richards, Conservative, Banff—Airdrie, AB]

Thanks, Charlotte.

Mr. Lee, I know your organization has certainly been vocal about some of the concerns you have. I would assume there are a lot of smaller businesses in your industry. Those could be family-run businesses and things like that. Could you maybe speak to your concerns or thoughts around these changes, and whether you feel there's been proper consultation.

[Kevin Lee]

Yes, I can certainly say that it's the number one issue raising its head in our home builders' associations all across the country. There are a lot of extreme concerns over this, because the nature of the business is that there are small family-run businesses. A lot of the planning is around succession planning for children and transferring a business, and it appears that these changes would make doing that less attractive, and sometimes not really feasible.

Passive investment is a critical part of our industry, because you need money on the side waiting for opportunities, particularly on the land-development side, and even for builders who are looking to, at the right price and the right point, make an investment to buy land and lots to build on.

There are an awful lot of concerns, including those around being able to properly engage other members of the family in the family business, including all the sacrifices that are made by the whole family in getting a company up and running and keeping it going. There's concern that they're being treated as if they were employees, and they're not. They take on all kinds of risk, and it's part of what makes our economy run.

We are hearing it an awful lot, and therefore passing the news on.

[Blake Richards, Conservative, Banff—Airdrie, AB]

Good. Thank you.

And maybe Mr. Lancastle, having worked in the real estate industry, I worked with builders but I also worked with appraisers, and I know many of them can be small operations. I don't know if that is so amongst your membership, but it's often father-son. I know in one case, there was a father-daughter operation, so I wonder if this is something you've heard much about from your members and what kinds of concerns you might have about these types of changes.

[Keith Lancastle]

Our members work in a wide variety of environments, everything from very large employers, institutional employers, and public sector employers down to small businesses, as you've described. It's an issue our members are aware of. We support the notion of tax fairness but also recognize the need to make sure measures are balanced in such a way that they don't impinge on those small businesses. But I would say it has not been a top priority issue for our membership at this stage.

[Blake Richards, Conservative, Banff—Airdrie, AB]

I would assume probably, for some of the smaller operations, they might be a bit more of a concern obviously than for some of the other ones, for sure, right?

[Keith Lancastle]

Again, we are an individual member organization. Some of our members are employed, some work for the Government of Canada, some work for provincial governments. For others who do own and operate their own business, it would be a greater degree of focus.

[Blake Richards, Conservative, Banff—Airdrie, AB]

Excellent. Thank you very much.

[The Vice-Chair, Conservative, Pierre Poilievre]

Go ahead, Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you, Mr. Vice-Chair.

My first question goes to Mr. Wilson.

Here in Ottawa or where I live, in Sherbrooke, people take it for granted that they can drink the water. When I turn on a tap, I am not concerned, because I know that the water is good and that I can drink it. But that is not the case everywhere in Canada.

The Prime Minister promised to eliminate all the boil water advisories on First Nations reserves. Has he kept his promise? Has the situation improved since the Prime Minister took office?

[Daniel Wilson]

It's actually difficult to measure. That is, in fact, the correct answer. What happens is that, while some have been alleviated, new ones have arisen. What we see in many cases is a periodic solution that is temporary. The spring's high water flooding situation was problematic in a number of communities. That creates a clean water issue. There are others that are very long-standing and have yet to be addressed. So, although the statistics that I have seen from the government, the measure of their progress, would show a small diminution of the totality, at this stage, it is difficult to imagine a full elimination of all of the boil water advisories across the first nations communities in Canada within the timeline that was envisioned. There are a number of steps that can be taken to address that.

In part, we have spoken to that in our submission with regard to the investments in operations maintenance. One of the largest cost areas for water treatment plants is, in fact, not the construction—although that is a significant capital outlay—but the operations and maintenance.

Secondary to that, the education and training of people locally who might take those positions and continue that work, which has, of course, a relationship to the underfunding in education and jobs and skills training. There are specific investments that can help to create a more stable foundational structure for the eventual elimination of the boil water advisories. We are not specifically tackling one at a time the individual problems that have arisen, or necessarily by constructing a water treatment plant in those areas where one is needed. We have to actually get underneath that, understand what the larger cost drivers are in addressing the problem, and invest there. We have identified the largest one as being operations and maintenance.