Evidence of meeting #111 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was innovation.
Liberal
The Chair Liberal Wayne Easter
We will take just a couple of questions. We'll go a little over our 10:30 deadline.
This is for Rob, John, or Mr. Huber.
On this Naylor report, you're basically asking for $1.3 billion over four years to implement it. Regardless of how we got here, it seems to me the federal government has shot itself in the foot on the Chalk River situation. How do you see that we get around that issue by way of a budget? What can we do?
Rob Norris Senior Strategist, Research Partnerships, Office of Vice-President Research, University of Saskatchewan, Canadian Neutron Initiative Working Group
Thanks very much, Mr. Chair, and for all the interest from across the committee.
The looming closure of Chalk River simply reinforces the significance of materials research as it's needed in Canada for our scientists, for our students, for industry, and we've offered a broad range of what that looks like.
Practically speaking, what we've tried to do is say the investment today, $100 million per annum, if we were to take roughly a fifth of that we could make enhanced investments at McMaster, also an aging facility, but one capable of meeting some of Canada's needs. Then, quite frankly, work diligently to develop some formalized and sustainable partnerships.
I'll offer an example. It's not simply that Chalk River is closing next year. There is a partnership with Oak Ridge, Tennessee, which at the exact same time is coming to an end. That relationship needs some immediate attention so we can begin to have conversations. That's quite open. It's a well-established relationship and collaborative set of arrangements. We're also looking at Europe. Honestly, we're taking a technical team over to Europe to have a look. Could we do some of that on a sustainable basis?
The key here is that we need to make sure there's access not simply for our scientists but also for our industry partners. These protocols take time, so the clearer, earlier signal we could have to move forward on these partnership connections as well as enhancing the infrastructure at McMaster, would send a very reassuring signal to our scientific community.
I was recently in Chalk River and had an opportunity to speak with some of the scientists, and there is a great uncertainty.
Liberal
The Chair Liberal Wayne Easter
I wonder if you could construct what you've outlined into a bit of a plan that we could consider as a recommendation, and forward it to the department.
Back to you, Mr. Bouchard. On the proposal that you handed in, you're basically looking at getting those six measures you laid out as a way of a project. Is there anything that could be done if that project doesn't come through? What are the other options that would be available to get there?
To me, that is the cutting edge in terms of putting Canada ahead of the field in terms of IT and agriculture and so on. What can be done if that project doesn't come through?
Chair of the Board, Enterprise Machine Intelligence & Learning Initiative
Are you referring specifically to the supercluster initiative?
Chair of the Board, Enterprise Machine Intelligence & Learning Initiative
That's why we've also approached Agriculture, and that's why we're working hard with AAFC to see if funding is available through the innovation bucket through Agriculture. If we could secure funding there, at least we would be able to start, and we would be able to show what can happen when you have a business-led initiative focused on innovation and integration of technology. Anything we could do to encourage AAFC to come through with funding would allow us to start immediately. We have about 18 shovel-ready projects that we could start within four months.
Liberal
The Chair Liberal Wayne Easter
With that, thank you very much for all your presentations and the discussion.
We will suspend until 10:45, for the next panel.
The meeting is suspended.
Liberal
The Chair Liberal Wayne Easter
We'll reconvene.
Welcome to the second panel in Saskatoon. It's a pleasure for us to be here.
What I'll do, because we are out of Ottawa, is ask the members to introduce themselves so you know where they come from and what areas they represent.
I'm Wayne Easter, member of Parliament from Prince Edward Island.
I had an office on 2nd Avenue South here 25 years ago in the good old days of the farm movement.
We'll start with Michael.
Liberal
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Keeping it short as Michael, which is hard for me, I'm Francesco Sorbara, member for the riding of Vaughan—Woodbridge, bordering the city of Toronto.
Liberal
Greg Fergus Liberal Hull—Aylmer, QC
My name is Greg Fergus. I am the member for Hull—Aylmer, in Quebec.
Conservative
Dan Albas Conservative Central Okanagan—Similkameen—Nicola, BC
I'm Dan Albas, member for Central Okanagan—Similkameen—Nicola, in British Columbia.
I love being here in Saskatchewan with all of you. I hope you guys can meet the same standard as in the briefs we had in the last panel. They were wonderful.
Conservative
NDP
Pierre-Luc Dusseault NDP Sherbrooke, QC
Hello. My name is Pierre-Luc Dusseault. I am the member for Sherbrooke, a riding in southeastern Quebec. I am a member of the NDP.
Liberal
The Chair Liberal Wayne Easter
Thank you.
Welcome again to the witnesses. I also want to thank any of you who provided submissions prior to the end of the first week of August. We have those submissions. They're on our iPads. They will be considered as part of the consultations, and this is just to follow up on that.
Starting with Ag-West Biotech Inc., we have Mr. Pitka and Ms. Dorish.
If you could try to keep it to about five minutes, that would be dandy. Thank you.
Patrick Pitka Chief Financial Officer, Ag-West Bio Inc.
Thank you. My name is Pat Pitka and I'm the CFO at Ag-West Bio Inc. I'm accompanied by Boni Dorish, director of finance, administration and human resources. The comments we are making today are on behalf of Ag-West Bio Inc.
Ag-West Bio is a member-based, not-for-profit organization with over 100 members, including multinationals such as Bayer CropScience, Cargill, and PotashCorp; various government agencies and departments such as AAFC; and small and medium-sized organizations such as Bioriginal Food, Prairie Berries, and Prairie Plant Systems.
Ag-West Bio's strategies are to promote the development and adoption of emerging technologies, create connections and partnerships to build community, enable and accelerate commercialization, advocate for science and build trust, and build national and international awareness of the cluster. The agrifood sector presents great opportunities for the province and for the Prairies.
The prairie provinces contain about 85% of the arable land in Canada. The Prairies used to be known for wheat, oats, and barley production, which was grown, harvested, and shipped overseas. This has all changed, thanks to the innovation of our researchers and the technologies used by our farmers. Today, canola is a $27-billion crop, 50% of which is processed in the Prairies. Pulses, also known as legumes, are another example. These include crops like lentils, peas, and chickpeas. Lentils alone are a $2-billion crop, and 99% of the lentils produced in Canada are grown here in Saskatchewan and processed and exported to countries like Turkey and India. Continued research is leading to further improvements.
Our farmers are leading in the use of technology. An example is zero tillage, which preserves moisture, reduces soil erosion, and acts as a carbon sink. Thanks to zero till, Saskatchewan farmers are responsible for over 11 million tonnes of carbon sequestration a year, significantly reducing the impact of farming on the environment. New digital technologies are also having an impact. For example, drones are used to help farmers assess fertilizer and chemical requirements, thereby eliminating overuse of these products. Dot Technology Corporation, a company near Regina, is developing a new driverless tractor using GPS to guide the process. It is currently at the prototype stage, and field demonstrations have taken place. This will help farmers control labour costs.
New technologies keep our farmers competitive on the international market without government subsidies, which is a great achievement. Continued public investment in research is critical.
We support the federal innovation superclusters initiative. Key priorities in the agrifood sector should include: more value-added processing and commercialization to develop food and feed ingredients for our global customers; stimulate the creation, growth, and attraction of companies; support for emerging technologies, including artificial intelligence, big data, and robotic applications; and improved crop varieties for ever more discerning global markets. We are searching for the next canola. Investment in research and development is critical for the future of agriculture in the Prairies and in all of Canada.
An impact study completed by MNP of Vancouver found that for every dollar invested in R and D in the Prairies, there is a $6 return on that investment. This is something for governments to consider.
Regarding challenges for the future, preservation of the family farm is critical. The current environment and success in the Prairies has been achieved without large public corporations owning or operating the farms. We need tax changes that support the intergenerational transfer of the family farm without penalties. Right now, it is more advantageous for a farmer to sell to an outsider than to transfer the farm to his or her children. This must change if we are to preserve the family farm.
There is another issue the government should consider. We're talking about a new phrase called “freedom 85”. In an article published in the September 2017 issue of CPA Magazine, life expectancy has increased at the rate of one year in every five years. At this rate, half the children born in Canada in 2007 can expect to live to 104. This is good news and bad news. Collectively, we need to find ways to financially support a long life. The retirement age of 65 was set almost 50 years ago when life expectancy was 72. Unless you have a defined benefit plan from a government or major company, you'll have to invest a lot of money into your RRSP for your retirement years.
The government could consider some options, such as deferring the payment of old age security until a later year, maybe age 70. The second option would be to allow small business owners, including farmers, to make an extraordinary contribution to their RRSPs in years with unusual events, such as exceptional profit or the sale of their business.
Thank you for your consideration.
Liberal
The Chair Liberal Wayne Easter
Thank you, Mr. Pitka.
Turning to the International Association of Heat and Frost Insulators and Allied Workers, we have Mr. Rudder, business manager, and Mr. Engel, international vice-president. Welcome.
Vince Engel International Vice-President, Western Canada, International Association of Heat and Frost Insulators and Allied Workers
Thank you, Mr. Chair.
Thank you to all the members of the committee for the invitation to participate today. My name is Vince Engel, and I'm the western Canadian vice-president for the International Association of Heat and Frost Insulators and Allied Workers. Let me briefly tell you a little bit about who we are, just for some context, before I speak about our recommendations to improve productivity in the Canadian workforce and the competitiveness of the Canadian economy.
Our association represents Canada's mechanical insulators. We are tradesmen, expert in the insulation of mechanical systems in buildings—buildings just like this one—and in refineries, pulp mills, hotels, schools, and hospitals. Mechanical insulation restricts heat loss or gain in mechanical systems, ultimately increasing the efficiency of heating and cooling systems. Mechanical insulation reduces greenhouse gas emissions, saves money, and puts people to work. Mechanical systems that require insulation are primarily ducts, pipes, and equipment such as boilers, furnaces, pumps, and fans.
Our skilled tradespeople are industry leaders in health and safety through the removal of hazardous waste, including asbestos. Our members also support fire prevention through the insulation of firestop materials. There are approximately 7,000 qualified, ticketed insulators in Canada. The mechanical insulation industry also includes Canada's mining and manufacturing sector in the production of insulation. Fibres used in modern insulation are made from raw materials mined right here in Canada.
Mechanical insulation is a practical, cost-effective solution for improving energy efficiency in buildings. In a report released last month, the Canada Green Building Council said that the country could reduce emissions by as much as 50% by 2030 if owners worked with governments and investors on energy consumption initiatives, including more efficient heating and cooling systems. The Government of Canada has made substantial investments in improving the energy efficiency of buildings to reduce their environmental footprint. These investments are essential to ensure the competitiveness of the Canadian industrial and commercial sectors. The Green Building Council's report also noted that energy-efficient retrofits to private sector buildings could save Canadian industry as much as $6.2 billion in business costs, resulting from reduced energy consumption. That's $6.2 billion that could be reinvested into Canada's economy to improve things like critical infrastructure, health care, and supporting small businesses, all of which improve the country's productivity and competitiveness.
Supporting heat and frost insulators goes hand in hand with these commitments. By working with construction trades like ours, the federal government has the opportunity to improve productivity and competitiveness within the trades and contribute to environmental objectives, including reducing greenhouse gas emissions.
It's also important to ensure that the monies set aside for greening buildings is well spent so that work is not being unnecessarily repeated in the future. For Canada's mechanical insulators, this means making use of qualified, certified tradespeople on all federal building projects. Supporting skilled tradespeople who have been properly trained ensures that the work needed to upgrade buildings is done right the first time, ultimately saving on costs down the road. By requiring the use of properly trained and certified skilled tradesmen on work sites, the federal government can enable a productive workspace by ensuring that the work contracted is completed professionally and sustainably.
Our main asks of the committee are these. Continue financial investments in union-based training programs that support those in the skilled trades, including insulators, in the green economy. Ensure that any federal-provincial incentive programs for energy-efficient retrofits in the private sector include mechanical insulation. Finally, require the use of qualified, certified mechanical insulators on projects designed to support energy efficiency.
Thank you. That's my report.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, Mr. Engel.
We now turn to Mr. Moen and Ms. Wasylow, from the North Saskatoon Business Association.
Keith Moen Executive Director, North Saskatoon Business Association
Thank you.
My name is Keith Moen. I am the executive director of the NSBA, a dynamic business organization that I'll expand upon in a moment.
First, let me thank you all for coming to Saskatoon. Welcome back, Mr. Easter.
I also want to acknowledge the appreciation, admiration, and respect I have for anyone elected to public office. Thank you for your respective commitments to the public service for the betterment of our great nation.
The NSBA is a member-driven business organization that serves, promotes, and protects businesses throughout Saskatoon and beyond, through our lobbying and advocacy efforts. From its grassroots origins some 50 years ago by a handful of businesses, today's NSBA consists of a membership in excess of 700 companies, with members ranging from single owner-operator proprietorships to large multinational corporations that employ thousands. Although diverse, our membership mainly consists of a strong community of small to medium-sized businesses that are largely owner managed by entrepreneurs. We are known for our pragmatic, common-sense approach—not just to talk about it, but to actually get things done.
Our response to question one, in terms of benefits to Canada as a whole, is that we believe productivity would increase through funding for indigenous peoples and programs that are directed more toward action rather than toward more reports or studies. It's a multi-generational issue that needs to begin one step at a time, but it needs to be a step in the right direction.
Specifically, we would encourage the government to direct dollars into distance education that enables people to learn skills that can benefit their communities without having to leave those communities. We would encourage more emphasis on finance and business development education for band chiefs who are receiving federal money and implementing educational programs for their bands.
Education and workplace preparation, i.e., work readiness, is key for Saskatchewan, where more skilled labour is needed to keep up with the rates of business growth and retirement in the current workforce dynamic.
Our response to question two is for the federal government to have a growth-friendly tax policy, to implement a procurement model built on best value, and to have open borders based on fair trade enforcement, for example, a working agreement on internal trade. Let's make it easier to do business in Canada, not harder.
Another measure would be to have a patent or innovation box on tax returns to incentivize the commercialization of intellectual property, encourage entrepreneurship, and grow the economy while adding value to society.
Another measure would be the development of trade corridors outside of Canada's large metropolitan centres, such as Toronto, Vancouver, and Montreal. We live in the heart of a commodity-based jurisdiction, which benefits not only our local economy but that of Canada. We have what the world needs—not just wants but needs—food, fuel, and fertilizer, all of which need to get to export markets. For many years, we've had a need for a perimeter highway around Saskatoon, which has only become more pronounced during our recent population and economic boom.
Last but certainly not least—in fact, it's the biggest point I want to stress here today—the proposed changes to tax planning and private corporations can and will hurt the competitiveness of Canadian businesses, especially relative to neighbouring jurisdictions that aren't raising taxes. I specifically raise this issue last to emphasize that we are a pragmatic organization that sees things holistically, and we are not a single-issue organization.
During the very brief consultation period, you've seen and heard many passionate and personal opinions on this topic—and, believe me, we have those as well—but we want to emphasize that the proposed changes do not stand up to reason or fact, and therefore have no value or net benefit to the government. If they are implemented, the law of diminishing returns will be in effect. Specifically, changes to the effective tax rate on passive income held within a corporation will not only stifle investment and job creation, but will reduce jobs as well, and the middle class will be negatively impacted as a result. This negative impact will be felt across all industries and sectors.
We support fairness and welcome changes that increase fairness, but the proposed changes fail in this regard. The analogy I have been using to stress this point is that the federal government is using an RPG to kill a fly, when a fly swatter would suffice.
We have heard the minister and other leaders in government, including members of this committee, say that the changes will not hurt the majority of small businesses, farmers, and incorporated professionals. However, tax professionals tell us otherwise, and we believe in and trust their expertise and facts.
In closing, we strongly encourage the federal government to take a holistic approach regarding taxation, which is to say a non-partisan apolitical stance for the betterment of the Canadian economy, because when it comes to economic development and growth, the solution lies in the private sector, not in government.
Thank you.
Liberal
The Chair Liberal Wayne Easter
Thank you, Mr. Moen, for those direct remarks.
Next is Mr. Hopkins from the Regina and District Chamber of Commerce.
John Hopkins Chief Executive Officer, Regina and District Chamber of Commerce
Good morning, Mr. Chairperson, and members of the committee.
My name is John Hopkins and I'm the chief executive officer of the Regina and District Chamber of Commerce.
I want to begin my comments by expressing our shock and dismay about the manner in which the largest tax changes in 45 years were communicated. Tax cheats, not paying their fair share, tax evaders, and the list goes on: these accusations are being levelled at people who used to be the most respected professionals and business people in the land, farmers, doctors, dentists, lawyers, accountants, and business owners on every single main street.
What is most appalling is that these accusations did not come from a fringe group but, rather, from the Government of Canada, a government that is supposed to represent all Canadians, including business people, most of whom are in the highly exalted middle class. These changes were released in the dead of summer with only 75 days to disseminate. However, these are not simple changes. They are complex and far reaching.
Our view, which incidentally is the view of virtually every chamber of commerce, board of trade, and every other major business association in the land, is that there needs to be meaningful, open, transparent consultations where everyone can be heard. During the 1960s, the Carter royal commission took four years to propose changes, but for these changes it's 75 days. Why the rush?
Recently we had the opportunity to meet with numerous chamber executives from all over our country and, without question, by far the most egregious challenges facing members of chambers of commerce and boards of trade are the corporate tax changes. Our approach to dealing with the discussion paper was to encourage our members to get professional tax advice. In addition, we asked members to let their voice be heard through an online forum. To date, we have had over 1,320 individuals fill out the form, which calls upon the government of Canada to take the current proposals off the table and to launch meaningful consultations.
Business owners are risk takers and in many cases put it all on the line, and during start-up there's typically limited or no profit with the potential for downturns at any moment. At the same time, business owners have no safety net. There is no social program if the business doesn't make a profit. They simply don't get paid. There is no earned vacation pay, no medical leave, no maternity leave, no overtime pay, no employer contribution to a pension plan, and no severance or health benefits that many middle-class employees receive, which in many cases are mandated and in some cases paid for by businesses but are mandated by law. Yet the discussion paper goes to great lengths to say that both are on the same level playing field.
The proposed income-sprinkling changes will have dramatic impacts on some business owners and their families, while the government continues to say this will only impact the highest income earners. We're less than convinced. In addition, the government's reasonableness tests are not clearly defined, particularly given the reality that in many cases a family business person may be in charge of multiple duties that may not have a market comparison.
The goal of most businesses is to increase the value of the business as an asset, which has proven to be exceedingly valuable to all Canadians in terms of job creation, capital investments, and tax revenues for all governments. One can and should question what impact these changes will have on the national economy. Passive income is the most disconcerting tax change. While we do not know exactly how this will be implemented, our discussions with numerous tax professionals have led us to believe that these changes could be very material and have far-reaching impacts.
Most prudent businesses will have or will be seeking to have an adequate level of reserves through economic slowdowns, capital purchase, expansion, new acquisition, and the list goes on. Will these reserves, which are typically invested in various financial instruments, now be deemed as passive income? What about those who are saving to expand or buy out competitors, or those who have reserves to ensure that they don't lay people off? If these changes go through and these types of dollars are now deemed passive income, what happens to the pool of capital across the nation?
On intergenerational transfers, we were absolutely flabbergasted that this common practice was not caught until late in the consultation period. The unintended consequences of that measure alone sent shockwaves through families and businesses. Are there others? Business owners, business groups, individuals, and even some of the government's own MPs are calling for the Government of Canada to hold meaningful consultations.
As a country we cannot and should not be throwing out the baby with the bathwater. Please heed the call of Canadians and hold meaningful consultations.
Thank you.
Liberal
The Chair Liberal Wayne Easter
Thank you very much, John.
Turning to Polytechnics Canada, we now have Mr. Johnson and Mr. Rogers. Welcome.
Dennis Johnson Vice-President, Strategy and Business Development, Polytechnics Canada
Thank you, Mr. Chair.
Mr. Chair, committee members, thank you for having me here today representing Polytechnics Canada, and president of Saskatchewan Polytechnic, Larry Rosia.
As we enter into the fourth industrial revolution, Canada's future looks bright. We are well-positioned to harness new technologies, to adopt new production processes, and to develop a workforce that has the future-forward skills needed to succeed in this new world of work. However, as bright as the prospective future looks, our economy faces wide-ranging challenges. Two of these significant challenges are productivity and competitiveness. As I will outline today, polytechnics are one important economic development lever that addresses these persistent challenges, but are underutilized and under-leveraged in federal policy and programs.
Polytechnics are leaders in creating innovation-led inclusive growth and are leaders in the ways in which we contribute to made-in-Canada talent development. This is how Canada's polytechnics contribute to productivity and competitiveness most: innovation capacity and human capital development. Yet, we can do more, but only if the federal government can right-size, re-balance, and re-tool its support for polytechnic education and innovation.
Polytechnics build Canada's innovation capacity by helping firms bridge the commercialization gap. We move products from the laboratory and shop to markets and to people, and ultimately ensure that these products are creating revenue and income for Canadians.
As much as connecting people to products and makers to markets contributes to our productivity and competitiveness, in Canada we don't value the near to market end of the innovation spectrum as highly as we value basic research. Canada is great at supporting ideas, but we must be stronger in our support for the commercialization of those ideas.
Disappointingly, of the $3.1 billion the government spends annually on the higher education R and D, only 1.7% or $53 million is available to the entire sector of polytechnics in colleges, primarily through one program. The remainder goes to university-driven research, leaving important applied research successes to wither away or suffer from underutilization.
As you are aware, industry is critical to driving innovation. Institutions such as Saskatchewan Polytechnic are nimble, and have strong track records of working with industry on applied research projects. A lack of research funding and restrictive policies would prevent us from meeting the huge demand from companies for R and D projects that would lead to the commercialization of products and services, and would diversify and grow the provincial and national economies.
In 2016 alone, the college and community innovative program supported 2,815 firms across Canada. However, current funding levels cannot effectively meet the demand. Presently, the program is oversubscribed and faces a $13-million shortfall. The irony is that the message this sends to industry, that innovation is not that important particularly for the small businesses that want to work with us to solve their problems, contradicts the government's message.
To support innovation-led growth and productivity, we urge the committee to support our call for the federal government to right-size its funding to polytechnic innovation by doubling its current $53-million commitment.
On talent, we know the world of work is changing. It's critically important we invest in our people to support an innovative, productive, competitive, and inclusive new economy.
We have a number of recommendations on talent and skills. I want to focus in particular on the skilled trades. Canada's polytechnics produce highly skilled, multidisciplinary talent that grows both the knowledge economy and the know-how economy. Yet, we often forget that the knowledge economy and the know-how economy enable each other.
As the impact of technology increases, our skilled tradespeople are critical to the success of the new world of work. They are in fact automation enablers. The government's ambition to improve productivity and competitiveness, while reducing income inequality and growing Canada's middle class, requires smarter use of higher education's contribution to the economy and society.
Canada's polytechnics are ready to contribute, and today I urge the government to harness us better.
Thank you very much. I look forward to your questions.
Liberal
The Chair Liberal Wayne Easter
Thank you, Dennis.
Next is the Saskatchewan Economic Development Association.
Mr. Wallace, welcome.
