Finance Committee on Oct. 4th, 2017

[Darren Schemmer, Co-chair, Board of Directors, British Columbia Council for International Cooperation]

Distinguished members of the committee, I would first like to thank you, on behalf of the British Columbia Council for International Cooperation, for inviting us to appear before you today.

The British Columbia Council for International Cooperation is a network of 150 civil society organizations, educational institutions, affiliate members, and individuals who share a common interest in making our world a better place.

As part of the non-profit sector, we would like to thank you for taking our views into consideration. Canada has the second-largest non-profit sector in the world. Our sector is larger than the automotive sector and contributes 8.1% of gross domestic product. Keep in mind that these are real jobs employing 13% of paid employees in Canada.

The statistics on volunteerism are equally impressive: 13 million Canadians volunteer their labour and skills.

We would also like to thank you for considering international development when formulating our national budget. You are clearly aware that what happens in one corner of our planet affects every corner. Our interdependence became obvious to Canadians a decade ago when it was growth in developing countries in Asia and Africa that prevented the world from falling into a deep economic depression.

In recognition of this interdependence in 2015 Canada and 193 other countries signed onto the United Nations' 2030 agenda for sustainable development and agreed to pursue 17 sustainable development goals with targets to achieve by the year 2030. One of these, goal 8, is of particular interest to those of us gathered here today. It is about decent work and economic growth. Among other targets, Canada and the other countries agreed to: “By 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average”.

BCCIC attended the United Nations summit where countries signed on to the sustainable development goals. We returned curious to know if British Columbians shared this agenda. Over the past two years BCCIC travelled this province and met with more than 700 leaders in over 50 round tables in 32 communities. We mobilized teams of young people to speak to thousands more on the phone. Together we explored what it means to balance the local agenda with our common international agenda. We have mapped over 2,500 groups just in B.C., Yukon, Northwest Territories, and Nunavut who are working on the sustainable development goals. We encourage you to look at our digital map online at bccic.ca/ to see for yourselves how active this mosaic is.

In the context of the sustainable development goals, you were asking us about goal 8, decent jobs and economic growth in relation to Canada. Goal 8 cannot be addressed successfully in isolation from the rest of the goals, and the national cannot be addressed successfully in isolation from the global scale. We were inspired by recent Canadian policy statements that recognize this, such as the feminist international assistance policy.

The global agenda can be summed up in our commitment to leave nobody behind, which brings me to my main point. In every corner of this province and in the territories we found unanimous interest in the sustainable development goals. It mattered not an iota what a person's personal theory of change was, nor their politics. All agreed upon the benefits of municipal, provincial, or national plans working within the framework of agenda 2030 and the sustainable development goals.

Everyone knows we live in a globalized economy on a planet with ecological limits. Everyone sees that security, prosperity, and well-being in Canada depend on security, prosperity, and well-being elsewhere.

How does this translate into a federal budget for Canada and Canadians? Budget 2018 in our opinion must step up Canada's capacity to engage outside of as well as within our borders on all 17 of the sustainable development goals. Others will speak to you about how budget 2018 can support the goals in Canada. I will speak to you about how budget 2018 can be more representative of Canadians' interest in supporting the goals globally.

On average Canadians donate about $530 a year. This represents a little over 1% of our average personal annual income. Internationally governments are expected to contribute just 0.7% of their gross national income toward official development assistance. Many countries have achieved or even exceeded this target, so how does Canada perform? Are we pulling our weight?

You will be saddened to learn that Canada is at an all-time low. For many years our official development assistance was growing, but today we are spending a paltry 0.26% of our gross national income on official development assistance. Let me repeat that: 0.26%, a quarter of a penny, for every dollar that Canada earns.

BCCIC is concerned that our federal government underestimates the interest of Canadians in the sustainable development goals. We are more generous than our government with our donations of money and we show up in droves to volunteer our time. Our recent federal government budget priorities do not reflect this commitment by Canadians, but they should. With shifting security concerns, a changing climate, the aging global population, and the limits of a finite planet, it makes no sense to view our national economy in isolation from our global context.

Budget 2018 is the time to aggressively commit to the 0.7% target. We recommend achieving 0.7% of gross national income for official development assistance within five years if not sooner. Canada must commit to the sustainable development goals with more than just words.

Thank you for your consideration.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Darren.

Turning to the Burnaby Board of Trade, we have Mr. Holden, CEO. Welcome.

[Paul Holden, President and Chief Executive Officer, Burnaby Board of Trade]

Thank you.

The Burnaby Board of Trade represents roughly 1,100 member businesses, entrepreneurs, and organizations from Burnaby and across the lower mainland. We work at making business better by providing our membership with insightful leadership, advocacy, education, and a platform for collaboration.

We're also unique in that we approach all issues with a triple bottom line perspective. We consider economic, social, and environmental factors whenever we consider an issue.

In repeated consultations with our members, both explicitly to inform our pre-budget submission and through other unrelated outreach such as our innovative business walk programs, we've seen a consistent focus on a few key priorities from our members, which all impact the issue of productivity. These issues are transportation and mobility, employee attraction and retention, housing and real estate costs, and business investment. It is these areas on which we suggest the federal government focus in budget 2018 as a way of improving the productivity of our workers and businesses.

In the area of transportation and mobility, as Burnaby is a dense urban city of more than 220,000 people, transportation and the efficient movement of goods, services, and employees is of significant interest to the business community. Traffic and congestion cost businesses both time and money by delaying the movement and delivery of their products and their workers.

While commuters and drivers of personal vehicles often have options for different travel methods or travel times, businesses often do not. Our manufacturers can't deliver product by bus. Continuing the government's investment in both rapid transit and major transportation infrastructure would be the most direct way for budget 2018 to achieve tangible improvements in efficiency and productivity in the movement of our goods, services, and people. If employees are stuck in traffic and congestion is slowing down the movement of products and services around our region, productivity suffers. As a recent Canadian Automobile Association study found, congestion in Toronto, Vancouver, and Montreal is responsible for adding nearly 88 million hours annually to Canadians' commutes. That's over 10,000 years' worth of extra time every year that drivers in those cities are stuck in their vehicles.

In the area of employee attraction and retention, businesses tell us that attracting and retaining staff is a major issue, and having vacancies and staff turnover can be detrimental to productivity. Our members also tell us that government can play a role in helping business by ensuring people can access training for the skills we need in our workforce and by ensuring our immigration system allows us to attract the kind of talent our economy needs.

That said, many of the existing training programs still require a considerable investment from businesses, making it difficult for companies operating with limited capital or cash flow to avail themselves of these programs. In particular, in many of the high-skill sectors, there is significant competition for talent, which creates disincentives for employers to invest in training for employees who can easily move to competing firms. A focus on working with the provinces and territories on delivering innovative and effective training programs that can overcome these barriers, such as the unemployed stream of the Canada jobs grant here in B.C., would be welcome in budget 2018.

In regard to immigration, we have long advocated for a focus on skill-based immigration and suggest that initiatives such as the temporary foreign worker program should be targeted at filling the unique skills gaps our businesses are experiencing.

Regarding housing and real estate costs, the rapid rise of real estate costs in our urban centres, and increasingly in suburban and exurban areas, is now a business issue. Last year, for the first time, we saw a considerable number of businesses raise this issue as a concern and cite it as responsible for rising business costs, increasing lease and rent rates, and the difficulty in attracting workers from outside of the region to move here. Further action is warranted by the federal government in budget 2018 to work with its provincial and municipal counterparts to address the rapid increase in housing prices and the decrease in affordability through a focus on both supply and demand factors.

Business investment is crucial to both innovation and economic growth. When companies invest in improvements to the tools, equipment, and infrastructure their workers use, it increases their productivity, spurs innovation, and drives economic output. However, many businesses can't justify or accommodate a big upfront investment. Programs would be welcome to offset that initial capital outlay or speed up the recovery of that investment through savings or capital cost depreciation.

In our own efforts to encourage businesses to make investments to increase their environmental sustainability, we have seen first-hand the difficulty many have in making initial investments if the benefits take too many years to accumulate. Often small businesses have limited cash flow or lack the capital to justify or accommodate a significant upfront expense, even if it will have benefits and will pay for itself in the long term.

Budget 2018 should build on current government actions that encourage and incentivize investment in new equipment, technology, machinery, and software, which help boost the competitiveness and productivity of our local firms. Budget 2018 should also specifically look at creative ways of helping businesses overcome potential upfront financial barriers to making these kinds of capital investments.

We feel that proactive approaches that encourage and incentivize business investment are a far better approach than are punitive measures, such as the proposed changes to the taxation of private corporations, and, especially in this context, the proposed restrictions on holding passive investments within a business. We should look for ways to empower businesses to invest in innovation and productivity and not put barriers or potential barriers in the way of that kind of investment.

Thank you for the opportunity to share our thoughts and those of our members with the committee today.

[The Chair, Liberal, Wayne Easter]

Thank you very much for sharing your thoughts with us.

From Clean Energy Canada, we have Mr. Woynillowicz.

[Dan Woynillowicz, Policy Director, Centre for Dialogue, Simon Fraser University, Clean Energy Canada]

Good morning to the members of the committee, and thanks for having us here today to share some of our thoughts.

Clean Energy Canada is a think tank based at the Centre for Dialogue at Simon Fraser University, and we work to address climate change by accelerating Canada's transition to a clean energy system. I'd like to focus my comments this morning on recommendations that will support the federal government's implementation of the pan-Canadian framework on clean growth and climate change, and more specifically the forthcoming zero-emission vehicle strategy.

Canada's transition to electric vehicles will result in significant emission reductions. Transportation accounts for nearly a quarter of Canada's carbon pollution today, and electric cars can make a big dent in that. That's especially true when they're charged from clean power, and Canadians are fortunate to have an electricity supply that's already 80% non-polluting.

An effective zero-emission vehicle strategy can help position Canada as a strong competitor in the global transition to clean cars, and budget 2018 should provide the funding needed for that strategy to succeed. That means using the budget to help advance three goals: first, making it easier for Canadians to choose an electric vehicle; second, making it easier for Canadians to charge an electric vehicle; and third, helping ensure that Canadian businesses can capture the economic opportunity presented by the global shift to electric vehicles.

To make it easier for Canadians to choose an electric vehicle, we need to provide them with an efficient way to get high-quality information and provide them with an opportunity to actually test drive and compare different vehicles. The reality in Canada right now is that it's hard to find an electric car at most dealerships to test drive, let alone purchase. Myself, I've been a lifelong Volkswagen driver, and I was excited when they released an electric Golf earlier this year. I contacted my local dealership to see about going in and taking a look at one, perhaps taking a test drive; and I was told that they had already sold out, there were none on the lot, and there wouldn't be until next year.

Now, this isn't uncommon. A 2015 study found that more than a half of certified electric vehicle dealerships in Canada didn't have a single electric vehicle in stock. Based on this kind of inventory, the study concluded that it was five times harder in Canada to purchase an electric car than in the United States. Not surprisingly, a follow-up study in 2017 concluded that a lack of inventory statistically decreases consumer interest in buying an electric car.

To remedy this, the federal government should support a national network of electric vehicle discovery centres modelled on the facility operated by Plug'n Drive in Toronto. This facility allows interested consumers to learn about electric cars without any pressure to buy and take models out for a test drive.

I had the chance to visit the EV discovery centre in Toronto last week, and not only was I able to test drive one of Volkswagen's e-Golfs, I also got to drive the Chevy Bolt and the Nissan LEAF and learn a lot about those different models and what they had to offer with no pressure to buy. Had I wanted to move forward with a purchase, I would have just been referred to any of the local dealerships in the area.

It's a proven a model, and we believe it should be expanded to other parts of the country as a public-private endeavour, similar to the model in Toronto that includes funding from utilities, from the car manufacturers, the Government of Ontario, as well as TD Bank.

Once a consumer decides they'd like to purchase an electric vehicle, there is still the challenge of overcoming higher purchase prices. There's no question that rebates matter. The three provinces in Canada that offer rebates for the purchase of zero-emission vehicles account for 95% of Canadian sales. During the transition period until electric cars attain price parity with internal combustion engine vehicles, well-designed point-of-sale rebates are an important tool that the federal government should offer coast to coast for consumers purchasing zero-emission vehicles. For budget 2018, a national commitment to electric vehicle rebates would send a powerful signal.

To make it easier for Canadians to charge electric vehicles, you've heard recommendations from the Canadian Automobile Dealers Association, Plug'n Drive, the Canadian Vehicle Manufacturers' Association and Electric Mobility Canada; so I won't comment further, other than to add our support to their recommendations for sustained investment in electric vehicle charging infrastructure across the country.

Lastly, but just as significantly, the economic opportunities of a domestic and global shift to electric vehicles are compelling. Canada has strong technical capabilities in auto parts, manufacturing, and automotive innovation. Electric cars and their charging infrastructure also require significant software and technology expertise, another area of Canadian strength.

Canada is rich in many of the natural resources, such as copper, required for the construction of electric cars. For example, electric vehicles require four times more copper than internal combustion engine vehicles.

To ensure that Canadian businesses can capture this economic opportunity, the federal government should support an updated and expanded zero-emission vehicle technology road map, a tool that the federal government has successfully used for other sectors to assess Canada's strengths and determine how best to capitalize on them.

Thank you for the opportunity to provide these recommendations. I look forward to your questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much Dan.

Turning to the Fraser Institute, we have Mr. Lammam.

[Charles Lammam, Director, Fiscal Studies, Fraser Institute]

Thank you, Chairman, and thank you to the committee for having me participate in these pre-budget consultations. I hope that you find my comments helpful as we craft next year's federal budget.

I'm the director of fiscal studies at the Fraser Institute. We're an independent, non-partisan, economic policy think tank. The mission of the institute is to help average Canadians understand the impact of government policies on their lives and the lives of future generations.

I understand that looking at the budget is really an endeavour of looking into the future, but I want to spend a little bit of time with my opening remarks providing the context that we find ourselves in today, so looking backwards.

Despite recent headlines about positive economic growth, the reality, I believe, is that we don't have as rosy a picture as these headlines would suggest. It's important to keep in mind that we're coming off two very weak years of economic growth in 2015 and 2016, so there is a natural rebounding that has occurred so far this year. When we look at the last quarter of growth, which is the second quarter of 2017, we see that 40% of that growth came directly from the energy sector, so as the energy sector continues to rebound, that's going to drive some of the growth.

If you look at growth projections going forward, whether from the Bank of Canada or from private sector forecasters, you'll see that the expectation for Canada is for economic growth to moderate and slow considerably in the coming years despite the small blip in 2017.

One of the critical concerns I have is regarding our economic fundamentals, particularly the slowdown in business investment, which receives little attention but is a key driver of our long-term growth and prosperity.

When businesses invest in the latest technologies and production techniques, and expand their operations, it spurs economic growth and raises living standards for workers because it makes them more productive, which in turn allows them to command higher incomes. However, business investment in Canada has been falling. In fact, the level of business investment in the latest quarter of available data is down 20%, after accounting for inflation, over the peak in 2014. By international standards, Canada's rate of business investment as a share of the economy and per worker is among the lowest compared to other countries where we have comparable data; in fact, it's second lowest among 17 countries.

Looking at the longer-term trends, business investment—particularly in machinery and equipment, which is the type of investment that provides workers the tools that they need to become more productive—has been on a long-term downward trend going back to 2000.

There are many possible explanations for why we've seen the decline in recent years. Certainly, part of that has to do with the drop in commodity prices. However, some factors affecting growth and investment are due to policy decisions, and on this front, the federal government hasn't acted. Policies are sent signals that have discouraged investment and economic growth in recent years.

For example, we've seen an increase in marginal income tax rates, particularly those that affect entrepreneurs and highly skilled workers. We've seen, by extension, an increase in the capital gains tax rate, which is levied at half of one's marginal tax rate. There's been uncertainty about whether the capital gains inclusion rate will increase. The government did muse about this last year but has not really closed the book on whether that will happen. This creates an enormous amount of uncertainty among investors and entrepreneurs.

In addition, we have a looming payroll tax hike, both from the employment insurance system as well as from the planned expansion of the Canada Pension Plan, and a new carbon pricing mandate, which will certainly affect business investment in our country, particularly as other countries like Australia move away from carbon pricing. Of course, there's an unstable fiscal framework, federally and in a lot of provinces. I don't need to remind the committee about the government's pledge to run no more than $10 billion of deficits for three years before returning to balance. So far, they've doubled and tripled that amount with no plan to revert back to a balanced budget. This matters for investment for a number of reasons.

In particular, it creates uncertainty about future tax hikes introduced to repay and service the increased debt that's being accumulated. There have been missteps by the federal government in response to these challenges, which I argue are contributing to our depressed levels of business investment. They are being exacerbated by several provincial policies. We don't need to get into those, but they include higher marginal tax rates as well as increased corporate income tax rates, which have led to an increase in the effective tax rate on new investment in Canada, unstable fiscal frameworks, a dramatic increase in the minimum wage in some provinces, new labour regulations, and skyrocketing energy prices in Ontario.

As a result of all this, Canada has become less competitive in recent years as a place to do business and as a place to work. For instance, according to the World Bank's rankings for ease of doing business, Canada dropped to 22nd from its 14th ranking of last year. Also, a recent survey of large companies by the Business Council of Canada found that 64% of CEOs thought Canada's investment climate had been worsening over the last five years, with particular notes about the tax and regulatory burden increasing. Similar results have been found by small businesses in surveys done by the Canadian Federation of Independent Business, so overall there has been a decline in our investment climate over the years.

In addition, I would like to point out that while there are some near-term challenges with investment and economic growth there are also long-term challenges that flow from an aging population. This is an issue that is often discussed but doesn't receive enough attention, in my opinion. There are concerns that older people will be less entrepreneurial and will participate in the labour force less than their younger counterparts. This demographic shift is causing projections for very long-term growth to fall below 2% over the next 35 years. On this front, the government has also discouraged the labour force participation of our seniors through a policy that reduces the age of eligibility for old age security.

There are lots of policy ideas that could be used to counteract these forces. I'm happy to elaborate on some of them in questions and answers. I would like to point to two broad issues. One of these, which is important for our prosperity to thrive, is the need for increased certainty in our business environment and investment climate. We can achieve greater certainty through a more sound fiscal framework going forward. The government is now undertaking a review of the personal income tax system, which is a positive move in light of the growing complexity and our declining competitiveness in recent years. While this review is under way, the government should move to reform the system more comprehensively rather than adopting a piecemeal approach, which is what it has done to date.

Those are my opening remarks. Thank you for the opportunity. I'd be happy to answer any questions in the Q and A.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Charles.

I think it was you on the other end of the phone last week speaking on the issue of small business corporate taxes. I know you came on with less than 24 hours' notice. We appreciate that.

We're turning now to Mr. Black, with the Greater Vancouver Board of Trade. Thank you for coming. The floor is yours.

[Iain Black, President and Chief Executive Officer, Greater Vancouver Board of Trade]

Bonjour mesdames et messieurs. I will speak in English. While my children are fluently bilingual, my high school French is unfortunately not going to do more than get me into a bar fight. I with stick with English, with your indulgence and the greatest of respect.

Ladies and gentlemen, the difficulty in going fifth, behind a whole bunch of really smart people, is that all the good stuff has been taken. I'm going to be freewheeling my remarks a little bit more, and hopefully we'll keep it a little more conversational.

Let me start by saying thank you to all of you for your service to our country and for sitting on this committee. I know well what you are going through. I served as an MLA and cabinet minister in the province of British Columbia for two terms, and actually I sat on the provincial version of this committee. I know what a privilege it is to get to know intimate little corners of the country that you never thought you'd find yourself being in, but I also know that it is not glamorous work. It is a grind. It is also very important work that you are doing, so thank you so much for doing that.

Member Sorbara, to you in particular, when I was first elected, I had three children under the age of five. I know well what it's like to be missing them, so thank you for that additional sacrifice that you are making.

Gentlemen, I stand before you as the CEO of a 130-year-old non-profit organization, which is a little different from many other kinds of chambers of commerce and boards of trade in the country. We have a very unique history, and we have a very unique approach to the world in our diversity, first and foremost with respect to the industries and the size of the companies that we represent.

We don't have any one dominant industry within the membership of our organization, which represents, through its membership, about one-third of the working people in the province of British Columbia. Eighty per cent of our members are small to mid-sized enterprises, many of them family-owned. That is the nature of business in British Columbia; we're a branch-office kind of place. Much of the wealth is generated by small family-owned businesses, multi-generational—of not a bad size in many cases, with a couple hundred employees. We are not a headquarters kind of town as Toronto is, for example.

We are also a very progressive organization. We are not your traditional “cut it, burn it, pave it” kind of free enterprise-oriented organization, although we are definitely a free enterprise organization. We build communities. Part of our history is that we are very focused on issues and have taken leadership positions on issues like homelessness in the Downtown Eastside, in which you'll find the poorest postal code in all of Canada. We were considered a tipping point in that particular conversation about seven or eight years ago, and likewise with mental health and addictions, housing affordability, etc. We have a much broader focus on how we do business, which will become pointed for the last part of my remarks.

Your invitation to speak before you today was greatly appreciated. Thank you. You asked me to focus on two areas: the productivity of our people, and the productivity and competitiveness of our companies.

With respect to our people, I would refer you to our December submission with respect to the budget, in which we spoke about a couple of key things lifted directly from a piece of work that our organization did a couple of years ago, which we refer to as the greater Vancouver economic scorecard. I will distribute copies to the committee.

Effectively, this was an unprecedented study that took two years. We did it in conjunction with The Conference Board of Canada. We studied this region as a region, as opposed to the 22 different municipalities that comprise it. We compared ourselves to 19 other jurisdictions around the world to figure out how we were doing. One of the areas that we came to where we needed some focus was indeed the area of human capital. I'll focus on that one area, because the scorecard itself is quite a comprehensive piece of work. In that we identified that we had to attract, develop, and retain human capital.

On the attraction side, we recommended, through our letter from December of last year, that you focus on areas of foreign credentials and recognizing them, on streamlining and revising the temporary foreign worker program, and in particular on those who are abusing it to make sure that abuse is curbed, so that the true intent of that program and the very important role that it plays in our economy in British Columbia is actually delivered. On the side of developing human capital, we focused a lot on areas of post-secondary education and the investments that need to be made there strategically, as well as on retraining people as appropriate, as we go through economic and industry changes in British Columbia—which have been remarkable in the last 25-odd years that I've had the privilege of living here.

On the retaining side of things, we focused a great deal on housing affordability. We're about 15th out of 17, unfortunately. We have a very low grade on that scorecard that I referenced. Our ability to attract and retain people under the age of 35 in the Lower Mainland is one of the worst in the world, to be quite candid. We found ourselves placed 15th out of the 17 jurisdictions that we studied.

We also inextricably linked housing affordability to investments in public transit. You will forever, from this point forward, see our organization do that. We will not talk about housing affordability without talking about investments in public transit, because in a modern metropolitan area such as we now live in, you can't actually separate the two. I'll come back to that very slightly in just a moment.

The only further comment I made on housing is that we urge the federal government to get back in the game. There was a time, 30-odd years ago, when the federal government played quite a role in a housing strategy that was federal and actually coordinated efforts with municipalities and provinces to address some of the challenges we're currently facing. Frankly, it could have prevented them a wee bit, too, particularly when it comes to issues of rental housing stock.

Turning to businesses for just a moment—I recognize that I'm now at the point of needing to turn the mike back to the committee—we had a variety of recommendations around the business competitiveness side of things, focused a lot on our geography and where we are: the Pacific gateway. We're very unique here. We are the St. Lawrence Seaway of the 21st century. I can get back into that in the Qs and As if you like.

We had a lot of focus on optimizing the supply chain; interprovincial trade; air competitiveness, specifically with YVR; the shared capitalization of airports and ports, which we strongly urge you to leave alone; and then finally, again, the investments in public transit south of the Fraser River in particular, and the Broadway extension as well.

But I could not sit in front of you without talking about the changes in small business taxation that are being proposed. I'll finish my comments on this.

In this context, I have to remind you—or educate you, if you don't know—that in British Columbia we're unique when it comes to the small business community. Over six out of 10 jobs in B.C. come from the small business community. That's the highest in Canada. Over a third of our gross domestic product comes from the small business sector. That is also the highest in Canada. We also support the highest number of women-owned or -operated entrepreneurial ventures in all of Canada. We have a very special relationship here with the small business community.

Perhaps poignant for this conversation, I had the pleasure of serving as the small business minister for this province for two years, so I know this stuff fairly well, and I'd be glad to carry on with any conversation in the Q and A.

We have seen something rather unique happen in our organization in the last three or four weeks. It's unprecedented. We are not a radical, dramatic, “step back on our heels” kind of organization. We're a pretty polite bunch. We get along with governments of all stripes and have done that for over a century and a quarter, but we've never seen our members react the way we've seen them react to the proposed changes that are on the table at the moment.

In the last three weeks, we solicited input from our members and anticipated about 5,000 emails to be generated. As of yesterday, we've produced over 25,620 emails to the members of Parliament in British Columbia through inviting small business members to make their views known. Of the two or three dozen issues that may exist out there on this particular conversation—it's fairly complex, and I recognize that—I want to focus on two. With that, Mr. Chairman, I'll wrap up.

First, I want to focus on the ongoing and fundamental disconnect that exists between the narrative of the federal government, specifically including our Prime Minister and our federal Minister of Finance, and the advice and the analysis of the experts: the accountants, the advisers, and the financial planners of hundreds of thousands of Canada's small business owners. These trusted specialists have repeatedly and emphatically stated that the federal government's assertions and assessments about who is impacted and how they're impacted are arithmetically inaccurate. It's not about politics. It's about math. They are factually incorrect, and they are simply wrong.

The second point pertains not to tax rates or any financial issue, but to the philosophy and the culture of entrepreneurship in Canada. At issue are the accepted, legitimate, and legal mechanics, not loopholes. Let's be very clear. These were deliberately designed to encourage human behaviour around creating jobs and employment in the small business space, but they have for decades defined the sacrosanct relationship between government and small business. It is not needed and it is not the government's place to further dictate how, what, and when a business owner pays people or puts money in or takes money out of a small business.

If the government continues down this path, what we risk compromising is the ability of small businesses to do what we do: to fund a local soccer team, a hockey team, Rotary Clubs, hospitals, hospices, soup kitchens, and food banks. Thus, and in conclusion, these changes not only threaten Canada's golden goose of the economy, but are also poised to undermine small businesses' role as a cornerstone of Canada's communities.

Thank you for the opportunity to be here today.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

I would say that on this committee we have seen some of that reaction—in spades.

We'll go to seven-minute rounds, starting with Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you very much, Mr. Chair.

I would like to again thank all our witnesses for being here. This is my first year on the Standing Committee on Finance and I have never seen a group of business people so concerned about other issues and not just profitability. I commend you.

Mr. Schemmer, before asking the business people some questions, I would like to mention that I am well aware of the work done for years by your national organization, the British Columbia Council for International Cooperation. I am very interested in hearing about your concerns with respect to international development and the fact that Canada must play a greater role in that area.

Mr. Holden, it is very encouraging to hear that a board of trade is concerned abut the triple bottom line.

Several of you mentioned the issue of transportation and noted just how important it is for the federal government to continue investing in public transit. I completely agree with you.

I would also like to thank Mr. Albas for his comments about electric vehicles. I have owned a hybrid car for 10 years, and so I really understand what he is saying. Public transit is of great importance to me, and I work hard in my riding to ensure that the federal government invests in public transit. I realize that this is an important issue.

That said, my two questions are for Mr. Lammam and Mr. Black.

Mr. Lammam, I have read the publications of the Fraser Institute, a highly respected organization, for quite some time. I appreciate your concerns as well. I would like to ask you a few questions about carbon pricing. You stated that this will pose a challenge for Canadian businesses. You also mentioned that Australia would cancel the carbon pricing established by a previous government. Is there a way to link the economy and the environment? In my opinion, there seems to be a general movement in the industrialized world towards imposing carbon pricing. Some say that if people want to make a profit, let them make as much profit as they can. However, I believe that we should instead determine how to use the economy to ensure the development of a sustainable economy.

Mr. Black, once again, you spoke about public transportation, affordable housing, and the importance of investing in postsecondary education. I am certain that you are aware of the fact that the federal government quite recently, in late 2016 and early 2017, committed to investing in affordable housing. I would like you to comment on this and to tell us how this is a key issue here in British Columbia.

[The Chair, Liberal, Wayne Easter]

Mr. Lammam, go ahead.

[Charles Lammam]

Thank you for that question and for following the Fraser Institute's work. I'm pleased to hear that. There are a few things I'd like to say.

First of all, I'm not an environmental policy expert, but I will refer you to work that we've done that has measured the quality of Canada's environment over longer periods of time. Quite surprisingly, we find that we do a pretty good job in this country of maintaining a good environment. That's something that I think Canadians should be proud of. I think that's an important backdrop for understanding what types of environmental policy measures we take. But carbon is different, obviously, given the types of issues surrounding it.

I'd like to say a couple of things about the way carbon pricing is implemented in practice versus the theory behind it. There tends to be a disconnect. In theory, a carbon tax that is more economically benign has features that we do not see in practice. For example, implementing a form of carbon pricing needs to be done concurrently with removing any existing regulations that serve the same purpose of regulating the emissions. Otherwise we could have basically a double hit to the same type of activity. So, we don't see that type of implementation where there is a retraction of existing regulations that serve the same purpose as carbon pricing.

In addition—and this is a very important feature of how carbon tax is implemented in practice—we don't see anywhere in the world, and certainly not in Canada and certainly it won't be the case with a federal mandate of carbon pricing, where provinces are required to offset new revenues through the carbon pricing, however it's implemented, by reductions in other forms of taxation. This is important for many reasons. Again, it helps mitigate some of the economically damaging effects of the carbon tax. So, the federal government, in it's mandate, has not specified how exactly the provinces must use any new revenues they generate from the mandate, and there has been no interest, certainly, not even in B.C., which at one point did have a revenue-neutral carbon tax—it no longer does. Even in B.C., the plan with our current government is to raise the price per tonne with no offsetting reductions in other taxes like personal or corporate income that could mitigate some of the damaging effects of a carbon tax.

It's unambiguous that carbon pricing will put Canadian firms that are emission intensive at a disadvantage. The issue is about what the magnitude is, but it certainly will do so and it will do so at a time when business investments slow, at a time when our competitiveness is down. So, this is yet another policy that will have to be dealt with by businesses, investors, and entrepreneurs in the country at a time when we actually need pro-growth and pro-productivity types of policies.

It's so important to understand where we are in North America. We have a southern neighbour that has essentially put on hold or put aside any desire to implement a similar type of policy. So, when you think of people contemplating where to invest their next dollar or production facilities in Canada near the border, we could conceivably see situations of businesses moving south of the border where they don't deal with the same types of production costs that come from a carbon tax. It's more perverse than that in that we don't see any environmental benefit because the production activity is really just being shifted from Canada to the United States.

So it's important to understand the area of the world we are in. With a southern neighbour that's not really interested or hasn't expressed any interest in pursuing carbon pricing, I think it makes it all the more concerning for Canada to go at it alone in a North American context.

[The Chair, Liberal, Wayne Easter]

Mr. Lammam, we are going to cut it there. I know Mr. Black is making notes. We'll bring him in later. Next time I'm going to cut Greg off at two and a half minutes into his question.

Go ahead, Mr. Albas.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair.

Thank you to all of our panellists for being here today. I'm going to be focusing more on the economic and tax-related matters.

Mr. Lammam, you had mentioned your concern about low business investment levels. I think we're at the lowest we've been in Canada since 1981. Now, eventually what happens is that you have depreciating capital, where you have machinery that is not being replaced. So it's not just a matter of new capacity; this is a matter that we're not replacing old capacity. What happens to an economy that begins to see that it's all consumption, so to speak, and not enough money is being put into new capacity?

[Charles Lammam]

I can't overstate the importance of having robust business investment. It's partially what is driving the questions from this committee about productivity. Canada will not see its productivity levels grow unless we provide workers with the kinds of tools that they need to be productive and unless we invest in new, innovative ways of doing things. I would argue that it's an absolute national disgrace that we have such a low level of business investment. This is a long-term problem that we have in this country. It was partially masked by the recent oil boom from 2009 to 2014, but it's become more pronounced as commodity prices have fallen. We didn't become an investment powerhouse internationally, so to speak, but, again, the improved performance in our energy sector did mask an underlying problem.

Going forward, I think the solution needs to be squarely on policies that encourage investment in new structures, in machinery and equipment, and in innovation. It's so important for us as we enter a period of a declining labour force participation. We're currently in a period of relatively slow growth or low growth. Improving our productive capacity is going to be key moving forward. My concern, with regard to the federal government's approach, is that we are enacting counterproductive policies that do not help at the margin to spark business investment in a meaningful way. I cited some recent surveys about the sentiments among businesses, both large and small, plummeting in recent years, about our relative standing declining, and about the signals that are being sent to entrepreneurs and investors about whether Canada is a positive place to invest and to undertake new investments in machinery and equipment.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

What also concerns me is that every single person who spoke at the open mike and many of your fellow panellists today have talked about the need to invest in many different things. However, if people are not investing in the productive capacity of this country.... Human capital is also very important, but they need to work with something. I'm very concerned, so I appreciate that.

Mr. Black, I certainly appreciate your presentation and the 25,620 emails. I've connected with many former high school counterparts who have gone on to great things in your neck of the woods, and they are very concerned.

Just with regard to the tax changes, your group put forward a campaign to hit the pause button. Yesterday, there was a vote in the House of Commons that basically asked for an extension of the consultations and whatnot. Where does the government go from here? My opinion on this is that you have a situation where now it's political because decisions are going to be made. What kinds of things do policy-makers need to bear in mind, and what is the optimal route moving forward?

[Iain Black]

I stand before you without the luxury of political opinion. We have an organization that by its very bylaw is non-partisan, and we have illustrated for a long time now that we work with anyone. We focus on what's right, not who's right.

In our letter to the finance ministry on the budget consultations, we included a comment made in budget 2016 that said that the government was interested in removing—and I'll quote our letter—“ inefficient and ineffectual taxation measures”. We were very encouraged by that, to be honest. We responded accordingly in December and made two very specific recommendations. The first was around maintaining “personal and business tax competitiveness to enable our nation to effectively compete for financial and human capital”. In the second, we applauded the notion of simplifying or reviewing the tax regime and said, “Include tax system simplification as a key outcome in the governmental review of Canada’s tax regime”.

To be honest, this is not really what we had in mind in terms of what's come forward. I'm not in any way trying to kind of pile it on here. I recognize you've had a tremendous amount of feedback, and it's probably not been fun for many of you. Here's the thing: we honestly believe that there is a very important, thoughtful conversation that needs to take place around looking at how we have people pay tax in this country, and recognize that taxation policy is to trigger a certain human behaviour to encourage people to do one thing or discourage them from doing another. It hasn't been done thoroughly in this country for probably 25 or 30 years, and it really should be done every 10 or 15 years. We're very much in favour of that conversation, and we'd love to be part of it. What we're struggling with is that the last time changes such as those being contemplated right now were introduced was about 40-odd years ago, and it was a two-year consultation process, not 75 days introduced in the dog days of summer.

We recognize that the government has been projecting through its campaign and whatnot that it wants to go down this path. But let's be very clear: that's not consultation, and that time frame should never, ever, be included by any sitting government as part of, if you will, a respectful and formal consultation period. Our campaign all started with “Hit the Pause Button!” We're not against some of the philosophies around taxation reform, but we do think this has been awfully rushed. It started as being very prescriptive. I sense there's been a shift in the narrative a wee bit toward being a little more open to have things go forward. We actually think standing back, erasing the whiteboard, and starting again is probably the best path. We'd be delighted to be part of that conversation should the government wish to go down that path.

[The Chair, Liberal, Wayne Easter]

We have time for one set of quick questions.

Dan.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

In regard to your comments earlier on efforts to look at airports such as YVR, which is a very successful model that people from all around the world speak quite highly of, why are you suggesting that the government not proceed in that area?

[Iain Black]

It's going to be a little different across Canada. Those of you who are from different parts of Canada might not see it the same way in your local surroundings, but every airport and every port is different. Shared capitalization conversations are quite complex, and they have different implications depending on where you live and the status of the entity in question.

We have a very strong airport, a very strong balance sheet. We have a port here that is one of the most efficient operating on the planet. As to the benefits associated with privatization—and bear in mind that this is coming from a free enterprise oriented organization—we actually believe we've already received the benefits that would come from privatization at the port of Vancouver, which has been recognized by all kinds of independent folks as being very efficiently run. Changing the share capital of the port, for example, would actually cause prices to go up in a very competitive international shipping market. That has phenomenal impact in the Lower Mainland, where over 100,000 people are directly or indirectly employed by the port of Vancouver within about five kilometres of the water itself. It's a pretty big deal.

To your question on YVR, with the greatest of respect to the idea, the value of $4.5 billion to $6 billion, which is what I understand the airport is assessed at, is not the government's money. That value has been created through passenger traffic and through airport fees that have been charged to renters, to the surrounding real estate folks, and to the airlines. There have been modest contributions by the federal government of different political stripes over the last 25 years since it went into this really interesting, unique community leadership model. With greatest pride, the Greater Vancouver Board of Trade was a key proponent of that. We have a board seat on the airport to this day because of our role in taking it to this new model. It has been the number one airport in North America for six out of the last seven years, and number two in the world.

It is a shining example of how well it works, so we're very cautious of anything that would cause our airport to get off the track of being best in class on an internationally recognized level. Changing the share capitalization of YVR could absolutely do that, because the only way a private investor would be interested would be to reap a return, which by definition means the costs of running that airport go up, and that would get passed along to passengers and airlines.

[The Chair, Liberal, Wayne Easter]

Thank you all.

Last year, the finance committee's recommendation 76 was that the Government of Canada, at the earliest opportunity, undertake a comprehensive tax review with the objective of simplifying the Income Tax Act. I can say as chair that our thought was a little more comprehensive than what happened as well.

Mr. Dusseault.

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

Mr. Chair, I will try to be as brief as possible so that I can ask all witnesses a question.

My first question is about the 0.7% target. I can't help but talk about it after everything we just heard from the public.

Mr. Schemmer, in order to give us an idea of the scope of the target, what does the 0.7% target represent in terms of dollars or investments in 2017?

[Darren Schemmer]

Canada currently spends approximately $3 billion a year in official development assistance. To reach 0.7%, it would spend about $6.5 billion a year. Putting it that way makes it seem like a really big amount. However, as a percentage of the federal budget, it is not that much. As you know the expenditures in the federal budget total hundreds of billions of dollars.

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

That gives a better idea of the extent of investment required. The budget envelope would be more than doubled in the end.

With respect to boards of trade, Mr. Holden, you mentioned the cost of commercial rents. Perhaps I should have realized it before, but, up until now, I hadn't really thought about it. When we think of rents, residential housing comes to mind first. Nevertheless, commercial rents are definitely also affected by soaring prices. I would like to know just how much of a problem this is.

On a related matter, is online competition one of your concerns given that it is becoming increasingly expensive for businesses to have a bricks and mortar store while online retailers do not have to pay commercial rents?