Evidence of meeting #112 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was research.

On the agenda

MPs speaking

Also speaking

Ann Frost  As an Individual
Raymond Frost  As an Individual
Erin Arnold  As an Individual
Sharon Gregson  As an Individual
Dawson Markle  As an Individual
Lucia Rincon  As an Individual
Darren Schemmer  Co-chair, Board of Directors, British Columbia Council for International Cooperation
Paul Holden  President and Chief Executive Officer, Burnaby Board of Trade
Dan Woynillowicz  Policy Director, Centre for Dialogue, Simon Fraser University, Clean Energy Canada
Charles Lammam  Director, Fiscal Studies, Fraser Institute
Iain Black  President and Chief Executive Officer, Greater Vancouver Board of Trade
Robert McMaster  Member of the Board of Directors, HealthCareCAN
Ian Moore  Past Chairman, Recreation Vehicle Dealers Association of Canada
Clay Gillespie  Managing Director, Rogers Group Financial
Michelle Travis  Research Coordinator, UNITE HERE! Local 40
Jamie Cassels  President and Vice-Chancellor, University of Victoria
Val Napoleon  Associate Professor, and Law Foundation Professor of Aboriginal Justice and Governance, University of Victoria
Fernande Pool  As an Individual
Celena Benndorf  As an Individual

10 a.m.

President and Chief Executive Officer, Burnaby Board of Trade

Paul Holden

I think it's inevitable, as things move more and more online, that life is going to be more challenging for the traditional bricks and mortar businesses. I'm sure our friends in the retail associations are spending a lot of time working with their members on looking at ways that they can improve the efficiency and effectiveness of their businesses.

I think, for us, the issues of commercial leasing costs and rental costs are so intertwined with the overall cost of property, whether it's accommodation or business property expenses, certainly in the Lower Mainland, that I think it's an issue that is affecting businesses, both on the hard cost of running their business, but also on the cost to their employees of being able to live at a reasonable distance from their business and afford to work there.

We certainly found when we did the last of our business walks, which is an innovative program that we started a few years where we visit businesses across our city, that the rising costs of housing and commercial rent is something that is affecting more and more businesses.

10 a.m.

NDP

Pierre-Luc Dusseault NDP Sherbrooke, QC

My next question is on electric vehicles. Perhaps you prepared an analysis or a recommendation about this.

Have you discussed the possibility of the government—and I am obviously thinking of the federal government—including the purchase of electric vehicles in its procurement policy? The average person may not necessarily know the extent of the fleet of government vehicles.

Have you analyzed the procurement of electric vehicles by the federal, provincial, and municipal governments? This could result in significant progress being made in this area.

10 a.m.

Policy Director, Centre for Dialogue, Simon Fraser University, Clean Energy Canada

Dan Woynillowicz

We don't have anything specific in this submission, but we have been doing quite a bit of work and engaging with the the centre for greening government that has been established to look at how the federal government can use the power it has through procurements to actually look at the greenhouse gas emission footprint of products and services that are being procured. Certainly the fleet of vehicles that the federal government maintains is a key opportunity for the government to create that market pull for electric cars. The International Energy Agency has really flagged, in terms of the cycle of growth of electric vehicles and their technology and their cost, that we're at a stage where we need to create that positive feedback loop of beginning to get to a greater scale, which brings costs down, which then is going to make it more accessible to a greater number of consumers and enable governments to remove rebates.

Absolutely, we would support the federal government looking at, where practical, procuring electric cars for their fleet. Certainly when we look at the driving habits of average Canadians, the federal government has found that electric cars can meet 90% of Canadians' daily driving needs, in terms of the range of those vehicles. Certainly for many government applications of vehicles, that would likely be the case as well. Of course, there are going to be other aspects within the federal government, like the Department of Defence, where that may not be as practical, based on the vehicles they need or the range they need, but certainly we would support having the federal government establish criteria that electric cars be selected where they meet the driving requirements of that type of vehicle.

10 a.m.

NDP

Pierre-Luc Dusseault NDP Sherbrooke, QC

I know that people interested in this issue always raise this point. What about the disposal options for the waste from electric vehicles? How can we dispose of the batteries? Is there anything new in this area? Most people see this as one of the problems with electric vehicles.

10 a.m.

Policy Director, Centre for Dialogue, Simon Fraser University, Clean Energy Canada

Dan Woynillowicz

Yes, significant progress is being made, both from a policy perspective in terms of developing that end-of-life requirement for recycling and also, from a technological perspective. There's been a lot of research going on in universities around the world, including here in Canada, looking at how we can actually be harvesting metals and minerals from electronic waste, including lithium-ion batteries used for electric vehicles, which accomplishes two ends.

One is that it prevents that waste stream from going into landfills and causing issues with contamination.

Second, it can prevent the same extent of new mining and extraction activity to make sure that we have the metals and minerals we need for producing these vehicles. Whether it's electric car batteries or solar panels, the clean energy sector is acutely aware of the life-cycle impacts of their products from extracting the metals and minerals required for them through to their end of life. For the clean energy sector, much of their reputation is built on environmental credibility, so it's something that they're looking at very closely. The European Union, in particular, and now also China, are moving very aggressively at looking at how to close that loop with the end of life of electric vehicle batteries.

10:05 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, all.

Mr. Sorbara.

10:05 a.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Thank you, everyone, and good morning, again. Welcome.

This is day two of our western Canadian swing, and we've definitely heard a lot on the issue of tax fairness and our proposed consultation paper.

To Mr. Black, to your comments, we've heard them, and we're listening, and it is a consultation paper. Because I have some insight I can say this. About 25 years ago, a minister of the crown here in B.C., by the name of Grace McCarthy , came to Prince Rupert, which is my hometown, and presented me with an entrepreneurial award of the year for being a young entrepreneur in northwest British Columbia. I know what I did to get it, and I know how hard I worked, and I do have a lot of respect for small business owners, whether their business is 10 employees, one employee, or 1,000 employees. So, there's no need to continue on that route there.

Mr. Black, you did reference a report on the Greater Vancouver scorecard. Maybe someone in your staff can send that over to us via email, because I would love to take a look at it.

In terms of continuing to grow the B.C. economy—you are in B.C., and I want to continue on that—maybe you can highlight three of the major impediments to continue the growth that we've seen in the last decade, ever since, actually, 1986, when Expo came to Vancouver, which was really the catalyst, I think.

10:05 a.m.

President and Chief Executive Officer, Greater Vancouver Board of Trade

Iain Black

Thank you for the question.

Incidentally, I was at Grace's funeral. It was a wonderful tribute. It was a spectacular, provincial, non-partisan affair, actually.

Congratulations on the award. What were you, five years old at the time?

10:10 a.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

A bit older.

10:10 a.m.

President and Chief Executive Officer, Greater Vancouver Board of Trade

Iain Black

With respect to the economy, it's been a fascinating time. I've lived here for 25 years now, and I moved here as, I would like to think, a young salesman with IBM, and went into business for myself over the subsequent 20 years before my walk down the bucket list path into politics for a bit. So, I witnessed the economy change a great deal. I'll tap into both my own observations as well as the work that we did on the scorecard.

To your question on the scorecard, we will distribute that to all members of the committee. We will send that to the secretary of the committee when we get back to the office today. The summary booklet actually is great airplane reading, and God knows how much time you spend on airplanes. There's a wonderful summary there as to the challenges and whatnot.

What we've seen happen here in the last 25 years is the economy shift a great deal. The reliance we had in terms of our natural resources sector continues to be enormously high, but back when I first moved here, forestry was the dominant player in town. The head offices that existed in Vancouver in 1994 were many, and now they've all gone. For whatever reason, they've left town, and they're branch offices now, even though all the forestry activity continues, obviously, on the coast and in the central part of British Columbia. For the benefit of the committee, those are actually two sub-industries that are quite different, quite distinct, in terms of their fabric.

I think the impediments are really around...transportation investment is a huge one. On the Pacific gateway, you now have a situation where 75% of anything leaving Canada by water west of Thunder Bay, Ontario, goes through the port of Vancouver; and 50% of what leaves Canada by air west of Thunder Bay, Ontario, goes to YVR. It doesn't go through my hometown of Winnipeg. It doesn't go through Regina or Saskatoon or Edmonton or Calgary or Abbotsford, all the other international airports of choice that are between Thunder Bay and Vancouver. It comes here by rail or by truck, and it leaves by YVR. So, you've seen a big shift now where this region accounts for a great deal of Canada's economy by way of exporting in a manner that it just hasn't before in history. The port has had enormous growth. The airport thought it would hit 21 or 22 million passengers by 2025, but it hit that last year—probably this year, really. It's a crazy growth curve that they're on, and I'll defer to those organizations for the specific numbers, but the underlying point is nonetheless true.

So, investment into the Pacific gateway is very important. I did present to the B.C. members of the government caucus, and the Conservative and the NDP caucuses, on the day that we launched the scorecard, and we talked about this very briefly. I think it's very important to understand that it was across different stripes of federal leadership that we've seen the necessary investment into our port infrastructure, into our railheads, into the investment in and around YVR, and indeed the road system around here. We had wonderful support through those decades. Right now, it's not as clear to us that it's as much of a priority for the federal government as it has been in the past. I note, very quickly, that it was former prime minister Paul Martin who was one of the biggest champions of this region. It has truly crossed political stripes, and I would encourage you to continue on that line. So that's one.

We've already spoken about the investment of transportation and the linkage to housing affordability, and that is a key impediment economically in this region as well. Finding people to come to this province and live here as professionals, whether they're young professionals, aspiring, whether they are established professionals.... The people who hire people, the people who sign the front of the paycheque.... It is really difficult when the cost of living is as high as it is here. I'm one of the lucky ones. I got into the housing market a long time ago, and so I watched this with astonishment. There's no way I could get into the game today.

Those continue to be key economic impediments for where we might go next as a province. It's challenging because the folks in our northern community who are driving the natural resources sector, and, indeed, most of the economy here, frankly—

10:10 a.m.

Liberal

Francesco Sorbara Liberal Vaughan—Woodbridge, ON

Thank you, Mr. Black. I do want to ask the other gentleman on the panel a question.

Charles, from the Fraser Institute, I read your material. I may not agree with it all the time, but it's good to always inform yourself of all sides of the argument, and some of your stuff is actually useful.

In terms of the Fraser Institute's view on tax reform, holistically I take it you would like to see just a comprehensive tax reform undertaken for simplification?

10:10 a.m.

Director, Fiscal Studies, Fraser Institute

Charles Lammam

We actually produced, I would argue, one of the most detailed proposals for comprehensive personal income tax reform a couple of years ago. I'd be happy to send a copy of that report. The thrust of the report is that we've seen an enormous amount of complexity in the personal income tax system. We've actually done reports measuring that complexity using various methods, and I'd be happy to share that material as well. We've become as a country less competitive in our personal income tax system, and of course, this is against a backdrop of our not having significant growth. We're entering a period of slow growth.

So having a comprehensive package that reforms our personal income tax system achieves multiple ends. It makes our system more competitive, it makes it simple, and it can provide the economic jolt we need. We've provided a road map for how the government can do this. In fact, I was actually quite encouraged when the current government set out a plan to review the tax code and do away with much of the complexity, but what's happened in practice, though, is the government has eliminated some of these special preferences in the tax code, with small business measures being one of them, but has not concurrently enacted other changes to the system to help counteract whatever it's done, whether it's removing tax credits or special preferences. It's really retained that revenue. And part of a comprehensive tax reform package, which we saw in 1987 in this country, would involve a concurrent reduction in marginal tax rates. In fact, we've seen the opposite happen.

I'd be happy to share the specific plan of how we can simplify our system quite dramatically and provide the efficiency gains we need.

10:10 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you.

Go ahead, Mr. Kelly.

10:10 a.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

I'm going to start again and carry on with Mr. Lammam. You were asked to present on Canada's competitiveness as one of the items. I'd like you to comment further on the effect of mixed signals in the regulation of resource development, musings about increasing the capital gains tax, adding a carbon tax that contains all the shortcomings you've already identified, and the proposed taxation reform on Canadian-controlled private corporations. What is the cumulative effect of all of this on Canada's competitiveness, and how do they contribute to what you have characterized as a crisis of absence of investment in business?

10:15 a.m.

Director, Fiscal Studies, Fraser Institute

Charles Lammam

The short answer is that it's not helping. It's actually hurting it in a very negative way. Oftentimes, we look at the impacts of policies by what's been enacted. But investors and forward-thinking entrepreneurs also look at the economic climate based on what the expectations are for the future. So when we have a situation where there's an unstable fiscal framework....

Maybe I'll just digress for a second on this because I want to highlight how important it is to get our fiscal framework right. We are due for a recession in the next three to five years. When we have a situation where the federal government is running substantial deficits by choice, it puts our finances in a very precarious situation should there be a recession, should there be an economic downturn where revenues fall and spending increases. It's more important now for us to make sure our fundamentals are right, if and when that occurs.

But what's happening is that we're seeing the potential for further tax policy changes because of this uncertainty and the higher debt that's being accumulated—so the uncertainty from an unstable fiscal framework and the signals being put forth by the government, whether it's the musings about a higher capital gains tax, which it has not clarified whether that's completely off the table....

The unfortunate rollout of its current proposed changes to small business taxation are adding to a significant burden. I just want to highlight some of the language that's being used by the Minister of Finance. In a national interview, when asked about the proposed changes, he responded by using the words “going after” to describe the government's approach to taking more taxes from small businesses and professionals. It's a signal that's hard to quantify, but when put against a backdrop of higher marginal tax rates, carbon pricing mandates, increasing payroll taxes, and several changes happening at the provincial level, it certainly does add up, and it's now happening at a time when we need precisely a more certain and sound economic climate.

So it's really hard to quantify these signals, but they're certainly having an impact, and it's being demonstrated in several surveys that are now being done on Canadian business.

10:15 a.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

Thank you.

Mr. Black, you mentioned in your opening remarks that the reaction from your members to the proposed changes to Canadian-controlled private corporations was unprecedented in the 125 years of your organization. I know you mentioned, too, that you're aware that much has been said about this, and you expressed concern over whether people want to hear more on the matter. Transformative tax change has captured the attention of your membership. Tell us what your members think about this proposal.

10:15 a.m.

President and Chief Executive Officer, Greater Vancouver Board of Trade

Iain Black

Thanks for the question, and apologies to Mr. Sorbara if I spoke too long at the last opportunity.

It's a combination of things. I think they were caught off-guard by the timing and taken aback by some of the original narrative and the messaging. I think referring to long-standing, legitimate, accepted, and legal mechanics as “loopholes”, implying that they're skirting the system and being too cute by half, was really quite offensive. Whether that was deliberate, or just undisciplined language of the moment, is beside the point. That was the message that was sent, and it was unfortunate. I sense there's been some backtracking since then, and that's appropriate.

The process itself is problematic. Equally challenging for our members is for the government to go down the dangerous and slippery slope leading to accusations of “class warfare”. It's pitting people who are successful against people who are not, whether their shortcomings derive from personal circumstances, lack of opportunity and education, or cultural upbringing. This is an important conversation to have, but it's a very dangerous pool to swim in when you're trying to make necessary policy changes, and so our members reacted to that.

I think all the key points have been made across the country repeatedly. Our biggest concern right now is that we're seeing a constant doubling down by our elected officials, particularly the Minister of Finance, on this particular topic. Although you're now beginning to hear some language about the cake not being quite baked yet, that is a recent development, and it accounts for a small portion of the large volume of commentary that has come so far.

We're encouraging the government to step back from this and really think it through, really come to grips with it. The meetings that recently took place with a small number of hand-picked folks were much more open, transparent, and community-focused. It's really hard work, and I get that. It's not always fun to go into a room full of angry folks, and I really respect the Minister of Finance for doing that in the last couple of weeks. It's definitely what's needed when you contemplate something of this magnitude. In our view, first, it hasn't been done thoroughly enough, and second, there were a whole lot of unintended consequences from what sounded like not a bad idea to a bureaucrat who's never signed the front of a paycheque.

10:20 a.m.

Conservative

Pat Kelly Conservative Calgary Rocky Ridge, AB

Do you have any further comment on the extent to which this is not so much a partisan issue but one of simple mathematics, together with a lack of understanding of the existing system and its shortcomings?

10:20 a.m.

President and Chief Executive Officer, Greater Vancouver Board of Trade

Iain Black

I would refer the members to a series of submissions that have been made by one of the top experts in small business and family wealth in the country, a man out of Winnipeg, Manitoba, by the name of Doug Nelson. He has made several submissions. I've read them all, and one of them is 45 pages long, so it's not light reading. He breaks down very clearly that the families of small business people making $75,000, $100,000, $125,000—not the $200,000 or $250,000 numbers that have been tossed around in the media—are absolutely impacted. He illustrates why in detail. And let's not forget that this income has already been taxed at the business level before it is withdrawn as personal income.

The other challenge is the lack of encouragement to entrepreneurship. To go into business, men and women often walk away from well-paying jobs, where they might even have a pension. They often put their mortgage on the line along with their family savings and sometimes their parents' family savings to take risks that allow them to create jobs and drive the economy, which we desperately need them to do. To discourage these people from playing this critical role in our economy is one of the worst things a government can do. If I had to isolate one thing, that would be it. It's taking away that emotional drive that worries us, not just the particular policy.

10:20 a.m.

Liberal

The Chair Liberal Wayne Easter

Mr. Lammam wants in as well, and I know Mr. Holden mentioned this topic earlier, but I'd like to ask you a question. Right now the consultations are over. The uncertainty still exists. That's why I disapprove of extending the consultations: the uncertainty is already there, and there's already a flight of capital.

In about 30 seconds each, what would you suggest the government do now?

10:20 a.m.

President and Chief Executive Officer, Greater Vancouver Board of Trade

Iain Black

On the uncertainty piece of this, given that the negative reaction is so huge, it's the lesser of two evils to pause and rethink versus to proceed as is. You have two very uncomfortable choices in front of you. One is to proceed with things that are very clearly being negatively received by the employers in this country's small businesses—the people who actually write the cheques and employ people.

Your alternative with respect to standing back and having a broader conversation on taxation in this country, both the personal and the small business and incorporate—because I think you have to separate the two—is a much more important conversation. It's a very thoughtful conversation that should take place, but in our view it is without question the lesser of two evils when it comes to the uncertainty that's currently on the table.

A really bad outcome versus one that might be bad? I'll take that any day.

10:20 a.m.

Liberal

The Chair Liberal Wayne Easter

And I would include in that: why not a task force of experts? Take a year and do it right. Do a white paper, turn it over to this committee at some point. I don't know.

Mr. Lammam.

10:20 a.m.

Director, Fiscal Studies, Fraser Institute

Charles Lammam

That's a fantastic idea. The idea of tax reform is a good one. It's the right move, and it's the time to do it. What's problematic about this approach is that it's a very piecemeal approach. It's obviously upsetting a lot of people, in part because the government has said, “We'll have a consultation period, but we're doing this anyways.” That contradiction has infuriated people.

Tax reform is needed because of the complexity, because of competitiveness issues, and to provide an economic jolt. I'd reference our paper again for a road map on how that should happen.

I just wanted to follow up on the question about competitiveness. It's a bit of an elephant in the room, so I'm surprised we haven't touched on it. While we're going in the direction we are in this country, south of the border there are some major changes potentially happening with regard to the direction that administration may take.

It may or may not happen, but certainly corporate tax reform and regulatory reform are going in a very different direction in Canada, which puts us at risk, particularly now that access to the U.S. market through NAFTA negotiations could be tenuous going forward. Just more reasons for us to get things right.

10:25 a.m.

Liberal

The Chair Liberal Wayne Easter

Mr. Holden, you want in quickly..

10:25 a.m.

President and Chief Executive Officer, Burnaby Board of Trade

Paul Holden

Thank you, just a few seconds.

I'm thinking about some of the other points. The fact is, you can't put the toothpaste back in the tube. It's already out there. Some of the ill will or bad feeling is there. To Iain's point of the lesser of two evils, the business community is feeling very uncomfortable right now, and the best way to add a bit of comfort is to essentially say, “Okay, we heard. We listened. Maybe you don't think we did, but we listened. We've heard some of the comments. We've heard some of the concerns. We've heard them in huge numbers. We'll go back to the drawing board and we'll commit to striking a task force or commission, or whatever the right structure is. We'll revisit this, we'll do it properly, and we'll take on board the concerns we've been hearing.”