Finance Committee on Oct. 16th, 2017

[The Chair, Liberal, Wayne Easter]

Thank you very much, Carey.

We turn now to Hospitality Newfoundland and Labrador, and Mr. Foley.

[Craig Foley, Chief Executive Officer, Hospitality Newfoundland and Labrador]

Good morning, Mr. Chair, and committee members. Welcome to Newfoundland and Labrador.

On behalf of the more than 500 members and the board of directors of Hospitality Newfoundland and Labrador, I would like to thank you for the opportunity to participate in the consultation process for the 2018 federal budget and share our perspective on how the federal government can ensure high levels of productivity and competitiveness among Canadians and Canadian businesses.

Globally, tourism is the world's fastest-growing sector. The United Nations World Tourism Organization estimates that in 2016, 1.2 billion people travelled the world and Canada welcomed nearly 20 million international travellers. As the global travel market flourishes, Canada must take steps to improve its competitiveness on the international stage. The tourism and travel industry offers real and sustainable economic development opportunities, versatile employment, and prosperity for all Canadians.

In Newfoundland and Labrador, the tourism industry generates more than $1 billion in annual spending, supplying more than 8% of provincial jobs and encompassing nearly 2,600 tourism businesses. Tourism is an important source of employment in the province, especially in rural communities.

Hospitality Newfoundland and Labrador recommends that the federal government commit to funding for Marine Atlantic at appropriate levels over an extended period so that it enables longer-term planning and reliability, allows for pricing that does not erode the level of service or deter travellers, and is sufficient to drive continuous improvement and cost efficiency in the service. Price is a deterrent, and the ever-increasing portion of Marine Atlantic's operating costs that users have to bear is very concerning. Furthermore, steadily increasing costs for commercial traffic is concerning as it places further financial pressures on tourism operators trying to obtain goods and services required to meet the needs of travellers. Because Marine Atlantic is a primary gateway for growing inbound tourism, user fees must be set at affordable levels for extended periods, facilitating an increase in ferry usage rates.

Hospitality Newfoundland and Labrador recommends that the federal government commit to implementing fair rules for the accommodation sector in Canada. Recently the Hotel Association of Canada released a study on Airbnb and the hotel sector in Canada with a focus on hosts with multiple units. In Canada, the average number of active Airbnb units has almost doubled in two years. What started as true home sharing has expanded into commercial operations. Legitimate and regulated businesses cannot remain competitive in a business environment that is unlevel and unfair. Hospitality Newfoundland and Labrador maintains that the key to success in the new reality of the sharing economy is equity.

Hospitality Newfoundland and Labrador recommends that the federal government help businesses address labour capacity issues by supporting timely labour market research and industry relevant export readiness and workforce development programming. According to research conducted by Tourism HR Canada, it is estimated there will be 240,000 unfilled tourism positions by the year 2035, costing the economy $31.4 billion in forgone revenue and over $4 billion in taxes.

Tourism in Newfoundland and Labrador will experience one of the most acute labour shortages of any province in Canada. More investment is required in training and educational resources and funding programs for national and provincial organizations that are working to address labour shortage issues in the tourism industry. It is important that Employment and Social Development Canada work with industry and business to continually monitor current and future employment needs. Additionally, facilitating the transition of unemployed and underemployed persons as well as new immigrants into the workforce is a positive step toward addressing the labour shortage in the industry.

Concerning proposed federal business tax changes, Hospitality Newfoundland and Labrador asks that the government ensure the impacts on small business owners and tourism operators be given serious consideration. The vast majority of Hospitality Newfoundland and Labrador members are small businesses on whom proposed federal tax changes could have considerable impact. Many small business owners have built their lives, succession plans, and retirements around the existing rules and are expressing disappointment and fear of such fundamental changes to the business tax.

Some tourism operators have cited a change in their business practices until they are fully able to assess the impact that these changes will have on their businesses and the tourism market and visitation levels.

Travel and tourism are economically important to every riding of Canada, and one of Atlantic Canada's most strategic economic sectors. In addition to job creation, tourism attracts international visitors, who consume goods and services and pay value-added taxes. With a strong commitment and strategic, deliberative action on behalf of the federal government, tourism will bring further stability and diversity to the economy, and prosperity to Canadians.

Thank you for your time.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

We now turn to Mr. Russell, with the Investment Industry Association of Canada. Welcome, Ian.

[Ian Russell, President and Chief Executive Officer, Investment Industry Association of Canada]

Mr. Chair, thank you for giving us the opportunity to make a presentation before the Standing Committee on Finance, here in St. John's.

My name is Ian Russell. I am the president and chief executive officer of the Investment Industry Association of Canada.

It gives me great pleasure to be before this standing committee, to present to you as you proceed with your budget consultations. As some of you may know, I represent an industry that employs 40,000 individuals and is a source of high-paying jobs. It raises capital for governments. Last year, the industry raised $200 billion in debt capital for Canadian federal and provincial governments, and another $96 billion for Canadian corporations. We are also very significant contributors to the Canadian economy beyond employment, in terms of taxes paid. It's an industry that has been very generous in terms of charitable donations throughout communities in Canada.

I am going to constrain my remarks primarily on comments related to the small business sector in Canada. It's an important policy agenda for you as a committee and for the government to deal with. I just want to sketch one aspect of a problem and then talk about some possible remedial action.

Quite rightly, in last year's budget, the government put a priority on trying to augment the sources of equity capital for small and mid-sized businesses. The statistics would show that the amount of capital flowing to small and mid-sized Canadian businesses has declined, particularly in the public venture marketplaces, where we've seen a significant decline in the amount of financing, the transactions, the volume of financing, and the turnover activity generally. We have seen that the private equity market has had virtually the same level of financing over the last five or six years. This is a combined result that is not satisfactory in the context of a growing Canadian economy.

We can get into the reasons for that as we move forward, but our view is that there is an opportunity here. It's one we've reiterated, not just with this government but with previous governments. There is a need for a robust, proactive reform or initiative to boost financing in the country.

In the last couple of years, we have advocated the Canadian equivalent of the U.K. enterprise investment scheme. It's a scheme that does not rely on a particular expert running a venture capital fund or labour-sponsored fund who is somewhat detached from the investment, but it's a scheme that is open to all British citizens. That would be the equivalent in Canada: an incentive that would be available to all Canadians to invest in small businesses, businesses they are familiar with, primarily local businesses. They would receive a personal tax deduction. In the U.K., it's 30%. If they held the investment over three years, it would be exempt from capital gains tax.

It's a program that has been in place for over 20 years. It has provided financing for 26,000 companies. It has raised over 26 billion pounds, and it's been audited by the U.K. treasury. For that reason, we thought that this is a well-run, proven incentive for small business.

But I am coming to you here with another idea. The second idea I have is what I would term a “rollover provision”. There is an opportunity, through this incentive, to accomplish two things. First is to unlock capital so that it can be directed to small business. Second, it's a way that would not impact on the federal treasury, and that's been one of the biggest concerns around this.

The two big concerns have been around the tax break to encourage Canadians to invest in small businesses and a perception that there's a political undertone of benefiting wealthy Canadians. I might add that, on that score, if you look at the U.K. enterprise investment scheme, all the investments are in small amounts, and there are a lot of small investors that are active in that particular program.

The rollover provision, simply put, is that if you have a building, an asset, or possibly a financial stock, the idea would be that you would be able to sell that investment and as long as you rolled the proceeds into an eligible asset—that would be defined obviously by the incentive itself—and into small or medium-sized businesses with maybe a proven track record that could be defined, then there would not be capital gains tax on the proceeds.

Now when I say “not”, I'm saying a deferred capital gains tax, because the tax certainly wouldn't be paid at the time the funds were reinvested into small business, but over time as those investments grew, obviously capital gains tax would apply when the ultimate assets were eventually sold. The reason I'm saying the deferral should be something that's acceptable is that without the deferral, you probably wouldn't see the assets sold to begin with. So those revenues would not accrue to the government unless somehow you felt that the assets would be sold. In some cases they are, but in many cases they are not.

That's just a second idea that I put forward. I'm happy to discuss those proposals and any of the background related to the small business sector or the economy in general.

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Russell. Those are interesting proposals.

From the Newfoundland Aquaculture Industry Association, we have Mr. Lane.

Mark, the floor is yours.

[Mark Lane, Executive Director, Newfoundland Aquaculture Industry Association]

Thank you, Mr. Chair. Thank you to the committee for the opportunity.

I provided the clerk with a copy of the paper that I'll touch upon today, which is on collaborating to accelerate sustainable growth in the aquaculture sector in this province.

This document has been a collaborative effort between the Government of Newfoundland and Labrador, the Government of Canada, and the industry. We formed a 25-person committee and we looked at the industry as it is today and how we grow that. The provincial government under Dwight Ball's leadership has identified aquaculture as a number one strategic investment sector for the province because of the benefits that we realize or that we provide to rural coastal communities.

If you're familiar with Newfoundland and Labrador, we all look back at 1992 and the collapse of the north Atlantic cod stocks. Many communities that saw no future, didn't see the bright light at the end of the tunnel, now, because of the industry that we provide, whether it's mussels or salmon, do have a future. Many communities such as Gaultois and Hermitage, once far removed from anywhere, like here in the city, now see 100% employment in the industry. We are revitalizing rural coastal communities.

I've mentioned this paper. What we've done is identified all the barriers. Premier Ball and his government have agreed with industry to double Atlantic salmon production at 50,000 metric tons by 2022 and to triple the shellfish production by the same year. How are we going to do that? We have a plan. We've released two documents. The first one is a 28-point work plan that would fall under the regulatory framework of the provincial government. We've also released this document that's been provided to Minister LeBlanc for his consideration and the consideration of the Government of Canada. This contains 12 points on what the Government of Canada can do to help grow the industry, not just in Newfoundland and Labrador but from coast to coast to coast.

In Newfoundland and Labrador we currently employ about 1,000 people directly on farms. For every one of those jobs, it's about a 3.5 ratio, so it's spin-off jobs in the service supply industry, for example. Those jobs may not be as recognizable here in the city, but in the rural coastal communities where we operate they certainly are a huge benefit. As I've mentioned, communities that saw no future now have a future. But there are some recommendations. Of the 12 that are mentioned in this document that I've provided to the clerk, I'll touch on six very briefly.

The first one is a national act for aquaculture. In Canada right now we are governed under the Fisheries Act. I think it was written in 1867, Mr. Chair. The word “aquaculture” is not mentioned in the act. What that does is it creates uncertainty for investment, as Mr. Russell talked about, capital investment, foreign investment. We don't have the confidence of investors right now because we don't have an act that even has the term for the industry of which we're regulated, so we're pushing for that.

I know that Senator Manning, the chairman of the Senate Standing Committee on Fisheries and Oceans at our conference last year had released a report called, “An Ocean of Opportunities: Aquaculture in Canada”, which has identified and acts as a major priority for that committee. They support that. We've been talking to Minister LeBlanc and his counterparts in the federal government to do that. It doesn't have a budget. I don't think it's a budgetary item, Mr. Chair, but it's something for the committee to certainly consider before we move forward as an industry.

There are four or five others that I would certainly touch on. One is CSSP—being from Prince Edward Island—the Canadian shellfish sanitation program, which is there to ensure safety to Canadians and safety to foreign markets. The problem is that, in order for us to grow the industry, all of our sites have to be classified. When someone comes to the government, whether provincially or federally, and wants a new site to expand mussels or oysters, whether in Newfoundland and Labrador, or in P.E.I., those sites have to be surveyed. They have to be tested to ensure that they are safe to farm seafood sustainably and responsibly for local domestic markets and markets abroad.

The issue that we find is that there's so much interest in expanding our aquaculture industry on the east coast that there's not enough money through the CSSP program to enable government employees to do that, so there's a bottleneck of applications. Really, we're stalled in that. I think we can certainly triple shellfish production in this province, but that's one barrier that we need to overcome. I would certainly ask that more monetary investment be considered for the Canadian shellfish sanitation program.

As well, under the former administration, the only certified CFIA, Canadian Food Inspection Agency, laboratory was closed in St. John's. In Newfoundland and Labrador we have no certified lab. This fourth point is critically important not just to the food industry within which I'm responsible for aquaculture, but to all food industries. Closest to Newfoundland and Labrador, we would choose between either Moncton or Dartmouth. I'll give you an example. If we had heavy rains today and our shellfish program were shut down—because after a heavy rainfall we can't operate—it takes weeks to get samples back from mainland Canada.

I ask that you to review the monetary expenses and look at the value proposition for the expansion not just of aquaculture but of poultry or cattle, for example, and make a future monetary investment in and re-establish a CFIA lab here in Newfoundland and Labrador.

As well, there's the cost recovery. CFIA is currently undergoing public consultations about the cost recovery of certain services offered by the Government of Canada, which would be prohibitive to most shellfish operators and their ability to expand in the future.

My fifth point is about infrastructure. Telecommunications and wharf infrastructure are absolutely critical not just to wild harvest fisheries but also to the expanding aquaculture industry. We have great support in this province from small craft harbours through the Department of Fisheries and Oceans; however, there's always a necessity for more.

In looking at future expansion with additional companies coming to Newfoundland and Labrador, the largest salmon producer, Marine Harvest, now has seven sites in this province and 17 in some various levels of approval. Grieg, another Norwegian company, is looking at major expansion plans, but we have to provide the infrastructure for them to do that, not just environmentally responsibly but safely.

In many areas in which we operate in rural coastal communities, there are no telecommunications and Internet. In today's society, with technology and the high level of technology that we utilize in the industry, it's absolutely paramount that we get further investment into infrastructure, whether it's telecommunications or wharf infrastructure or roads, for example.

The final point I'd like to touch on very quickly is business risk management. Unlike terrestrial farmers in the agriculture industry, there is no insurance currently in which the government could certainly play a part. For agriculture we have agri-insurance so that in some unfortunate circumstance where some catastrophic event created a crop fail, for example, the government would help subsidize a national insurance program for agriculture. That doesn't exist for aquaculture.

In aquaculture, we should be looked at as being as important an industry as agriculture. An aqua-insurance program would mitigate any type of loss, but would also create assurance for future investors that Canada is open for business in aquaculture.

On that, Mr. Chair, I'll end. Thank you for your time.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Lane. I'm sitting here smiling a little because I chaired the fisheries committee in 2001. We recommended an aquaculture act for the country. I don't think we made a decision whether or not it should be under the department of fisheries or agriculture. That was a big debate at the time. We also recommended that the business risk management programs that work in land farming should apply to fish farming. You probably can't even find the study now, but it was good work, I think.

Mr. Grewal, you have a seven-minute round.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

I'm going to start with Mark from the aquaculture industry. You spoke about telecommunications. How are telecommunications in the province in access to high-speed Internet?

[Mark Lane]

They're not great. I live in a community called Holyrood, population 3,000. It's about 40 kilometres west of St. John's. You can only get cellphone coverage in one area of the town.

We have high-speed of course but realistically, within the outer metro area of St. John's, we still have difficulties with telecommunications. If you look at where we operate as an industry, 700 kilometres from here on the south coast in small communities, some of which don't have roads, it's obsolete.

For example I'll take salmon farming, if you haven't been to a salmon farm, right now we feed using computers. I have a picture of a young man in rural Newfoundland using an Xbox controller—that's what it looks like—to feed a million fish. To check on my fish in rural Newfoundland from a smart phone, we need broadband.

Just as important or more important than that is safety. In many cases we can't get coverage and we don't have radio signal back to the mainland outside of marine infrastructure.

[Raj Grewal, Liberal, Brampton East, ON]

What is the total infrastructure shortage in terms of dollars the government would have to invest there?

[Mark Lane]

My goodness, that's a very broad question. I wouldn't be able to put a number on that specifically.

I think the investment in small craft harbours in Newfoundland is upwards now of $25 million to $30 million. It certainly could be doubled, I'm sure, if you asked people, but realistically I wouldn't be able to put a dollar figure on it.

[Raj Grewal, Liberal, Brampton East, ON]

Has your industry made an application to ISED, which is going across the country to increase broadband access?

[Mark Lane]

I don't think we have. What does ISED stand for?

[Raj Grewal, Liberal, Brampton East, ON]

ISED is the new name for Industry Canada, which is the Department of Innovation, Science and Economic Development.

[Mark Lane]

Right.

When you say “made an application”, do you mean to a specific program?

[Raj Grewal, Liberal, Brampton East, ON]

Just email us offline and we'd be happy to connect you because they're doing great work in terms of rural areas. The government made a pledge in the last budget as well to ensure that.... For a country of Canada's size, it's always going to be a challenge to connect but we also understand that connectivity is going to lead to economic growth and you gave a perfect example of how important it is to your industry.

Just moving along to the fisheries and marine institute of Memorial University of Newfoundland, I read in the paper before I came out here that there is a bit of a transition in terms of how the industry is working locally. Do you have any comments on how you think we can meet the challenges of the demographic shift that's happening here?

[Carey Bonnell]

I could spend a lot of time on that topic.

We are in the midst of a shift here right now in our industry. We've gone from a shellfish-dominated industry in this province, which has been very lucrative. Our industry last year was worth about $1.3 billion and snow crab and northern shrimp had historically been a big part of that. Now those stocks are declining, largely around an environmental shift, which is the overwhelming opinion on that, and we're seeing groundfish stocks recover, so there is a lot of dialogue around northern cod as we're seeing signs of recovery.

The thing we need to keep in mind is that the world has changed a lot in the last quarter-century since we fished cod and my personal view is that we need to shift from an industry that was largely a volume-based industry with a focus on employment maximization in the day—which served the purpose, I don't dispute, as I grew up in the fishing industry and saw the value in that—to an industry that's more value based and that has quality of employment as its major consideration. That's where technology and innovation are going to be a major part of it.

We have labour demographics in this province right now that are scary, to say the least. To think that in the next several years we're going to have an available workforce in this province to support the growing aquaculture industry, the transitioning capture fisheries industry, or hospitality or some other sector, it's just not realistic. Technology and innovation are going to have to be a critical part of the fishery of the future, in my view at least.

I'm just back from a trip to Iceland where I saw how things can work. In Iceland in the seafood sector, it's amazing to see how they're focusing on maximizing value throughout the value chain, in every aspect focusing on quality improvement. Their metric, which I referred to in my opening comments, is around increasing value per kilo of catch, increasing utilization per kilo of catch.

They're in the process now, over the next five years, of trying to get more value from the traditional waste stream of a codfish than from the fillet. Think about going out tonight and having a nice meal of pan-fried cod—and that's valuable, don't get me wrong—but there is a big effort afoot right now in Iceland to get more value from the gut content, the oils, the heads, and all the various components of the animal through innovation, technology, entrepreneurship, and new business start-ups. It is the model of the future and it's the model we need to be adopting here, in my opinion.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you.

My next question is to the hospitality industry.

I think all the panellists can agree, the ones this morning and now, that labour is a challenge out here. Do you have any recommendations? Obviously with the Atlantic growth strategy the government recognizes that this is an issue. All the MPs from Atlantic Canada are doing a phenomenal job advocating for immigration levels.

Sometimes there is frustration with the immigration department and the programs we currently have. They miss the boat in that they make it overly complicated. Right now we have a fast-track program for skilled workers. If you are coming as a highly skilled engineer or a computer coder you can come here in two weeks, but that doesn't solve the problem out here. That doesn't solve the problem of the factory worker or the general labourer who could come here to help us increase economic growth.

Your comments on that would be greatly appreciated.

[Craig Foley]

I'd like to reiterate your comments because you said it very well. There's a problem with labour, particularly in hospitality, which is a people business and we have to have the labour force to do that. Without proper labour, businesses are hindered in their ability to grow. There is the skills gap that exists. There is a low public opinion of service jobs generally, and, actually, tourism jobs being deemed “low skill” perhaps doesn't help either.

By changing some of that terminology and understanding that indeed the tourism industry does provide higher-paying jobs and you can quickly ascend to management level and become part of a better workforce or a better-paying workforce.... Indeed, as you say, immigration is perhaps the key for a place like Newfoundland and Labrador. We have to be able to bring in the lower-skilled workforce faster so that businesses can grow.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, sir.

[The Chair, Liberal, Wayne Easter]

Mr. Albas.

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

Thank you, Mr. Chair.

Thank you to all of our witnesses for your testimony and expertise here today.

I'm going to start first by talking about aquaculture. Thank you, sir, for coming in. It's very refreshing for me to see a province that is determined to expand in the area you are in. In British Columbia there seems to be a bit of a mixed bag. Many people do not feel quite as comfortable.

Could you maybe point out why there seems to be such support from your provincial government in regard to this area?

[Mark Lane]

Thank you. That's a great question.

I'm very familiar with British Columbia as well. I served a number of years out there with the military and I also worked out there as a salmon farmer.

I'll go back to the cod moratorium. We've seen hard times because of the fishery, before oil and gas and before aquaculture, and communities had out-migration no different from any other rural community but the degree to which it was happening in Newfoundland and Labrador was staggering. They moved to Fort McMurray, Toronto, anywhere but rural Newfoundland. We're still seeing that a little bit.

Aquaculture is a shining light. It benefits rural coastal communities and people see that. I'm not saying there are no critics or opponents to our industry. Every industry should have its critics as long as criticism is founded on science and fact, and not necessarily emotion. We accept that too, but I prefer to deal with the facts.

Here on the east coast right now, even with the downturn in oil and gas, I've seen an even higher level of acceptance of aquaculture as a sustainable farming operation. We need to do it. As Carey mentioned, the United Nations FAO has forecast a massive shortage of seafood in the future, in the not-so-distant future, in 2030. We're looking at a 50-million tonne to 80-million tonne deficit.

Why our government in particular has taken an interest in this is that they see it as a renewable resource that benefits Newfoundlanders and Labradorians from outside what we call the overpass, outside the metro city. It benefits Newfoundlanders and Labradorians in rural coastal communities, and because it's renewable we're here this year, next year, and every year after.

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

I certainly appreciate your enthusiasm for it. What kinds of facilities do you have? Are they on land or are they coastally open net? Are they closed containment? I'm just trying to understand why there is such a big, vast difference in intention.

[Mark Lane]

We have both. As farmers of the sea, every one of our Atlantic salmon—which seems to be the most contentious from coast to coast, so just taking that one particular species, for example—that enters our oceans in net pen aquaculture for grow-out spends the first 18 months of its life on land. We, as farmers of the sea, do that, from egg to plate, responsibly and environmentally sustainably. People ask why we don't put it all on land. It's not possible. It's not financially feasible.

People use Norway, for example. I just presented before I came here to an inbound Norwegian mission. I've spent a lot of time in Norway. Our critics say that Norway is moving away from ocean-based farming, which is absolutely the furthest thing from the truth. They're looking at different levels of technology to do things differently in the ocean, but not necessarily moving the entire process to land.

The number one reason is that the ocean is a natural habitat. The ocean is there to be utilized. Once a salmon biologically requires salt water for smoltification to grow into an adult we place them back in their natural habitat. To put it in perspective, I think Carey mentioned that when you have a steak, for example, on a Friday night, not many people think about traceability or how it ended up on their plates that night. Salmon farming, outside of shellfish farming, is the most efficient form of protein farming on the planet. We use less water than beef or swine, and this is no slander toward terrestrial farming, but it is a fact. We use less water. We use less space. To provide 15 billion meals of salmon last year we used 0.00008% of the world's oceans.

It's efficient, so why not use it?