Finance Committee on Oct. 17th, 2017

[The Chair, Liberal, Wayne Easter]

We will come to order for the session in Halifax on pre-budget hearings in advance of the 2018 budget.

For the panellists who are here, welcome. We will get to you in a minute. We have a 15-minute space for what we call open-mike sessions before we start, and 30 minutes after, which will give people the opportunity to make a one-minute statement at the mic. There are no questions from members to those statements. They are statements that go on the record as part of the process.

We will start with those. I believe we only have two.

Welcome, Julianne. The floor is yours.

[Julianne Karavayeva, As an Individual]

Thank you very much for giving me the opportunity to speak this morning. I am very happy to be presenting on behalf of the ONE campaign with seven million people worldwide, as well as 130 million girls worldwide who are currently deprived of their human right to education.

As a student of international development, I can tell you that scholars in my field have been telling us for years of the positive benefits of educating young women in our world. We know this is the key to ending the volatile cycle of poverty, and we know that girls who graduate high school are less likely to be victims of child marriage and other forms of sexual abuse. We know that girls who graduate high school are also less likely to contract HIV/AIDS. We also know that for every $1 we invest in education, we see a benefit of about $10 in health care and income benefits.

Canada now has the ability and the opportunity to make a difference on this issue. The Global Partnership for Education is being replenished in 2018 and if we contribute our fair share of 2¢ per Canadian per day, we can become leaders in ensuring every child around the world has a decent quality education. This is the only global partnership that is dedicated solely to education in the developing world, and all the ONE campaign asks is that we contribute our fair share.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Julianne, and congratulations to your group. I believe there has been somebody at every presentation, and nearly every one of you speaks without notes, which is to your credit.

We now have Jane Ouillette. Welcome.

[Jane Ouillette, As an Individual]

My name is Jane Ouillette. I'm a volunteer with Engineers Without Borders Canada.

In budget 2018 we ask that Canada commit to a timetable of predictable annual increases to the international assistance envelope that would bring Canada's development assistance to 0.31% of GNI within this government's mandate.

Canada's current level of development assistance is 0.26% of GNI and is at the lowest in recent history. While development assistance globally has increased 9% in the past year, according to the OECD, it is disappointed that Canada's own contributions have declined by 4%.

Increasing aid will help Canada achieve sustainable development goals and increase economic growth. Forthcoming research from the Canadian international development platform suggests that countries receiving development assistance tend to import more Canadian goods than they would without aid.

We hope that budget 2018 can correct this downward spending trend so that Canada fulfills its global commitment.

Thank you for your time.

[The Chair, Liberal, Wayne Easter]

Thank you, and the same to you, Jane. We've heard from Engineers Without Borders Canada everywhere except in Yellowknife. They were there, but because we were late starting they had to leave.

Turning now to the panellists, welcome. For any of the groups here who have presented submissions prior to August 9, or whenever it was, they are on our iPads, so you will see people looking at their iPads from time to time. The briefs are there and are certainly part of the pre-budget consultation. We thank you for that as well.

Before I start with the first panellist, we'll give you a bit of an idea of where people on the committee come from and what they represent. We're travelling with a subcommittee of the full committee on finance with seven members.

We'll start with introductions. Dan, do you want to start?

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

Thank you, Mr. Chair.

My name is Dan Albas. I hail from British Columbia. My riding is Central Okanagan—Similkameen—Nicola. I've been to Halifax a number of times. Every time I come here I learn something new, so I'm looking forward to today's panel.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I am Tom Kmiec. I'm the member of Parliament for Calgary Shepard. I represent a mostly suburban area.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

My name is Alexandre Boulerice. I am the member for Rosemont-La Petite-Patrie, in the Montreal region. It's a very urban riding that is home to mostly small businesses.

[Raj Grewal, Liberal, Brampton East, ON]

My name is Raj Grewal. I'm the member of Parliament for Brampton East, just outside of Toronto.

[Jennifer O'Connell, Liberal, Pickering—Uxbridge, ON]

My name is Jennifer O'Connell. I'm the member of Parliament for Pickering—Uxbridge on the east side of Toronto.

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

My name is Greg Fergus. I am a Quebec member of the Liberal Party. My riding is Hull-Aylmer, located just outside Ottawa.

[The Chair, Liberal, Wayne Easter]

I'm Wayne Easter, the member of Parliament for Malpeque, Prince Edward Island, which is just across the water a little ways.

To start, we'll go to the Atlantic Canada Airports Association, with Ms. Pasher.

Welcome.

[Monette Pasher, Executive Director, Atlantic Canada Airports Association]

Thanks, Mr. Easter.

Good morning. Thank you for the invitation to appear before you as part of the pre-budget consultations.

In 1914, one of the early English pioneers of aviation, Claude Grahame-White, forecasted this:

First Europe, and then the globe, will be linked by flight, and nations [will be] so knit together that they will grow to be next-door neighbours.... What railways have done for nations, airways will do for the world.

Fast-forward a hundred years, and I think truer words were never spoken. Aviation has created a much more global world. Airport runways have quickly become the main streets of many of our towns and cities throughout Canada. Airports and air travel are so important to trade and economic growth here in Atlantic Canada, and I'd like to touch on that as well as discuss some of the challenges that our region faces.

First, let me start by saying thank you to this committee for your support for our 2017 budget submission. Our region's airports are very pleased that progress was made, particularly on the infrastructure funding file for eligibility for small national system airports across Canada. The Government of Canada's new national trade and transportation corridors program allows all airports to apply for funding, which is a big win for us. For several years, six of our small national airport system airports, four of which are located here in Atlantic Canada, were not able to apply for any form of federal funding support. They are now finally eligible to access federal funds to improve safety at their airports.

Our region's airports move nearly eight million passengers per year. That's three times the population of our region. That number has grown by about 22% over the last decade, and this year that growth has continued. We're already seeing an increase of about 3%. With that growth, it's imperative that we continue to maintain, improve, and invest in infrastructure at our airports.

The creation of the national airports policy back in 1994 resulted in the transfer of financial responsibility for airports from the Government of Canada to the community. This financial model has resulted in a net transfer of funds from aviation to the Government of Canada, which in 2016, for example, was $344 million in the form of airport rent.

Only a small fraction of those funds contributed to government go back into the aviation system. In fact, in 2016 approximately 10% or $38 million was invested through the airport capital assistance program, which is set up to support 200 small airports across Canada. Since 2000, the funding in this program has not changed, while the cost of doing business over those last 15 years, as you can imagine, has risen considerably. The airport capital assistance program needs a dramatic increase in funding support for small airports across this country.

As I mentioned, Canada's airports pay $344 million a year to the federal government in airport rent. Our Canadian airports are recommending that the government eliminate rent for all airports with fewer than three million passengers, which would amount to approximately $11 million of the $344 million paid to the federal government last year. In addition, we would like to see a cap on rent for other airports, so that it no longer continues its upward climb. Airports are closed-loop systems, and any reduction in rent would be passed on through lower airport charges and debt requirements.

Lastly, one of the main issues travellers are faced with in Canada today is increased wait times. There is a need to raise service level standards for screening and reduce wait times without increasing fees charged to air travellers. This can be accomplished through a more productive system and improved service standards and by expanding the adoption of new innovations, which do exist. We are pleased to see that some progress has been made.

Just under a year ago, Minister of Transport Marc Garneau committed to look at the CATSA governance model to make its funding more nimble for growing demand and more accountable to service standards. It is our understanding that governance changes for CATSA are now being discussed this fall. We would like to caution you that one size does not fit all across this country for the various sizes of airports.

CATSA currently targets to process 85% of passengers in under 15 minutes, which means that about 10 million travellers are waiting anywhere from 16 minutes up to an hour, and even this target is inadequate from a global competitiveness standpoint. Yet we understand from our Canadian airports that CATSA is not even consistently meeting that target.

Canada's largest airports are already having to spend millions of dollars to top up a service that travellers are already paying for through the air travellers security charge. These customers should not have to pay twice.

While CATSA's future governance is being evaluated, we need to ensure that in 2018, CATSA is sufficiently funded to support demand. Allocating all revenue from the air travellers security charge to CATSA screening would be a very good place to start. In addition, we need to move forward on innovation. CATSA-plus is a program that adopts technology and procedural innovations proven in other parts of the world. To date, the program has only been partially deployed at some checkpoints at the four largest airports. CATSA-plus is already helping airports manage summer travel volumes, but deployment to additional checkpoints at these and other airports is stalled pending additional funding.

Thank you for your support in recognizing the important role airports play by allowing national system airports to be eligible for national trade corridors funding. Seven airports in our region have already submitted projects. We look forward to working together on furthering the economic prosperity of our region and this country.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Monette.

We'll now turn to the Atlantic Institute for Market Studies, and Mr. Navarro-Génie.

[Marco Navarro-Génie, President and Chief Executive Officer, Atlantic Institute for Market Studies]

Thank you, Mr. Chairman.

Mr. Chairman, honourable members of the committee, and witnesses, good morning. I'm grateful for the chance to appear before you on behalf of the Atlantic Institute for Market Studies this morning.

Among the greatest killers of productivity are less-than-thoughtful regulations and taxes. In Atlantic Canada the levels of taxation have reached murderous rates and they need reform. For over two decades our research shows that wealth is most productive in the hands of dynamic, creative individuals: entrepreneurs. While government can sometimes be a force of good, it is no replacement for the innovative and entrepreneurial spirit. The more we leave in the hands of entrepreneurs, the more productive we are likely to become as an economy, providing, of course, that public services are delivered well.

Conversely, the more government directly vacuums from the hands of entrepreneurs, the less productive entrepreneurs can be. Reforming the tax system to take even more away from entrepreneurs seems inconsistent with increasing productivity.

I would like, perhaps, for us to consider a couple of things. Even some of the proposed reforms.... I know the whole thing is in flux at the moment. Rural businesses, as the chair would know well, are regularly family businesses and they are likely to be detrimentally affected by some of the rules as they are proposed and changed, even while they're being changed.

We accept that the tax code needs reform and income tax sprinkling might be an issue to address in specific contexts, but the nature of the family farm, for example, is that the family is involved. Greater clarity in terms of what exactly it means to be engaged in the family business, in a farm, in a family restaurant, and generally speaking in the agrifood business, is welcome. The new rules, as they were proposed, largely disadvantage rural businesses.

In particular, these new rules as they were conceived may also have an enormous impact on business succession, which is a significant problem in our region and has been on the radar of local governments for quite some time now. As one of our senior fellows has recently pointed out in a newspaper publication, more farms in Canada have become incorporated, even though there are fewer farms, in order to encourage the next generation to take up farming. The new rules impair the efforts of regional governments in reversing rural decay in Atlantic Canada, so this is crucial for us.

When a family-run restaurant, farm, or grocer decides to retire, the proposed rules make it significantly more difficult for a family member to take over the business. We risk vaporizing strong efforts by the regional and local governments to find solutions to what essentially could be a succession crisis in the years ahead. Often because these are small family businesses, they are not likely to be bought by outside investors or foreign corporations, so family succession is the best option available. When people walk away from businesses, important wealth disappears from smaller communities, undermining productivity and undermining at the same time rural communities in this region.

Similarly, our own chair of the board has recently pointed out in another publication that the nature of the start-up sector in our region, which is a growing sector in all Atlantic provinces, risks being negatively affected. Start-ups often rely on investments from friends and family. Under certain aspects of the new rules, as he pointed out, “gains made by family members who invested in helping get the business started would be taxed at the highest marginal rate. This is more than twice the rate that the same individuals would pay in the event they invested in any public company.”

Ironically, Mr. Chair, the technologically advanced sector of our economy is greatly responsible for developing tools and techniques that would increase our productivity.

Finally, Atlantic Canadians already live in the most taxed region of the country. Mark Milke recently calculated for our institute that people pay 30% more in the lowest-taxed Atlantic province, which is New Brunswick, than in the least-taxed non-Atlantic province, that being Manitoba, and double that of a similar family in Saskatchewan. The comparison between Newfoundland and Alberta is off the scale.

The proposed changes, unless carefully reconsidered, will only make the existing problem of the region's existing high taxes even worse. As a whole, the Atlantic Canadian economies and the Newfoundland economy in particular, given its current fiscal troubles, cannot afford to be sending more money to Ottawa in indiscriminate ways.

The tax code needs reform, to be sure, almost as badly as there is need for disciplined federal spending. Rushing through, as the government appears to be doing, without carefully evaluating potential negative consequences, will harm productivity in two major ways.

First, botched jobs always need redoing, and doing things twice is always less productive. Let's measure twice and cut only once.

Second, impairing succession, or making investment more difficult to flow into the start-up sector at crucial moments in its cycles will deprive our Atlantic economies, rural and urban, of vital oxygen, and will set us back on the fragile progress being made on these fronts throughout the region.

To sum up, while reform is needed, virtually confiscating capital from small entrepreneurs will not improve productivity in this country, and surely not in this region.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Marco.

We're turning to the Canadian Worker Co-operative Federation, and Ms. Corcoran.

[Hazel Corcoran, Executive Director, Canadian Worker Co-operative Federation]

Thank you very much for inviting us to appear before your committee.

Worker co-ops are inherently more productive than other business types because they make workers into business owners. They are also longer lasting than other business forms. We've quoted various studies in our brief that provide evidence for this.

I have four main points to present to the committee. The first is on business succession using co-operatives. As previously mentioned, a wave of business owner retirements is coming, estimated to be about half a million in Canada. This is only now starting, and the issue will be most acute in rural areas. Many companies risk closure, as a result of which thousands of jobs could disappear. However, the employees of these companies could mobilize to save their jobs and their communities by creating worker and other types of co-operatives. It's another way beyond family business succession.

This is why our federation, along with Co-operatives and Mutuals Canada, has submitted a joint proposal for a support program for co-op business succession so that Canada can maintain more locally owned jobs and services. This approach can also help to increase salaries, helping to strengthen the middle class.

The Careforce home health care worker co-op in the Annapolis Valley is a great example of this potential. When the owner there decided to look at the options for succession nine years ago, there were about 20 workers. A worker co-op was then formed to purchase the business. The co-op has been profitable every year, now has about 80 employees, and has received numerous business awards.

The second is on the need for a RRSP program adapted for employee entrepreneurs. Unfortunately, a change was made in budget 2011 that hurt the capacity for co-ops to capitalize themselves through member investment. The measures on self-directed RRSPs in that budget rendered co-op shares ineligible for RRSPs by members who hold more than 10% of any class of shares in the co-op. If an individual is affected, there are very high penalty taxes. We believe that these provisions are unfairly putting jobs in co-ops at risk. We further believe that the old limit of $25,000 should be adjusted for inflation.

The third is on distinctive tax treatment for indivisible reserves in worker co-ops. An indivisible reserve in a worker co-op is property owned by the co-operative that cannot be divided among members as is typical in non-profit societies. Because indivisible reserves cannot be cashed out by members, they provide long-term investment capital that supports the longevity of the co-op and more clearly demonstrates the community benefit of the co-op. Such a reserve can be created either because it's required by law, as in Quebec and Newfoundland, or because the co-op decides to adopt it, which is the case in other jurisdictions. Providing distinctive tax treatment for such reserves would be fair because the co-op would be receiving a benefit for its commitment to community, reflecting the same logic that says that non-profits are not taxed on their surpluses, and also because co-ops generally cannot access a capital gains tax exemption.

The fourth is on co-operative capital. One of the key differences between co-ops and other corporations is the role of capital. In a co-op, capital is simply one of the tools required to achieve the goals of the co-op. Under most co-op acts, capital receives a limited return and most shares have par value, so that there is no potential for capital gains. In seeking capital, emerging co-ops have two barriers that conventional corporations do not face. First, the democratic structure and the limited returns on capital mitigate against the usual sources of venture capital, which seeks significant control of the enterprise. Second, because co-op par value shares do not generate capital gains, members don't receive the same taxes they do from the government to reinvest in their enterprises.

To help address these barriers, Co-operatives and Mutuals Canada announced just yesterday the creation of a $25-million Canadian co-op investment fund, or CCIF, funded by co-op sector contributions, including from our federation. CMC is requesting a federal contribution that would give the fund the capacity to meet more of the needs of emerging co-ops in Canada.

I would urge the committee to recommend to the government an investment on a matching basis in the fund. We note that better resourcing of this fund could fit well under the federal social innovation and social finance initiative being developed by ESDC. We urge the government to adequately fund this social innovation initiative and to equip it to resource entities like this fund.

Thank you for the opportunity to present.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

We'll turn now to the Halifax Chamber of Commerce. Mr. Sullivan and Ms. Conrad, welcome.

[Patrick Sullivan, President and Chief Executive Officer, Halifax Chamber of Commerce]

Good morning. My name is Patrick Sullivan. I am the president and CEO of the Halifax Chamber of Commerce. The Halifax Chamber of Commerce is a best-practice business advocacy organization that continuously strives to make Halifax an even more attractive city in which to live, work, and play. Together the approximately 1,600 member businesses and their over 65,000 employees act as a single, powerful voice, through the chamber, to promote local business interests.

With all due respect to the members seated here today and their constituencies, I would say Halifax is one of the most economically dynamic cities in the country. Recently, innovation minister Navdeep Bains named Halifax as the winning Atlantic region for our ocean supercluster, incorporating digital technologies and aquaculture, fisheries, offshore oil and gas, and clean energy.

Nova Scotia is a province rich in history and culture, and together with our drive for prosperity through our multitude of educational institutions, economic sectors, and—as mentioned—superclusters of innovation, we continue to strive to make Halifax a vibrant and successful community. We appreciate the opportunity to address the House of Commons Standing Committee on Finance today.

What we tried to do was address the specific questions that the committee presented. The first question was, “What federal measures would help Canadians to be more productive?”

Halifax is facing a significant challenge to generate a talented workforce that can not only replace the number of current employees who will be retiring over the next few years, but also provide for future growth in our business community and address our aging population. Our province, and subsequently our country, cannot be completely productive without a full labour force driving economic growth, ensuring that Canadians, particularly those from under-represented groups, have the skills they need to participate productively in the modern economy as a critical part of building the labour force our region will need to succeed in the future.

The federal government plays a key role in skills training in Canada, and it is important to ensure the existing programs provide effective training to Canadians. As well, Nova Scotia has struggled to retain its youth and recent graduates in recent years, compounding our demographic challenges of building a productive workforce. To address this, the federal government could continue to increase supports enabling youth and recent graduates to take better part in experiential education opportunities. We define “experiential education opportunities” as opportunities for youth to participate in co-ops, internships, and anything that puts them in the workforce prior to graduation and then provides them with better skills to obtain a job at graduation. This would help prepare them for the workplace and increase labour force attachment and retention, thus replacing those retiring with highly skilled and educated graduates.

Halifax is a hub for innovation. As mentioned, it was recently named an oceans supercluster. That continues to provide our province with productive and competitive resources and employment. The government has taken the initiative to invest in Nova Scotia's clean technology sector, as well as the oceans sector. We ask that the government continue to invest in other sectors, such as life sciences, and more specifically in preventive health care, which can increase workplace health and in turn workplace productivity.

The second question was, “What federal measures would help Canadian businesses to be more productive and competitive?”

When we speak to our members, the overall tax burden, as Marco mentioned, is a constant source of frustration and a deterrent for business productivity, especially now that the federal government has taken actions to make changes to the corporate tax policy. These proposed changes have caused undue stress for individuals, as they leave many with uncertainty for their business future. That uncertainty has now been going on for four months and is expected to continue.

The proposed changes may have a significant impact on Nova Scotia's economy, and more specifically on small businesses and entrepreneurs both within Halifax and—again as Marco mentioned—in the rural areas. These changes could raise taxes, increase the administrative burden on SMEs, harm gender parity, and have negative impacts on family-run businesses. These tax changes may reduce the productivity of business in Canada. Many individuals may delay or are already delaying important decisions, or will choose not to go into business at all.

While we were very pleased to hear yesterday's announcement—the October 16 announcement on the reduction in small business taxes to 9% by 2019—we urge you to think about the consequences that the uncertainty is having on Canadian business productivity and global competitiveness.

We've heard that additional announcements are coming this week on topics such as income sharing and transitional impacts, which will undoubtedly have an impact on our members in Halifax. Additionally, reducing regulation, providing timely customer service, consulting the business community early in the regulatory process, reducing red tape, and continuing with fiscal responsibility will help make life easier for business.

Ensuring that Canada has the transportation and information technology infrastructure required to participate fully in the global economy is critical for productivity and competitiveness. Investing in trade-enabling infrastructure and improving the ability of companies in our region to export their products and services around the world is a key productivity goal for business and will help communities across the country.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thanks very much, Patrick.

Turning to the Prince Edward Island Fishermen's Association, we have Mr. Avery and Mr. MacPherson.

[Ian MacPherson, Executive Director, Prince Edward Island Fishermen's Association]

Thank you very much.

I would like to thank the chair for the opportunity for the Prince Edward Island Fishermen's Association to present to the Standing Committee on Finance this morning.

My name is Ian MacPherson, and I'm the executive director of the PEIFA. Today I'm joined by Captain Craig Avery, who has over 40 years of experience in the commercial fishery, harvesting species such as lobster, tuna, and herring.

In terms of the mandate of the House of Commons Standing Order 83.1, we would like to expand on item two, which asks what federal action would assist businesses to meet their expansion, innovation, and prosperity goals, and item three, which asks what federal measures in rural or remote communities would encourage expansion and prosperity in serving domestic and international customers. This all ties in with the question around improving productivity.

The PEIFA represents the interests of 1,288 independent businesses on P.E.I. The association is dedicated to making positive changes in the fishery so that current and future generations can remain active and financially viable in the fishing sector for many years to come. As a side bar, we would like it noted that we strongly support the federal government's current position of strengthening the language around owner-operator and fleet separation policies and putting these policies into permanent legislation. Each of our owner-operator captains has significant financial investment in their fleets, which translates into a direct connection with our fishery and the desire to improve it.

Our fishery, along with agriculture and tourism, is one of the three top economic drivers of the Prince Edward Island economy. Proportionally, the fishery on P.E.I. contributes the highest percentage to provincial GDP than any other fishery in Canada. Our focus today is the reduction of licences under a fleet sustainability program as an effective way to increase the financial viability of fishing fleets.

The reduction of greenhouse gas emissions is also a key component of this program. One of the most impactful and effective methods to improve our multiple species fisheries is the permanent retirement of licences that allow those who want to exit the fishery the ability to do so in a dignified and planned manner.

In addition, a fleet sustainability program would reduce fuel consumption and the amount of gear in the water. This past summer has shown that conditions can change rapidly in our coastal ocean environments. Many times our fishery has been the subject of crisis management. We welcome the recent Atlantic fisheries fund that will assist in funding projects in technology, infrastructure, science, and marketing.

The PEIFA, in conjunction with Fisheries and Oceans Canada, has been one of the leading organizations in Atlantic Canada in fleet reductions. In the past five years, the P.E.I. fleet has retired 59 lobster licences, and over 44,000 traps have been removed from the water, resulting in increased catches for many harvesters and increased economic viability. Positive environmental impacts were also significant in the reduction of carbon footprints by having fewer boats make fewer trips while using less gear on the water.

The PEIFA and DFO program is an effective, proven, and implementation-ready program that can be applied to other species. However, to make a significant impact, hundreds of groundfish and tuna licences need to be retired over a much shorter period of time. This can only be achieved by an injection of additional funding to complement the financial resources that the PEIFA is now allocating towards this program. An overall contribution of $3 million towards the retirement of groundfish licences and $7.5 million towards the retirement of tuna licences would have a significant and positive impact on these fisheries. A 50% reduction in 872 groundfish and 360 tuna licences would achieve the impact that is required to put these fisheries in line with available quota.

From an environmental perspective, fuel reductions in tuna alone would be as follows. On average, 200 to 400 litres of fuel are consumed on an average trip. The reduction of 180 trips per year would result in reduced fuel consumption of between 36,000 to 72,000 litres annually based on each boat making one trip to catch fish. A more realistic projection would be three to five trips per boat, which would reduce fuel by between 108,000 and 360,000 litres per year.

All active licences have been issued by the federal government, and we are seeking the assistance of the federal government to help bring back balance to these targeted fisheries. This type of streamlining has taken place in the past in other sectors, such as tobacco and hog production in the agricultural sector.

In summation, the Canadian inshore fleet is a key component of both provincial and national export-growth strategies. With increased efficiency and economic viability of the inshore fleet on P.E.I., these growth strategies would be attainable for Prince Edward Island, the federal government, and the people of Canada.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Ian.

From the Canadian Cable Systems Alliance, we have Mr. Edwards, vice-president.

Welcome.

[Chris Edwards, Vice-President, Regulatory Affairs, Canadian Cable Systems Alliance]

Good morning. Thank you for your invitation to appear today.

I'm Chris Edwards, vice-president of regulatory affairs with the Canadian Cable Systems Alliance, known as the CCSA. CCSA represents some 125 cable, telephone, and Internet companies that serve more than 1,200 communities from sea to sea to sea. Our members are community co-operatives, family-owned businesses, municipalities, and first nations. They provide communication services to rural and remote communities throughout Canada, including across the north.

CCSA has been very pleased to see that the government's $500-million “connect to innovate” program has focused on providing broadband transport connections to rural and remote communities and that it has also included funding for last-mile network builds. That is the right approach. We need to build the main connections and then encourage local entrepreneurs to expand networks out from those connections.

We recommend that the government continue to expand the connect to innovate funding program. Many more dollars are needed to meet the ultimate objective of connecting all Canadians regardless of where they live. Expansion of the program would be a strong step toward accomplishing that goal.

Our key point today is that our members already operate networks that extend broadband service to Canadians at the edges of the existing terrestrial network. They are a vital and necessary component of a national broadband strategy.

Canada's fiscal policy should support the government's objective of extending broadband service to all Canadians. That policy should leverage the existing networks, skills, and entrepreneurial drive of these locally based companies. Current government funding programs provide only for capital building costs. However, ongoing operational costs often present just as great a hurdle to network extension as the capital investment required does. As an example, capital project funding may enable a small cable company to extend its physical network to 250 new homes. However, the increased monthly wholesale cost of the additional broadband capacity needed to serve those new customers may still make the project unviable. There's no point in building an unsustainable network.

For that reason, it's important to consider how smaller companies that are willing to extend and improve their networks can be supported on an ongoing basis.

That leads us to recommend that the government should consider lowering the capital gains inclusion levels and the income taxation rates that apply to small businesses like those our members operate. In our written brief, we also recommended a reduction of the business income tax to 9%, and we were very pleased to see yesterday's announcement of that initiative.

We recognize the revenue implications that such measures have for the government. For that reason, we favour targeted measures that relate directly to the successful execution of a national broadband strategy. As an example, small companies that invest in network improvements and extensions could be allowed to recover sales tax rebates for the equipment purchases they make to do that. Similarly, there could be a sales tax rebate for the wholesale purchases of transport capacity that these smaller companies must make.

What we ask then is that government consider how targeted fiscal policies might be coordinated with and used to support Canada's broadband strategy. We ask that the government, in making such policies, recognize the vital role that local entrepreneurs with existing networks and expertise can play in achieving Canada's broadband goals. We ask that those policies recognize the special ongoing economic challenges of sustaining networks in often rugged, spread out, and thinly populated areas.

The extension of broadband infrastructure and service to all Canadians is a critically important but daunting task. It requires efficient application of all the resources we can bring to bear. Locally based independent communication companies are an important existing resource. Canada's fiscal policy can and should be used to unlock the great potential such companies have, which contributes to the success of Canada's goals for a modern digital economy.

Thanks for your time. I'd be happy to answer any questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Chris. I can't help but think the one thing any of us who are rural MPs gets is lots of complaints on the speed of the Internet in rural areas, so there will be some questions on that, I'm sure.

I know the P.E.I. Fishermen's Association has a flight to catch, so we'll go to the first round for each party and then we'll open it up for anybody else who has questions for the P.E.I. Fishermen's Association at that time so they can leave.

We'll go to seven-minute rounds.

Mr. Fergus.

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

Thank you all for your presentations. I thought they were very insightful, and they will be very useful to us for making recommendations to the Minister of Finance.

Mr. Navarro-Génie, I have a point of clarification. You said that tax rates have historically been very high, but it seems to me that it's quite the opposite. Governments are increasingly reducing tax rates for businesses and for individuals. Could you comment on that?