Finance Committee on Oct. 18th, 2017

[Raj Grewal, Liberal, Brampton East, ON]

I have one more question, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

You had better be quick.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you.

My colleagues talked about this as well, but the Montreal Economic Institute said that if our neighbours down south reduced corporate tax rates, there would be a risk to productivity in Canada. I respectfully disagree. I don't think that businesses make their decisions solely based on tax policy. Canada has a lot of advantages compared to down south, and one thing I will say with a great deal of confidence is that we have political stability. Whether it's in politics or economics, making assumptions without factual data is always tough. We can take this offline, because you are an expert, but I don't think that because they propose to reduce their tax rate by 15 points, it's going to result in a huge flight of capital to outside of Canada.

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

The last comment goes to you, Mr. Bédard.

[Mathieu Bédard]

You're right that many things influence business decisions, but how can the federal government influence the stability of the U.S. government? You can't, but you can control corporate taxation at the federal level. Yes, it does affect productivity a lot. The science behind it is nearly unequivocal among economists.

[Raj Grewal, Liberal, Brampton East, ON]

But the growth rate in Canada is at 4% this year, which is the highest in the G7.

[The Chair, Liberal, Wayne Easter]

Raj, you'll have to take it offline.

I want to make one comment to Mr. Gagnon on the tobacco issue.

Having been Solicitor General and having seen this activity at one time in my life, I can say there are two bigger issues besides taxation. I know we're a finance committee, so you could expect we'd argue that there was a taxation issue. However, there is also the issue of extreme criminal activity and involvement, and there's the bigger issue around health. Nobody knows what's in this illegal tobacco, and that is a huge problem. I share your worries on the new Health Canada proposal. I don't mind saying that at all. However, on the enforcement side, based on my experience, there's a real fear of challenging the locations where this criminal activity is taking place because—and this is not going to sound politically correct—doing so will be seen as race-based. That worries me.

I'll leave it at that, but I think that's the reality of the world on the enforcement side. If criminal activity is taking place, I don't care where it's taking place. If it's criminal activity, it needs to be addressed. The enforcement community on the policing side needs to address it because it's becoming more and more of a health issue related to the impurities that are in the tobacco, rather than a tax issue. As far as the tax issue goes, it's lost revenue, but the real issue is health, young people smoking, impurities in the tobacco, and so on. It's going to lead to many more problems, I believe.

Do you want to add anything?

[Eric Gagnon]

No, I will leave it at that.

[The Chair, Liberal, Wayne Easter]

Thank you.

Thank you to all the panellists for their presentations. We will suspend until the next panel in about 10 minutes.

[The Chair, Liberal, Wayne Easter]

We'll reconvene. Welcome to the second panel for the pre-budget hearings in advance of the 2018 budget. Before we start, we'd just like to give you an overview of where everyone comes from. We basically represent the everywhere across the country. This is a subcommittee of the finance committee. We have more members when we meet in Ottawa, but we travel with fewer.

We'll go with a round of introductions.

Mr. Boulerice, could you start this time, please?

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

Thank you, Mr. Chair.

My name is Alexandre Boulerice, and I am the member of Parliament for Rosemont—La Petite-Patrie. That means I'm a member from the Montreal region.

[The Chair, Liberal, Wayne Easter]

Then we have our other member from Quebec, Mr. Fergus.

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

Good morning. My name is Greg Fergus, and I am the member for Hull—Aylmer, in the Outaouais region, just across the river from Parliament Hill.

[The Chair, Liberal, Wayne Easter]

Ms. O'Connell.

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

Hello. Welcome, everyone.

I'm Jennifer O'Connell. I'm the member for Pickering—Uxbridge, which is just on the east side of Toronto.

[The Chair, Liberal, Wayne Easter]

Mr. Grewal.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

My name is Raj Grewal. I'm the member of Parliament from Brampton East, just outside of Pearson International Airport. It's great to be in Montreal, but I'm still a Leafs can.

[The Chair, Liberal, Wayne Easter]

Oh, my. Them's fightin' words.

Mr. Albas.

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

Good morning everyone. My name is Dan Albas, and I am the member for Central Okanagan—Similkameen—Nicola.

I'm very glad to be here with you today. I look forward to learning about your views. Thank you.

[The Chair, Liberal, Wayne Easter]

Mr. Kmiec.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Good morning. My name is Tom Kmiec, and I represent the riding of Calgary Shepard, in western Canada. I'm happy you're here to meet with the committee today.

[The Chair, Liberal, Wayne Easter]

And bonjour aussi. I'm Wayne Easter, member of Parliament for Malpeque, Prince Edward Island.

With that, we will turn to the first presentation from the Association francophone pour le savoir, and Mr. Bouchard.

The floor is yours. We'll try to keep it if we could to about five minutes.

[Frédéric Bouchard, President, Association francophone pour le savoir]

Thank you. I'm happy to answer questions in French or English on any issues on research and innovation, but I'll do my presentation in French.

Honourable members of the committee, thank you for the opportunity to speak to you about the importance of research funding for our collective future. I am the president of the Association francophone pour le savoir, or ACFAS for short. Established in 1923, the ACFAS has more than 5,000 members across the country in every sector of research—primarily in colleges and universities, but also beyond that realm. We are the largest multidisciplinary association in the country and the largest in the Francophonie, representing all fields. From art history to quantum physics, researchers in all fields are welcome in our association.

Since 1923, the ACFAS has been working to help the public understand the importance of research and its impact on our lives. Does research affect our lives? The answer is simple. From the moment we get up in the morning to the moment we go to bed at night, every object we use and every way in which we do things was discovered or made better by researchers. The urgent need to support research becomes clearer when we think about cancer treatments, climate change, or major technological breakthroughs that lead to explosive economic development. Research entails all of those things, but also, much more.

We enjoy better and richer lives thanks to students and professors in multiple disciplines who are building and sharing new knowledge and identifying the challenges of tomorrow. How are we able to do something as simple as get a glass of drinking water, like the one here in front of me? Obviously, we just pour it from a pitcher and drink, but we are actually able to do that thanks to years of chemistry, biology, public health, and engineering research.

How are we able to devise stay-in-school strategies? It is possible thanks to years of research in the fields of psychology, psychoeducation, education, sociology, and economics.

How are we able to adapt society to accommodate our aging population? It is only through years of research in demography, anthropology, labour relations, social work, psychology, and medicine.

How are we able to identify computer hackers trying to influence the outcome of our elections? It is thanks to years of studying cybercrime and operations research.

I could go on for ages. The ways in which research affects our lives and raises our quality of life collectively are infinite or, at least, indeterminate—if I were in the presence of mathematicians, they would demand precision.

Beyond all that, though, research helps us to understand and enrich the human experience. How is our cultural heritage similar to or different than that of our neighbours? How do we define justice or equity? How do social media change the nature of our friendships and social interactions? From literature, art history and linguistics to communications, political science and law, research gives us the tools to not only live better lives, but also flourish as individuals and as a society.

What can we do, then, to better support research in the country? It is important to note that Canada lags behind the OECD average when it comes to investments in research and innovation. Canada invests approximately 1.6% of GDP in research and development, even though the OECD target is 3% of GDP, on average. Some countries, including South Korea and Israel, spend nearly 5% of GDP on research and development.

We need to take immediate action in order to maintain Canadians' quality of life in the coming years. The ACFAS endorses the key recommendation set out by the expert panel on Canada's Fundamental Science Review in the Naylor report. The panel recommended a substantial increase of $485 million, over four years, in the base funding provided to the three granting councils that award research funding to colleges and universities. The granting councils are the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, and the Canadian Institutes of Health Research. The recommended increase also applies to the Canada Foundation for Innovation, which provides our researchers with the tools they need to make research and innovation breakthroughs. This funding increase would give us the resources to make up much of the ground we have lost. If the funding is to be effective, however, it must be distributed to the various councils and agencies in a diverse and balanced way, to encourage greater diversity in research and innovation.

In conclusion, I would remind you that it is thanks to thousands of brilliant minds working across the country that small miracles, like drinking this water, are possible. I know that, when I drink it, I will be fine because thousands of researchers have worked to bring us this safe drinking water, and that applies to every sector of society. My example illustrates something very important. Funding is a practical response to a philosophical question. How do we improve the lives of our fellow citizens? I am here today to tell you that the answer is simpler than you might think. Investment in research is the best way to improve all facets of life for all Canadians across the country. I urge you to support a major and immediate reinvestment in research, because it is research that enables us to build our future, not just endure it.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thanks very much, Frédéric. We've heard a lot about the Naylor report in our travels across the country, at, I think, pretty well every stop.

We'll turn now to the Board of Trade of Metropolitan Montreal and Ms. Huot.

[Céline Huot, Vice-President, Strategy and Public Affairs, Board of Trade of Metropolitan Montreal]

Thank you. I'll be pleased to answer questions in both languages after my presentation, but I will do my presentation in French.

Thank you very much for inviting the Chamber of Commerce of Metropolitan Montreal to share its recommendations as part of the pre-budget consultations in advance of the federal budget.

We represent all of Montreal's business community, which, alone, accounts for 50% of Quebec's economy. It is our view that the next federal budget should address these five priorities: supporting private investment and innovation; expediting infrastructure projects through swifter distribution of funding; encouraging the internationalization of our companies; promoting tax fairness and competitiveness; and setting out a plan to balance the budget. I will spend the next five minutes discussing each of these points.

Montreal's business community sees the economic climate as favourable and the outlook for growth as extremely positive. That view also applies to job growth, especially in Montreal, where we are nearing virtual full employment. I can come back to that later.

Regarding the first priority, we would like to see very strong support for private investment and innovation. We applaud the government on its creation of the innovation superclusters initiative. We have seen that the private sector is on board and ready to invest, so it would be a shame to miss out on promising projects. We realize that the government wants to support a maximum of five projects, but it is our view that the next budget should identify ways to expedite the projects that have been submitted. Otherwise, we will miss out on opportunities for growth.

As I mentioned, Montreal is nearing full employment, and the new economy will also impact workforce availability. Therefore, the budget should set out measures to make the hiring of foreign workers easier. Temporary work permits go a long way towards meeting labour needs in all technological realms, including the booming video game and animation sectors, delivering tremendous value added to our economy.

The government should also focus attention on the requalification of workers in order to maintain the country's productivity. That means partnering with the provinces, having foresight, and laying the groundwork. If the government does nothing to address the issue, a portion of the population will be left behind, and we can't afford to let that happen.

Furthermore, the government should ensure that the personal income tax system is aligned with a return to work, meaning that the system must be competitive. Canada is one of the most heavily taxed countries in the OECD. It is important that all the measures in place allow the maximum number of people to participate in the job market.

Our second priority concerns the timelines for infrastructure projects. The House supported infrastructure spending because the business community relies on infrastructure, in the transportation and digital sectors alike. However, releasing and disbursing funds for major projects sooner is key. VIA Rail's high-frequency train project is one example that comes to mind. The distribution of funding has to allow for a timely analysis leading to the project's implementation.

We have a number of different infrastructure projects at the Montreal port, such as the renewal of the icebreaker fleet operating on the St. Lawrence River. That's a crucial project. The port is a veritable economic gateway, not just for Quebec and Montreal, but also for the entire northwest of North America. With the Canada-European Union Comprehensive Economic and Trade Agreement coming into force, capitalizing on these infrastructure projects is paramount.

Our third priority is the internationalization of companies. There is no use in telling you that NAFTA is a huge concern for the business community. I think the budget should include a plan B, in case the NAFTA negotiations don't work out. Companies will face immediate consequences in the short term, so the government should plan for that in the budget. We also need to adopt measures that encourage market diversification, to open up markets with other trading partners, such as Japan, China, and India. That said, the measures in place to support businesses in the international market must be consistent. From time to time, the government organizes missions, but companies can't access risk guarantees through Export Development Canada. Therefore, program consistency is key in order to speed up the pace of market diversification.

Our fourth priority is tax fairness and competitiveness. Tax fairness is an issue that merits review. The government seems to be open to that, and we are very glad. Nevertheless, we would like to know the specifics and have the assurance of predictability. We are indeed supportive of fairness, but any strategy must allow businesses to make investments and take risks. For that reason, we'll be paying special attention to the changes the government comes out with.

We are extremely pleased with the reduction in the tax rate for small and medium-sized businesses. Ensuring our businesses are competitive from a tax standpoint is even more important given the aggressive tax reforms the U.S. is considering.

We cannot ignore those reforms completely, and we absolutely have to maintain our competitiveness. Moreover, sales taxes are often preferred to payroll or income taxes, since they do far less harm to the economy.

As for the complex issue of e-taxation, we feel that Canada must encourage deep reflection on the issue as a matter of urgency, so that we do not end up with a two-tier system. We want those of our companies that invest in e-commerce to be treated in the same way as foreign companies. We need to embrace fairness in this respect, as other countries in the world are doing.

The last point is about the need to have a plan to return to balanced budgets. The international economic situation is still the source of a number of uncertainties. We have to be ready for all eventualities, whether in the price of natural resources, the risks around the NAFTA negotiations, or even the rise of protectionism in certain countries.

We therefore recommend that the government should remain prudent and should give itself a cushion of from $3 billion to $6 billion in order to be ready for all eventualities. Spending must also be rigorously managed and there must be a plan to return to balance, with intermediate targets for annual deficits so that we can see them coming.

Thank you very much for your attention; I will gladly answer your questions.