Finance Committee on Oct. 20th, 2017

[Tom Kmiec, Conservative, Calgary Shepard, AB]

I'm Tom Kmiec. I'm the member of Parliament for Calgary Shepard.

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

Good morning. My name is Alexandre Boulerice and I am the member for Rosemont—La Petite-Patrie, a riding in Montreal. I too am very pleased to be here.

[The Chair, Liberal, Wayne Easter]

I'm Wayne Easter. My riding is Malpeque, in Prince Edward Island, which runs between Charlottetown and Summerside.

With that, we'll start with the first witnesses.

From Addictions and Mental Health Ontario, we have Ms. Czukar.

[Gail Czukar, Chief Executive Officer, Addictions and Mental Health Ontario]

Good morning. I am Gail Czukar. I am grateful for the opportunity to present today on behalf of Addictions and Mental Health Ontario.

Addictions and Mental Health Ontario is the provincial voice for over 220 organizations that provide mental health and addiction services and supports. These include supportive housing, outpatient care, community-based counselling and case management, withdrawal management, residential addiction programs, peer support, and hospital treatment programs.

Our members see first-hand the impact of mental illness and addiction on productivity and the health of our communities. Each week, 500,000 Canadians will miss work due to a mental health or addiction issue. The Conference Board of Canada has estimated that untreated mental illness and addiction cost the Canadian economy upwards of $50 billion a year.

As you are aware, we are in the midst of an opioid crisis. Just last week, Hamilton lost five individuals to opioid overdose. Last year, it was 46 people. One of those young men was a resident of one of our members' supportive housing programs.

I want to be clear. This is not just about opioids. We are in fact facing an addiction and mental health crisis. To paraphrase Dr. Gabor Maté, an addiction physician in Vancouver's Downtown Eastside, we have to ask ourselves not “Why the addiction?” but instead, “Why the pain?”

Addiction and mental health issues touch all of our lives. I am sure many of the committee members here can speak first-hand to lived experience with mental illness or addiction, whether for themselves, a child, a family member, a friend, or a colleague. What I bet all those instances have in common is the significant struggle in knowing where to find help.

Eleven years ago, the Senate urged Canadians to bring mental illness and addiction “out of the shadows”. We are making progress on reducing stigma, but when people reach out for help, who is there to take their hand? Eleven years after the Kirby report, I am sad to say that Canadians living with mental illness and addictions are not that much better off. We've made some progress but not enough. The good news is that we know what works, and we have many examples of programs and innovations that are ready to be scaled up.

Our recommendations to the Standing Committee on Finance are straightforward. They are detailed in our written submission, which was made in August. I understand that you have that.

I am going to focus this morning just on our central recommendation, which is to target investments in mental health and addiction where they will have the greatest impact: in the community. The other points—about partnering with indigenous communities on mental health and addiction, preventing the opioid crisis from worsening, and targeting housing funds to supportive housing—are included in our written submission.

What helps people recover and sustain a better quality of life? Although prescription medication can be an important component of treatment, it is not enough, in most cases, for a person to achieve recovery. Emergency departments are a critical resource. In fact, for many people with mental health and addiction issues, they are the only resource. But where would each of us want our loved ones to find the support they need to rebuild their lives? We would want them to find somewhere where they are treated as a person first, where they have a say in their treatment, and where all of their needs and challenges are considered.

We would want them to find services like case management and counselling, and in some cases housing, in addition to these supports. We would want them to be connected to peer support workers who have gone through what they've gone through. We would want the services to be flexible so that, if necessary, they can be connected to more intensive services, such as residential addiction treatment programs.

There is ample evidence to support the value and outcomes of the community-based services I just mentioned. Take, for example, the managed alcohol supportive housing program offered by Nipissing Mental Health Housing and Support Services, in North Bay, Ontario. Six months prior to moving into the home, their seven residents spent a combined 315 days in the hospital. Six months after the move-in, that number dropped to zero. We do know what works. Community services enable greater client choice and support people to do just that—live meaningful lives in their communities.

To conclude, the health transfer investments in mental health and addiction are a welcome start, but we know that mental health and addiction are chronically underfunded in Canada. The Mental Health Commission of Canada recommends increasing health spending on mental health and addiction from 7% to 9%. In Ontario, at current health spending levels, the health transfer in year five will bring mental health and addiction spending up to 7.3% of the total health budget.

Too many Canadians are struggling with mental health and addiction problems and not getting the help they need. I am asking you today, “When Canadians reach out to make the call for help, will you be there to answer?”

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Gail.

Now we turn to Ms. Alexandra Dagg, from Airbnb, a former union colleague.

The floor is yours.

[Alexandra Dagg, Public Policy Manager, Canada, Airbnb]

Good morning. I am Alex Dagg, and I am Airbnb's public policy manager here in Canada. I am also an Airbnb host. I would like to express my thanks to all members of the finance committee for your time today.

The Government of Canada has focused its last two budgets on middle-class Canadians. While Canada's overall economic picture has been positive in recent months, many Canadian families haven't felt as fortunate. Wages have stagnated for many years, and household debt remains high. Meanwhile, the cost of living keeps on growing in Canada. Statistics released just this week show that the cost of renting a one-bedroom apartment is about $2,000 in both Vancouver and Toronto.

Airbnb gives Canadians a chance to earn some extra money by sharing their home, allowing them to keep 97% of the listing price on our platform, and earn some extra money from their most important asset, which is their home. That means 97¢ of every dollar earned on on Airbnb stays right here in communities across Canada, and the same cannot be said about the hotel industry.

The reality is that the tourism pie is growing. Today, almost 10% of the global economy is travel and tourism. This represents $7.2 trillion of global GDP, which is $2 trillion more than global oil revenues. Home sharing is allowing everyday middle-class Canadians to benefit from this explosive growth while democratizing travel, and allowing more people, from millennials to seniors, to experience the world.

Around 80% of our hosts in Canada are occasionally sharing their primary residence and earn about $4,000 per year. About 57% of our hosts report they use Airbnb to help afford staying in their home, and 7% of them have said that home sharing has saved them from eviction or foreclosure.

Since 2008, women around the globe have earned more than $10 billion on Airbnb. In fact, 60% of our hosts in Canada are women, and nearly 5% of them have reported they use the income they have made on Airbnb to support a new business. We are proud of the role we've played in Canada and around the world to help women independently achieve greater financial, professional, and social empowerment.

Seniors are also some of our best and busiest hosts, many of whom face increasing costs while living on fixed incomes. Income from Airbnb is helping them to stay in their homes and age in place. In Toronto, a typical senior Airbnb house earns $6,700 a year.

Over the past year, Canada has welcomed nearly 3.5 million guest arrivals from throughout the world on Airbnb. Our surveys show that guests choose Airbnb because it's more affordable, and 35% of our guests have said they would not have travelled, or would not have stayed as long without access to our platform.

Airbnb allows more tourists from within Canada and abroad to experience the beauty of our country and the diversity of our cities, while also benefiting local businesses, like shops and restaurants, and businesses that are not just in the tourist zones but neighbourhood businesses where guests stay.

Over the past year in Toronto, Montreal, and Vancouver, Airbnb guests spent $329 million in restaurants. Airbnb and our hosts are generating new tax revenues for governments, both directly through hotel, tourist, and income taxes, and indirectly through economic spinoffs.

As a company we have entered into tax partnerships with more than 350 jurisdictions globally. This includes a new agreement just announced in August in Quebec, where we have agreed to collect and remit on the Airbnb platform the 3.5% lodging tax on bookings in the province of Quebec. This is our first agreement in Canada.

We have also worked with the Canada Revenue Agency, starting last tax season, to promote income tax compliance among our hosts by providing 55,000 Canadian hosts across the country with individualized statements of their earnings on our platform as well as links to the CRA website explaining how to report this income on their tax return.

In conclusion, I want to thank the committee for considering the benefits that the sharing economy brings to our communities and to middle-class Canadians. Home sharing has become a lifeline for many of our hosts, allowing them to stay in their homes, support their small business, or save for their children's education.

Thank you for the opportunity to speak today.

[The Chair, Liberal, Wayne Easter]

Thank you, Alex.

From the Canadian Beverage Association, we have Mr. Goetz.

[Jim Goetz, President, Canadian Beverage Association]

Thank you very much for inviting me here once again to present on behalf of the Canadian Beverage Association, which represents the non-alcoholic, non-dairy beverage industry.

We believe it is essential as a supercluster-identified sector that we engage with the government and Parliament to help create Canadian jobs, encourage economic growth, and drive investment. CBA members generate employment for more than 60,000 Canadians at better-than-average wages. Beverage industry salaries are, on average, 26% to 38% higher than the average for all manufacturing industries across the country. We contribute over $500 million in tax revenue to the federal government and an additional $400 million in provincial taxes.

We are a leading partner of small business in Canada. The sales of our members' products through grocery stores, food service vending machines, and convenience stores support tens of thousands of independent jobs and hundreds of thousands of retail and food service jobs.

I'm pleased that the MPs on this committee come from the Northwest Territories, British Columbia, Alberta, Ontario, Quebec, and Prince Edward Island. As an industry, we have a connection with each of your regions. For example, our members work with farmers to source sugar beets from Alberta and buy corn from Ontario. We purchase apples from B.C., Quebec, Ontario, and Nova Scotia, purchasing from 350 apple growers in Quebec alone. Our aluminum cans come from Whitby, Ontario. We employ people at distribution facilities in the Northwest Territories, and some of North America's largest manufacturing and distribution facilities are located in the 905 region.

Our members are making significant capital investment in Canada, bringing new technologies and efficiencies into the sector, such as having the largest fleet of hybrid trucks in North America. All the while, we employ well-paid, hard-working, middle-class Canadians. Our innovation is not limited to investment in our businesses. We also invest in strategies that will help support better health outcomes for Canadians. Launched in 2015, our industry-led “balance calories” initiative aims to reduce the calories consumed by Canadians from non-alcoholic, non-dairy beverages by 20% by 2025.

Very shortly, the Conference Board of Canada, our partner in our balance calories initiative, will be releasing our second report on the impact of our initiative. We expect that this report will show at least a 9% decrease in calories—calories being sugar—in our products since 2015. This means that in just 11 years our industry has already removed 29% of the calories that Canadians consume from our beverages. This is unprecedented in the food and beverage industry. As shown in the Ads Standards 2016 compliance report on the Canadian children's food and beverage advertising initiative, we have a positive record as an industry in adhering to our guidelines on marketing to children, which ban the marketing of our products to children under the age of 12.

The beverage sector shares the government's vision of building economic growth and benefits in Canada through innovation in the agrifood sector and throughout the food and beverage value chain. However, our members are concerned about increasing barriers to growth, including financial risks that impact our members on a daily basis, and speculation around a sugar tax and significant regulatory changes. The changes to front-of-pack labelling and CFIA regulations alone, according to Industry Canada, are estimated to cost the food and beverage sector over $2 billion over the next several years.

Coupled with those expenses, we understand that an economic impact analysis of the severe restrictions on advertising inherent to Bill S-228 commissioned by the Association of Canadian Advertisers shows a multi-billion dollar impact on GDP and revenues for Canada's struggling media industry and sponsorship of amateur sports, cultural events, and community giving; lost tax revenues for Ottawa and the provinces; and tens of thousands of job losses.

The CBA and its members recognize that obesity poses a critical challenge to individuals, public health, and government resources. At the same time, Statistics Canada data shows that the consumption of calories from beverages in Canada has continued to decline as obesity rates, unfortunately, have increased over the last 20 years. Proponents of a tax on our industry often point to Mexico as a success story, but the data coming out of Mexico's own reports is demonstrating that this is not the case. It shows that obesity has continued to rise. The revenue from the tax has also continued to rise, and 60% of that revenue is coming from Mexico's poorest households. We also know that there have been 11,000 job losses up and down the value chain. These are not the markers of a successful health or tax policy.

The Mexican tax also applies to a broad range of products, not just beverages, so even with that broad array of products targeted for taxation, there are no positive health outcomes. Why would anyone think that a narrow tax on products that supply 4% of calories to Canadians would make any difference?

What we are asking government and your committee to do, Mr. Chair, is quite simple. Protect our jobs and investment in Canada by ensuring regulation, policy, and taxation measures are principle-based, science-based, and equitable. Recognize that the Canadian beverage market is already evolving in a positive and significant way, and refrain from implementing any targeted attacks on a single industry.

In conclusion, the beverage sector has built its success on science, evidence, and innovation, and we continue to be encouraged by a chance to work with a government that understands the importance of public policy that works for Canadians and not against Canadians or Canadian workers.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Jim.

There is no snow out there today, but here from the Canadian Council of Snowmobile Organizations is Mr. Burns.

[Dennis Burns, Executive Director, Canadian Council of Snowmobile Organizations]

Thank you, Mr. Chair.

There is snow out west, Mr. Chair, and you need to know that. We have pictures and we post them on Facebook on an ongoing basis. It drives everyone crazy.

Good morning to everyone, and thank you very much to the committee for sitting and talking about snowmobiling. It is October and winter is coming down the pipeline.

I sit here as Dennis Burns. I am the executive director for the Canadian Council of Snowmobile Organizations. We're a volunteer-led, not-for-profit national voice for organized trails for all of Canada. We've been in business since about 1974 and we've been in Ottawa many times looking for ongoing partnerships due to the base of how we operate and what we do.

I'll bring the three previous presenters into my conversation because we actually work very closely with all three of them, so it's great.

We have a little over 120,000 kilometres of trails in Canada, which represent about 48% of all organized and managed trails in Canada today. If you want to know who is the biggest and who has the most trails out there, it's definitely snowmobilers. What's really unique about snowmobilers is that they will create a trail. They'll get up in the morning and decide that perhaps they need to put a trail some place to connect a new business, to actually reach across a farmer's land and get into the right piece of property, and they'll put a trail in. What normally happens is that the trail is then used for all four seasons.

We have many examples just north of the city of Toronto, where there are some incredible bridges that were put in, led by a volunteer snowmobile group. They're million-dollar bridges and now they're for four-season use. What's really unique about snowmobilers is that they wake up, they dream big, and they actually work the paper and meet with the partners to get the money to actually do a project, and at the end of the day, all four seasons get to benefit from the bridge.

We've recently completed our economic impact study. An economist, Harry Cummings out of the University of Guelph, put it together. We pay $1.4 billion each and every year in taxes to all three levels of government. We used the Conference Board of Canada's actual model. They created the TREIM model for Ontario, the tourism regional economic impact model and that nets $1.4 billion each and every year.

Again, the same study confirms there are 41,000 jobs through the course of snowmobiling all across Canada, and the number of family members involved in it is, very conservatively, about 1.5 million to 1.8 million active snowmobilers across Canada. We're very proud of that.

The main snowmobile manufacturer in Canada comes out of Quebec. Bombardier Recreational Products built the Ski-Doo, which is very popular across Canada and it does have the largest market share. They're all built here in Canada. The only thing that comes from elsewhere is the engine, which actually comes out of Austria.

If you look at the economic impact spin, in Quebec alone it's about $2.2 billion, and $1.7 billion here in the province of Ontario just from snowmobiling. Add into that the economics from building the snowmobiles in Valcourt, which adds in about another $1.2 billion. It's a really big industry. A lot of people don't realize how big we are. Overall, for our economic impact across Canada, we're looking at $8 billion, and we're very proud of that too.

When we look at who is actually paying for the trail system and access to the trails, we work our model on what is called a user-pay system. To drive your snowmobile on a trail you have to put a pass or a permit on it so we actually collect user-pay fees from the individuals. Therefore, we come as a very strong member, showing the government that we have $58 million that we're sitting on, as we prepare to expand our fleet and do more work on the trails. That's our part of the user-pay system, which is $58 million.

We've just completed a news release and the average age of a snowmobiler is 44 years. We've been in business since 1974, which I've already shared. We have 729 clubs across Canada. The unique thing about the clubs in Canada that provide the snowmobile trails is that this is not a business for us. This is done on a volunteer basis. That's the very unique thing about snowmobiling. A lot of people say, “It's big business, then”. It is, but it's all driven on the backs of the volunteers. A lot of our people are consuming the beverages from my friend, and we stay at the B and B locations all across Canada.

We're right now working through a study with the University of Guelph that speaks to the health of snowmobiling, and one chapter I'm going to add in particular is the mental health portion of it, because we really feel that a lot of people get very depressed in January and February. The concern is “Oh, my God, it's snowing outside” and everybody says, “Bundle up, stay at home, and don't do anything”. Snowmobilers say, “What a fantastic day for snowmobiling.”

I turn on the weather broadcast and it says it's -21°, but it's -30° with the wind chill. I said don't worry about the wind chill. We make wind when we go snowmobiling, so that's the best part of the whole day. We absolutely take advantage of it.

We represent everybody across Canada in organized trails, except Nunavut. We have no organized snowmobile trails. We've tried over a number of years, but once they get north of town, it's the tundra. It's just open riding. There are no organized trails there.

Our demographics work out to about seventy-thirty. Seventy per cent of our riders are male, while 30% are female. It's really key. We have potential growth with the ladies' side of the things. We've started Women on Snow. We have a major ride that has gone across Canada four times that's sponsored by Polaris. We've done a number of these rides. We have new ladies. She Shreds is one of the new businesses based in B.C. She is doing a fantastic business. She's teaching ladies to ride with ladies. They go into the mountains and they don't have their husbands, or boyfriends, or I guess in today's world, wives would be a correct statement as well. The concept is that they don't have anybody watching. They find that, if ladies teach ladies how to ride, they are not nearly as stressed and they learn how to do it a lot better, so we hope to increase our percentage of lady riders far above 30%.

Each and every year snowmobilers are very big advocates in the individual communities. They raise a lot of money. Ongoing, they average a little over $3 million, which they raise and they provide. The same volunteers that raise money for the local fire department are the same ones that work very hard at the local snowmobile club.

What we're looking for is a partnership with the government. My request is very clear. Over the five years, we would be looking for $8 million a year. That would be $40 million. At the same time, we pay about $7 billion in taxes. We're not looking for a major investment, just a small return on the amount of volunteer work that happens all across Canada.

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Dennis.

We'll be turning to Mr. Nantais with the Canadian Vehicle Manufacturers' Association.

[Mark Nantais, President, Canadian Vehicle Manufacturers' Association]

Thank you very much, Mr. Chairman, and thank you to the honourable members today for actually coming to town, so to speak.

As president of the Canadian Vehicle Manufacturers' Association, I am pleased to be here representing Fiat Chrysler Canada, the Ford Motor Company of Canada, as well as the General Motors of Canada Company. Together they are responsible for approximately 60% of all production annually, and as some of the largest multinational companies, exporting vehicles to 100 countries around the world.

Canada needs strong advocacy for its automotive manufacturing sector in order to achieve its economic goals. It will also be essential that the renegotiation of the North American Free Trade Agreement maintain outcomes that support Canada's auto industry and its highly integrated value chain across North America. On one hand, there is significant opportunity to support Canada's automotive sector competitiveness, and on the other, much to lose if we don't get this right.

The automotive sector is undergoing a technology transformation, including but not limited to the introduction of connected and automated vehicles within an evolving shared economy. Due to the strength of Canada in software engineering and innovation, significant investments have been made and partnerships established in Canada by Canadian member companies focusing on the car of the future.

For budget 2018, CVMA urges the government to continue the momentum it has developed, with a focus on the following items. The first one is the strategic innovation fund. The CVMA commends the government for introducing the ability to offer non-repayable investment support in the former automotive innovation fund, and we are pleased to see that this has been carried over to the amalgamated strategic innovation fund.

With the migration of the AIF, as we call it, into the broader SIF, the industry will be looking for assurances that there is the same degree of investment support for automotive investments as was previously available under the AIF.

The CVMA recommends that the innovation policy framework remain responsive and sensitive to the attraction of new investments. That will involve Canada vigilantly monitoring the incentives offered by other jurisdictions to ensure its own programs and policies are competitive, accessible, and useful.

Secondly, on the innovation superclusters initiative, further to the government's announcement of the short-listed nine superclusters, we are hopeful that the innovation partnerships going forward will not be limited only to the superclusters. To that end, we will continue working with government, academia, and industry as innovation opportunities are identified, developed, and implemented.

Thirdly, in terms of manufacturing research and development tax incentives, the Canadian auto industry is a major investor in the research and development of technologies that spur advanced production processes and vehicles that meet both public policy objectives and the driving experience demanded by consumers. We recommend a research and development program that is more flexible and responsive to the needs of industry and administratively efficient to help support the innovation agenda by promoting automotive research excellence and the opportunity to build on the existing research capacity.

A tax research credit that is truly supportive of innovation must be robust and reflect the true cost of advanced manufacturing R and D, inclusive of capital equipment, and based on a broader definition of innovation versus the current definition of science. Further to this, an allowance for our capital expenditures to support large-scale investments, which lead to job creation and retention, would also encourage manufacturing innovation investments.

While not all members utilize or benefit from the SR and ED tax credit, claiming the SR and ED credit is increasingly becoming more onerous and the current definitions under the program are simply too narrow. We would welcome again the opportunity to engage with government to explore ways of implementing an effective research experimental support program.

Our fourth recommendation is for continued investment in Canada's trade corridors. The CVMA recommends that the government build on the budget 2017 commitments to multi-modal border infrastructure interconnectivity, as well as funding support to implement the improved cross-border labour mobility processing procedures. We also look forward to the completion of an additional bridge crossing in the very important Windsor-Detroit gateway.

In addition to these recommendations, there are some very important considerations that, if left unaddressed, could undermine the objectives of the innovation agenda, for instance, an electric vehicle policy.

The electric vehicle market is clearly in its early stage of development and manufacturers have committed an estimated $100 billion to developing and bringing a rapidly increasing number of electric vehicles to market. The CVMA has been very active in the development of the pan-Canadian framework for an electric vehicle strategy and we believe a collaborative partnership between industry and government will lead to greater success towards increasing electric vehicle adoption.

We therefore encourage the federal government to do the following: continue the support in terms of electric vehicle recharging infrastructure that was announced in 2017, and provide further support by matching provincial government EV recharging infrastructure funding commitments dollar for dollar, if possible; establish federal incentives to help consumers with the purchase of electric vehicles that could be stackable on some of the provincial incentives; and lastly, examine tax policies that actually act as disincentives to EV adoption. Here I'm talking about workplace charging for employees being a taxable benefit.

We strongly recommend that the federal government avoid a zero-emission vehicle mandate, as we call it, given the potential negative consequences for consumers, dealers, and manufacturers. Rather, we recommend it focus on a more collaborative approach to enhance electric vehicle adoption.

Another opportunity to encourage EV adoption is to accelerate turnover of the existing on-road fleet. Such an approach would be less costly and provide even greater environmental as well as safety benefits more quickly.

My last comment relates to the aggregate policy impacts on operating costs. Automotive manufacturing in Canada is experiencing many operating cost challenges. We must be mindful of the aggregate impact of these cost factors on operations in Canada, which already makes us the highest-cost jurisdiction to produce vehicles.

On that point, Mr. Chairman, I'd be glad to answer any questions the committee members may have. Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Mark.

We'll go to the Intellectual Property Institute of Canada, with Mr. Lipkus. Welcome.

[Nathaniel Lipkus, Councillor, Intellectual Property Institute of Canada]

Thank you, Mr. Chair.

As mentioned, my name is Nathaniel Lipkus. I'm a member of the council of the Intellectual Property Institute of Canada, which is frequently referred to as IPIC. I'd like to first thank this committee for inviting IPIC to present to you our recommendations on budget 2018 and to answer any questions.

As you may know, IPIC is the Canadian professional association of patent agents, trademark agents, and lawyers practising in intellectual property on behalf of clients or employers across Canada. We believe our membership is uniquely positioned to help support the government's innovation objectives. IP agents help protect innovation investments and therefore form the backbone of any country's innovative industry.

A Canadian national IP strategy offers the perfect opportunity to create much-needed incentives for Canadian innovators to protect their inventions and enable their businesses to flourish in the long term. We recommend three incentives that would dramatically improve the way we as Canadians protect our IP: a first patent program, a commercialization coupon, and an innovation box.

Number one is the first patent program. In last year's finance committee report in preparation for last year's budget, the committee recommended that the Government of Canada create a first patent program with a design similar to that launched by the Government of Quebec. This program should subsidize the expenses incurred by small and medium-sized businesses obtaining a first patent. This recommendation ultimately was not included in budget 2017; however, we still believe the need exists, and it aligns now more than ever with the government's plans around the innovation agenda and its plan to create a national IP strategy.

Statistics from the U.S. show that patent allowances for start-ups have a significant economic impact, such as a 51% increase in sales growth and a 36% increase in employment growth. Such a program has existed in Quebec since July 2015. The program offers eligible small to medium-sized businesses a subsidy on expenses related to obtaining their first patent. The demand for this program has been so high that funds were quickly exhausted in less than a year.

A similar program at the federal level would directly help Canadian inventors, start-ups, and SMEs who are at the critical point where they have developed an innovative device or method and are able to seek patent protection, but do not have the resources to do so. This program would move the needle towards protection. By protecting their inventions early and allocating safe resources to supporting commercialization of their venture, they'll be better placed to establish their business and in the future improve their chances of scaling up within Canada and abroad.

We recommend the federal government create a similar program through budget 2018.

Number two is the commercialization coupon. To encourage researchers who receive federal grant funding to protect their IP and take the important step towards commercializing the inventions developed in the course of their research, we believe the government should make a commercialization coupon available. This should be a one-time-only option in the span of a grant term, which would provide a small amount of additional funding for commercialization activities such as filing for IP protection, conducting market studies, or hiring for business plan preparation. This coupon would allow commercialization activities to follow and be coupled with grant money, allowing researchers to be successful following the completion of their project.

Number three is the innovation box. The government should adopt an innovation box model to provide a reduced tax rate for income derived from commercialization in Canada of intellectual property. The term “innovation box” comes from a check box on tax forms to identify revenues that would be eligible for the reduced innovation tax rate. This idea originates from several other jurisdictions—most notably the United Kingdom, but also earlier this year in Quebec—where governments lowered corporate taxes on income derived from commercializing IP.

Although early, data is starting to emerge from the U.K. patent box program, where claims for the program are rapidly increasing, and interestingly, so are claims for existing R and D tax credits. R and D claims are up more than 22% for SMEs and more than 5% for large companies in the most recent statistics available. The potential downstream impact from these U.K. and similar programs may leave Canada lagging further behind our major trading partners if we don't implement something similar.

In conclusion, IP agents would like to continue supporting the government's goal of pushing Canada forward to be a leading innovator in today's economy.

Our first recommendation of a first patent program would help start-ups and small and medium-sized enterprises protect their initial IP. Our second recommendation would help researchers with federal grants to achieve successful commercialization. Our third recommendation would help spark innovation across Canada through lower taxes. All three recommendations, though, have a similar goal, to help support and protect innovative activities throughout Canada that would increase economic growth and build our innovation ecosystem.

Finally, Canada has the potential to be a leading innovator in today's advancing marketplace, and IP agents are at the forefront of helping us succeed with that vision.

Thanks so much.

[The Chair, Liberal, Wayne Easter]

Thank you, Nathaniel.

Our last witness on this panel is from the Toronto Region Board of Trade, Mr. Parker.

[Dr. Jeff Parker, Manager, Policy, Toronto Region Board of Trade]

Thank you.

Good morning, Chairman Easter, honourable members, and of course, our legislative staff. Welcome to the Toronto region.

I'm Jeff Parker. I'm the manager of policy for the Toronto Region Board of Trade. Thank you for giving me and our organization the opportunity to appear before the committee today.

The board is the Canadian Chamber of Commerce's largest urban centre, connecting more than 12,000 members in the Toronto region. The board seeks to make Toronto one of the most competitive and sought-after business regions in the world. In service of that goal, we pursue a robust policy agenda aimed at making our residents and businesses more productive and competitive, which also happens to be the focus of the finance committee's consultations this year.

In August the board provided a written submission to your pre-budget deliberations that includes a more complete discussion of the steps we believe the federal government needs to take to make our country more productive and competitive. In my brief time this morning, I want to focus on three areas of that submission: trade, transportation, and the supercluster initiative.

As a medium-sized economy of 35 million people in a world of seven billion, Canada's continued prosperity is dependent upon our ability to export and compete in global markets. Trade makes us more efficient and productive, focusing Canadian businesses on the goods and services that succeed globally. According to Export Development Canada, businesses that sell internationally are 30% more productive and 25% more innovative than businesses that do not.

Trade is also a source of employment. For every $100 million in new export activity, 1,000 jobs are created, often in well-paid sectors.

Despite the clear benefits of trade, Canada isn't doing enough to seize this opportunity. Specifically, our small and medium-sized enterprises, SMEs, are less likely to export than larger firms with more than 500 employees. Currently only 4% of Canadian SMEs are exporting compared with 23% of our larger firms. According to the research featured in the board of trade's recent priority export markets report, this is the lowest figure in the G7. In Germany, 28% of SMEs export, as do 27% of French SMEs, and 21% of British ones. This is a lost opportunity. If Canada increased its share of SMEs exporting to the same level as larger firms, 23%, it would mean an extra 219,000 businesses generating an estimated $225 billion in new export activity. This is the type of economic transformation we should be striving for.

Since the 1980s, the federal government has taken the first step by negotiating free trade agreements with dozens of countries, including the recent deal with the European Union, but more can be done, and we urge the committee and the government to adopt the following recommendations.

First, partner with the board's World Trade Centre Toronto to expand our trade education services nationally. The World Trade Centre Toronto has already provided trade education to more than 170 SMEs through its trade accelerator program. The federal government should work with us to extend the program nationally to prepare more firms for international trade.

Second, prepare businesses to take advantage of CETA. Our trade agreement with the EU provides new opportunities for SMEs, but unfortunately, according to our research, many businesses are not sufficiently informed or prepared to take advantage. In partnership with chambers of commerce and industry associations, the federal government needs to do more to provide SMEs with information and resources to fully engage with CETA.

Increasing trade among Canada's businesses also requires the more efficient movement of people and goods throughout our cities. Unfortunately, a lack of investment in transportation infrastructure by all levels of government has caused congestion to increase, reducing productivity of businesses and residents alike. In the Toronto region alone, congestion is estimated to cost as much as $11 billion every year. The funding pledged to public transit in budget 2017 is a necessary step to address this, and we urge all members to ensure the government maintains its commitment to spend this money based on ridership and population growth.

Beyond funding, the federal government has a special responsibility for trade-enabling infrastructure, particularly at our borders and airports. If we want to expand trade, grow our economy, and increase our shared prosperity, the federal government can do more to enhance the movement of people and goods through the following measures.

First, speed up improvements to border infrastructure at crossings and airports. While the government pledged new investments in budget 2017, the border remains a major impediment to businesses such as automotive and food and beverage manufacturing that rely on the integrated North American supply chain. Border delays can mean increased costs and decreased productivity.

Second, invest in improvements in airport connectivity. In Toronto's Pearson and Hamilton's Munro airports, the Toronto region hosts the first and third most important airports for handling cargo. Pearson also centres an employment area of more than 300,000 people, and that's Canada's second largest, next to downtown Toronto. The federal government needs to work with the provinces, municipalities, and airport authorities to improve the infrastructure around these critical transportation hubs.

Finally, implement a regional airport strategy for southern Ontario. By 2030, Pearson, Canada's busiest airport, will be closing in on its passenger capacity limit. The federal government should work with stakeholders to implement a strategy that will accommodate rapid growth at the region's airports.

Finally, the board has been encouraged by the federal government's innovation superclusters initiative as a new approach to economic development. The board is proudly involved with the advanced manufacturing supercluster bid, which has brought together industry, municipal governments, chambers of commerce, and research institutions along the Toronto-Waterloo innovation corridor. The bid has attracted more than $600 million in cash and $148 million in in-kind commitments from the private sector.

Beyond our own involvement, though, this economic development strategy has much to recommend it. Rather than sprinkle subsidies across the country, the supercluster plan correctly acknowledges that Canada must focus on improving and scaling up existing areas of strength. The stipulation that the government will match funds from the private sector will further restrict the focus to clusters that are already achieving success.

The board urges the government toward final supercluster funding to the bids that are the most developed and will generate the greatest economic return. For this initiative to succeed, the government must resist the urge to make funding equitable by region and instead use transfer programs such as equalization to address regional disparities.

Despite the uncertainty presented by the current NAFTA negotiations, this is a moment of opportunity for Canada. To truly realize our potential, however, we must invest in our urban centres such as the Toronto region, the key drivers of our economic growth, and focus on bringing world-beating Canadian goods and services to global markets.

Thank you for your time. I look forward to your questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Jeff.

We will have to go to six-minute rounds with a little flexibility because we have one more witness than usual.

Ms. O'Connell.

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

Thank you, Mr. Chair.

Thank you all for being here.

I have a number of questions so we'll see if I can get through some of them.

I'll start with Addictions and Mental Health Ontario. Just to clarify, you said when the transfers go through from the federal government on the mental health side, that will represent 7.3% of Ontario's budget as an example. You said the range should be between 7% and 9%.

Are you suggesting that the range isn't high enough for the needs, or is it that it's not going to be happening fast enough? Can you clarify because we would be right in that range so I'm trying to understand what is needed.

[Gail Czukar]

As our brief states, in other jurisdictions they spend upwards of 11% to 13%.

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

It's the range that you want to see higher.

[Gail Czukar]

We would like the range to be higher. We would say a minimum of 9% would be a start. The chronic underfunding in this sector has left us so far behind.

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

Thanks. I appreciate the clarification.

Moving to Airbnb, you mentioned how much money is being spent in local restaurants, for example. I'm just curious. How do you collect that data? How do you know?

[Alexandra Dagg]

We survey all our major markets globally every year. The restaurant data we just talked about for Toronto, Montreal, and Vancouver was based on surveys from both our guest and host community, where they tell us how and when they spend their money.

One of the interesting things about it is that they also clearly tell us—and I just want to underscore this—that 35% of our guests travelling and using the platform in Canada either would not have done it or not stayed as long without the affordability option that exists on our platform.

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

Thank you.

To the Canadian Council of Snowmobile Organizations, in my riding in the northern part in Uxbridge we certainly have a lot of snowmobile trails so I understand the commitment there.

You clearly state you collect user fees so that you can bring that investment to the table. My question is with regard to your earlier statements about a snowmobiler who will wake up one day and dream where they want the trail to be. As a former municipal councillor, that also makes me wonder where these trails are going because I know how long it takes to put a trail anywhere.

How are you working with municipalities to ensure these trails are respecting municipal property, or have you partnerships and agreements and you're not building informal trails that then cause problems for municipal maintenance, etc.?

Is your $58 million in user fees in addition to the $8 million over five years that you're asking for? Is that to purchase property? How is this working?

[Dennis Burns]

Our goal is not to purchase the property. Our goal is to work with the municipalities very closely. Our volunteers, all across our 729 clubs, go in and meet with the councillors, and they talk to them to make sure that the trails are where you want them, where you don't get any feedback. I encourage all of my volunteers to meet with the mayors, the reeves, the councillors, and actually go to the individual meetings on a monthly basis and ask whether they are getting any feedback on snowmobilers, and if there is something we can help with.

Our group works with your planning departments. They make sure the trails are where they are. Our group doesn't wake up and say, “Well, let's put a trail in the middle of the meeting room because we think that would be a great idea.” We would come to the meeting and say, “We need a trail here. Who do we need to talk to to actually have access through that property?”

Quebec has a fantastic program for making a trail and putting it in place. If you have a trail in a provincial park, and the parks people come to the snowmobile club and say they want to reroute that trail, for example, Quebec put a mandate in. They say, “You, the parks people, can have the trail rerouted, but you, the parks people, have to budget and reroute the trail for the snowmobilers because the snowmobile trails are seen as an asset.”

The volunteers bring an asset to each one of the communities all across Canada. What we're looking for and encouraging is the partnership to actually make them better—