Finance Committee on Sept. 18th, 2018

[The Chair, Liberal, Wayne Easter]

You can have a short question, Pierre.

[Pierre Poilievre, Conservative, Carleton, ON]

Mr. Lee, we regularly see politicians simultaneously increase housing prices through burdensome regulations, zoning restrictions, taxes and excessive fees, and in the same breath say that they want to spend more tax dollars to reduce housing prices. Do you want to comment at all on this paradox?

[Kevin Lee]

I haven't seen much tax spending to reduce house prices. Can you give me an example? I fail to know of one.

[Voices]

Oh, oh!

[Pierre Poilievre, Conservative, Carleton, ON]

Fair enough. There has been a lot of spending. I'm not sure any of it has succeeded in reducing house prices, but it is always done as, quote, an affordable housing objective.

[Kevin Lee]

Yes, and I think it's really important that we draw the distinction between affordable housing and housing affordability. There have been a lot of investments. Certainly the current government, with its national housing strategy, came out with a national social housing strategy, and that's important. Jeff has spoken to the investment that has been done to support those in need, but let's not confuse that with an actual national housing strategy that addresses affordability and the housing that regular people, new homebuyers with two incomes, should be able to afford but can't.

There has been a lot of talk about investing in affordable housing, but let's not confuse it. Canadians are not unaware of this. We did a recent poll seeking public opinion. Canadians are very well aware of and very concerned about the problems of just being able to afford a house, frankly, and they recognize that governments are not addressing that right now. Taxes, regulations and everything else are driving up those costs. Zoning is driving up those costs. It's time to do something about it.

[The Chair, Liberal, Wayne Easter]

I am going to have to cut you there. We have time for one more questioner.

Go ahead, Mr. Fragiskatos.

[Peter Fragiskatos, London North Centre, Lib.]

Thank you, Mr. Chair. As a new member of the committee, I look forward to working with you and all colleagues around the table.

My question goes to the chamber, first of all.

Mr. Stratton, in your brief you mentioned the Atlantic immigration pilot. I'm not from Atlantic Canada. I'm a member of Parliament from London, Ontario. In our city, and indeed throughout the southwestern Ontario region, we are challenged by skills shortages. It's very common for me to hear business owners tell me that this is a main problem that they are faced with. Your brief calls for expanding the pilot so that it can—I'm quoting directly from it now—“fill labour force needs” throughout Canada. I wonder if you could expand on that for us.

[Dr. Trevin Stratton]

Absolutely, yes. The Atlantic immigration pilot was a regional pilot project to figure out what skills were needed in different regions or different parts of Atlantic Canada and to fill those with immigration applications. The idea is to expand that to the entire rest of Canada.

I travel to southern Ontario often and chat with local chambers of commerce there as well. I think it's important to keep in mind, too, that in some areas or some local communities it's not only about the skills challenge: it's also about just finding labour, period.

I hear from a lot of business owners who say that they will train people but are having difficulty just attracting people to their communities in order to be able to employ them, so on top of the Atlantic immigration pilot, we're also talking about the temporary foreign worker program and getting better labour market information on the ground too, so that the matching can be done in a better way. We're also talking about looking at the ability to transfer high-wage jobs and at “trusted employers”, who would then be able to choose workers through the temporary foreign worker program if they are designated as trusted employers.

[Peter Fragiskatos]

Thank you very much.

Mr. Kelly, would you echo that sentiment, specifically on expanding the Atlantic immigration pilot? Do you have a view on that?

[Daniel Kelly]

Absolutely. That is a terrific suggestion. We have followed that program closely.

It is very similar to the recommendation we made to government to consider something called an “introduction to Canada visa”. It would build on the temporary foreign worker program, but it would start somebody who comes over on a temporary basis on a pathway to permanent residency. I think that was the challenge of the previous program when it was, unfortunately, scaled back.

The Atlantic immigration project proposal really does address many of the design faults in our current immigration system. It allows employers a greater say in terms of bringing immigrants in to fill specific labour market shortages. When we did that in my home province in Manitoba through the provincial nominee programs, we found that a large percentage of those immigrants who came to those communities to take those jobs ended up staying as permanent residents in those communities. That helps spread the benefits of immigration across the country.

[Peter Fragiskatos]

Thank you.

Mr. Stratton, I noticed in your brief that you talk about venture capital and the challenges we face as a country around that. You talk about tax incentives as a stimulant for VC.

However, my question is for you, Mr. Lynds. While tax incentives are certainly important, I wonder if there's a place in the conversation, when it comes to venture capital, for intellectual property. I'll quote directly from a Globe and Mail piece: “VC firms put their money where there's IP”. I wonder, sir, if you could speak to the connection between intellectual property and venture capital.

[Grant Lynds]

Sure. Certainly when we deal with companies on the investment side, that's exactly it: the investors want to see what you're doing to protect yourselves and build for the future. It's a chess game. They want to see what you're doing now and what you're going to be doing 10 years from now.

I think that's where the importance of IP is, whether on the front end, as in the first patent program—get your first patent in place so you can show the investors you're taking those steps—or on the commercialization end, which improves the R and D side too. If companies know they can commercialize their product, their process, in a country at a preferred tax rate, they are more inclined to apply for intellectual property protection in that country—for example, in Canada. It works at both ends, the front end of obtaining your patent protection and the back end of commercializing it. The investors see that you're building for the future. They see that this is a company they want to be a part of, because it's not just one country; you have to think, “Where's next? What's the next opportunity?” Most IP is jurisdictionally based, and that's what the investors want to see—that you're taking the steps to build for today and the next 10 or 20 years.

[Peter Fragiskatos]

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you.

I have just a couple of points I'd like clarification on.

In your presentation, Mr. Lynds, you talked about the first patent program. In main brief that you submitted to us, did you say that the range of the cost for that would be $25 million, plus administrative costs? I'm not clear on this. Is that relating to the first patent program?

[Grant Lynds]

That's right. That was the estimate, based on the numbers in the submission, for companies interested in applying for a first patent, with $25,000 suggested as the maximum cap of the financing that would be going to that company in order to obtain their patent protection.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Mains, you're fairly open-ended in your 100% first-year deductibility for investments in farm equipment. Could you give us a little bit of a definition of what farm equipment you're talking about? If you're talking about it all, it's basically impossible to do, I would say, but if you're talking about new innovative equipment, that's a different story.

Second, which is the greater problem in terms of competitiveness with the United States, the corporate tax rate or the first-year deductibility that they're applying there?

[Howard Mains]

I will take the last question first. I think others on this panel may be better able to answer that question, but from what I've seen, there certainly is quite a call for harmonization or at least equalization between what our competitors in the United States are dealing with and what we have to deal with in Canada.

If we consider equipment in particular, there have been comments made around this table that when it comes to equipment, there's quite a broad range. It could be anything from lab equipment that is used by start-up companies on through to the equipment we see outside this building. I think we need to look at it with a broad lens.

[The Chair, Liberal, Wayne Easter]

With that, I thank each and every one of you for your presentations this morning. We appreciate them very much.

We'll suspend for a couple of minutes while we bring up the second panel.

[The Chair, Liberal, Wayne Easter]

Let's get back to the table, please. If we're late starting, we run over on the other end, and we're already late.

The bells are ringing. What time is the vote? It's at 10:55.

Are people agreeable to continuing until about seven minutes before? We usually do so at this committee because we're just down the hall.

[Kelly McCauley, Conservative, Edmonton West, AB]

Can you walk fast enough to get there in seven minutes?

[The Chair, Liberal, Wayne Easter]

Yes, we can do that, and we'll get through most of the submissions by then. Perhaps somebody could watch the time. Did we agree to that?

[Some hon. members]

Agreed.

[The Chair, Liberal, Wayne Easter]

Thank you all.

Welcome to all of the witnesses for pre-budget consultations in preparation for the 2019 budget.

We'll start with the Assembly of First Nations. We have Mr. Wilson, special adviser, research and policy.

Go ahead, Mr. Wilson.

[Daniel Wilson, Special Advisor, Research and Policy Coordination, Assembly of First Nations]

Kwe. Good morning, Mr. Chair. I thank you and the committee for the opportunity to appear today, and I thank the Algonquin nation for welcoming this meeting here on their unceded territory.

On behalf of the Assembly of First Nations, we begin by recognizing the unprecedented level of investment in the last three budgets. These investments have begun to address Canada's commitment to end the two-decade-long 2% cap, a temporary measure applied without regard to population growth, inflation and other cost pressures. Lifting that cap was the right thing to do. However, first nations' outcomes in social and economic development have been flat or have regressed during that time. As a result, this work is not complete. Additional investments are needed. As we will explain, the monies identified in the last three budgets must reach first nations more efficiently and effectively so that the impact can be felt on the ground, where it is needed.

The committee's theme this year is economic growth ensuring Canada's competitiveness. In 1996, just as that 2% cap began, the Royal Commission on Aboriginal Peoples published a study identifying the lost opportunity cost to Canada as well as the social cost of failing to invest in first nations. Here last year, the AFN cited to this committee studies showing that closing the socio-economic gap for first nation citizens, Canada's youngest and fastest-growing demographic, would in fact increase Canada's GDP by 1.5% per annum. This year we would balance that thought with the risks of not continuing to invest to close the gap.

From a continuing string of court wins by first nations, it is clear that economic growth and competitiveness rely on stronger co-operation with first nations and on the respect of our rights. It is important for this committee to understand the relationship between the fiscal capacity of first nation governments and the human rights aspect of closing the socio-economic gap.

The Prime Minister committed this government to working with us to realize a new fiscal relationship in order to ensure that essential government services comparable to those received by other Canadians can be provided by first nation governments. We have made some positive steps in the direction and we will be continuing that work. At a minimum, there is a need for transfers to keep up with inflation and total population, to address real needs and respect treaty obligations.

Canada was founded on agreements to fairly share the benefits of the lands and resources, a promise that has not been kept yet remains the way forward. Better partnerships mean stronger first nation governments and a stronger Canada. Continued investment will help build the new fiscal relationship to the benefit of all, fuelling growth and improving Canada's competitiveness.

We have provided this committee with copies of the AFN's pre-budget submission for 2019. The numbers you see, we recognize, are large, reflecting the size of the continuing need arising from decades of underfunding of essential government services.

Canada tells us that the 2% cap on annual increases to first nation budgets has been lifted, and we are pleased to hear that. But in some of the areas identified, such as core governance programs and services, band support funding, operations and maintenance, as well as post-secondary education funding, we have yet to see an annual increase of more than 2% since 1997. These are priorities. The investments identified in our submission would help to redress the damage done over those 20 years to level the playing field and to build the capacity in first nation governments that is needed in order to participate as a full partner with industry or other governments in economic growth.

Before I conclude, I must also highlight the needed investment in languages, both at Canadian Heritage and within the education program in Indigenous Services Canada. This is essential in order to implement the upcoming legislation on indigenous languages. It will help Canada address the effect of the residential school policy that robbed so many of their languages. Studies tell us that a strong base in their first nation languages will help our young people achieve more in school, contributing more to Canada's competitiveness and economic growth. It will help communities to restore pride and to heal, to become stronger and more empowered partners within Canada's economy.

Canada's economic growth relies on better partnerships with first nation governments. The investments outlined in our submission, and in particular those I've highlighted today, will contribute to building those partnerships.

Thank you. Wela'lioq.