Finance Committee on Oct. 1st, 2018

[Jennifer Evans, President, Greater Charlottetown Area Chamber of Commerce]

Good morning, Chair Wayne Easter, vice-chairs, and members of the committee.

My name is Jennifer Evans. I'm president of the Greater Charlottetown Area Chamber of Commerce. With me today is our CEO, Penny Walsh-McGuire.

Thank you for the invitation to present on the 2019 federal budget. The chamber serves as the voice of business for close to 1,000 members in the greater Charlottetown area. We provide services, opportunities and advocacy support for members to enhance their ability to do business. In our August budget submission, we offered several recommendations to build on the competitive advantage of business in our region and our country.

Now, how many of us were up way too late last night following the NAFTA negotiations? This has changed our presentation somewhat this morning, but we are delighted to see that a renewed trade agreement between Canada, the U.S. and Mexico has been agreed to in principle. This, of course, is a step forward, and we look forward to assessing the details of this agreement—probably right after this meeting. We would like to congratulate Minister Freeland and Canada's entire negotiating team for delivering an agreement that remains trilateral.

While we applaud the achievement of this agreement, we must remember how overly dependent we've allowed ourselves to become on one trading partner. We must continue to diversify our markets and protect ourselves in the future, looking at our regulatory and taxation framework in support of our competitiveness. I think the lesson we've all learned is that we need to start working together a little more, so that we are not left in such a vulnerable trading position.

Let's talk about Canadian tax competitiveness and our current tax environment, and how the current realities are impacting Canadian business competitiveness. Our chamber members are worried about the growing burden posed by fees, taxes and regulations on the private sector. This is of significant concern, given the U.S. administration's move to dramatically cut both regulation and business taxes south of the border. The chamber welcomed the federal government's move to lower the small-business tax in 2018, but more must be done to reduce the tax burden if our Canadian businesses are to remain competitive.

As such, we ask the federal government to consider the recommendation to respond to the reality of the changing tax landscape in the United States by reinstating Canada's business tax advantage and removing undue regulatory burdens on businesses of all sizes.

In the fall of 2017, we joined forces with chambers across the nation to oppose the unfair proposed tax changes. Our members remain concerned with the invasive and impractical reasonableness test designed to determine if a family member is deserving of the appropriate income from the business. As such, we recommend that the federal government enhance the proposal to impose an income reasonableness test on small, family-run businesses to recognize that family members can contribute to and support family business without being directly involved.

At this time, I'd like to turn things over to our CEO, Penny Walsh-McGuire, to highlight some of our additional recommendations.

[Penny Walsh-McGuire, Chief Executive Officer, Greater Charlottetown Area Chamber of Commerce]

Thanks, Jennifer.

I'm going to talk a bit about carbon pricing, a topic that is familiar to all of you and a hot topic across the country. Business and industry remain committed to moving toward a low-carbon economy, with innovation and ingenuity being applied in support of this across many sectors. Island businesses agree that a reduction in our carbon emissions is a priority, with the impacts of climate change a current reality rather than a future problem. With that, we feel it's important for government to recognize the complex nature of emissions and environmental regulations across the country. Provincial economies have different components and competitors that require different solutions.

At 1.8 megatonnes, P.E.I.’s carbon footprint is 0.25% of the national amount. The chamber is confident in island businesses’ ability to care for the environment without punitive tax measures. Therefore, we recommend that the federal government allow provinces to explore incentives to reduce carbon emissions before implementing the federal carbon pricing backstop policy. We certainly acknowledge the federal government implementing a carbon pricing backstop policy, and thus, if it is deemed necessary, implementing one pricing structure that would be revenue-neutral for business, that is, a tax shift rather than a tax increase.

I want to touch on a topic that was referenced by our colleagues at Bulk Carriers, and that is skill shortage as it relates to population growth. Our regional population growth and addressing our local labour challenges in Atlantic Canada are of particular importance. Our small population is susceptible to future skills and labour shortages and sees population growth as an avenue to address some of these problems. The issue of accessing labour is among our members' top priorities and directly links to their competitiveness.

Certainly the chamber recognizes our collective responsibility—business, communities and governments—to support population growth and workforce developments. I'll highlight one program that was recently launched, the P.E.I. network program. With support from IRCC and the provincial government, the chamber launched this program, which connects business and community leaders with P.E.I.'s newest top talent. The program is being offered in more than 20 cities across Canada, seeing newcomers build their network, in support of lifting their names off the pages of their resumés. We've already seen success in just a short time on this project.

I'll also note that the Atlantic immigration pilot program has helped address some skills challenges in the region, and it has seen excellent uptake among employers in P.E.I., with allocations of spaces in our province being fully subscribed over the last two years. We also want to note that we welcomed the news of the 500 additional spaces that were recently announced for this program. Given this marked success, we would point to the need to consider making the Atlantic immigration pilot program permanent.

In closing, I want to touch on federal finances. In budget 2018, we registered projected deficits of over $18 billion and the lack of a plan to move to a balanced budget in the near future. The concern is that the budget did not put Canada in a position to appropriately respond to uncertainty, to headwinds like those we've seen over the last year of negotiations on things like NAFTA, or to a possible downturn in our national economy. For this reason, we recommend that the federal government set annual targets for balanced budgets, or conditions permitting a surplus, subject to recessionary conditions, indicating a requirement for deficit spending to stimulate economic activity.

That summarizes our presentation. We thank you for the opportunity and welcome any questions you may have.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

With i-Valley, we have Barry Gander, co-founder, and Tony Walters, vice-president.

Barry, you're up.

[Barry Gander, Co-Founder, i-Valley]

Thank you very much.

I echo my colleague's support for the NAFTA agreement, and congratulations on that.

You may not have caught it, but on Friday there was an announcement that puts NAFTA to shame in the total economic impact it will have on the world. It is that India is now striving for a “broadband for all” policy. That will be huge. It will have 800 million people accessing the digital economy, and they are wonderful co-operators or competitors with Canadians. The access to that kind of economy is going to be huge. Remember that until the Second World War, our number one trading partner was the Commonwealth. This is just another global gateway to what was our natural advantage in dealing with the Commonwealth to begin with.

We have been advocating the Commonwealth approach—the Indian approach—for 10 years now. In India, for broadband for all, they are gathering all the stakeholders together. They're coming up with a national plan for the telecom providers, the ISPs, the government agencies and municipalities to come together and say, here's how we're going to do this, here's how it's going to work, and here's what it's going to cost.

A few years ago, we had the pleasure of having the head of the smart communities movement in India come to Canada and speak at one of our conferences. The plan he revealed was stunning to us, because we're not used to thinking on that scale. He said that this was going to be the number one public expenditure of any government anywhere in the next few years. That's what we're up against here.

They're taking off from the point that this is the number one thing people want these days. It's the Internet. This is a poll, not my own thought. They want it more than a car, more than chocolate, more than alcohol and more than sex. As I said, these are not my numbers, but there they are. It's the number one heartburn issue for everybody.

We are suggesting that we need two things. We're copying that Indian example, but we had the idea first. We'll pull the stakeholders together under a federal seed or catalyst, if you wish—it need not be a federal program—and then drive it forward and expect to spend, on a sustained basis, the kind of money that India would be putting into this. After all, we'd be creating a fourth utility, like the road system or the sewage system or the power system. This is the scale we have to think about. It goes coast to coast.

I used to live and work on the salmon boats in B.C., for example. I know that very well. I live in Nova Scotia right now, as does Tony. We cover the country. Right now, I'm the EVP of the Canadian Advanced Technology Alliance, which is Canada's largest high-tech organization. I'm able to be here only because of connectivity. I can be anywhere in the world if I want to, at the push of a button. These are the kinds of things we need.

To get that task force of all providers together, we have to copy the SWIFT model in southwestern Ontario—which is a spend of about $300 million, divided among the federal, provincial and municipal governments, and public-private partnerships—for an open network providing equitable coverage to everybody, under municipal control.

Let me stress municipal control, because the age of private telecom companies owning the network is over. We're trying to build a road system now, and you don't build a road for Ford, a road for GM, and a road for Hyundai. You build a road and all the traffic passes on that road. What we have here now is a move away from a return-on-investment model that the companies have, to a return-on-community-value model that the communities have. This patient capital is what we're missing here. It's almost like the co-op model.

People talk about how we don't have networks in rural areas because the market has failed. The market hasn't failed. The market's working fine. The market says that rural areas don't count. I'm happy with that. I used to work for Bell Canada. I worked on a billion-dollar Saudi Arabian contract. If the market is saying that, that's okay. You need something other than the market to dictate your policy. That thing other than the market is a co-op or community values program where the returns for the community come away from the bottom line. They're not detected by providers on their bottom lines. That's what we have to do right now.

It has to be municipally controlled, because these days municipalities have the cheapest networks, the fastest networks and the networks most open to the future. Those are the ones we should be copying, because they are the strongest networks going. They have, for the past 20-odd years, won every Intelligent Community of the Year contest by the Intelligent Community Forum, including several Canadian cities. In fact, more Canadian cities have won that award than those in any other single country.

We know how to do this. The future has arrived in Canada, but it's unevenly distributed.

We need to copy the best, and it's a municipal model going across Canada—open access and citizen control.

I will now turn it over to my colleague Tony to talk about what we have actually done here in reality.

Tony, you might talk about Pictou.

[Tony Walters, Vice-President, i-Valley]

Welcome, everybody.

As Barry said, we've done a tremendous amount of work, from the bottom up, analyzing the situation of broadband in the rural communities, mostly focusing on Nova Scotia, as it stands. We've done work on the south shore with a number of communities there. On the north shore, we were involved in the Kings application for CTI funds for broadband network, and we're currently active in Pictou, on the north shore of Nova Scotia.

We've done exhaustive analysis in terms of the demographics and businesses, at-home businesses and separate-building businesses. We've done mapping of dwellings and mapping of roads. We've looked at the topographies of what it actually takes to roll out Internet into these environments. We've come up with quite a good model in terms of understanding what has to be done and how that has to work. It is quite a bit different from what you would look at from a telecom perspective. We're looking at it from the municipality perspective and making sure the needs of their citizens and business are being taken care of through a rural broadband network. That's what our business here has been in the last little while, and we've achieved some good results in that area.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you, both.

From PEI Select Tours Incorporated, we have Kelly Doyle and Katsue Masuda.

Go ahead, Kelly.

[Kelly Doyle, President, PEI Select Tours Inc.]

Good morning, Mr. Easter. Thank you, Chair, for listening to us.

My name is Kelly Doyle, and this is Katsue Masuda. She's my operating manager. We own and operate P.E.I.'s only 100% Japanese tour company. We've been based in Charlottetown for the last 18 years. We supply guides for a tour company all over the Maritimes: Nova Scotia, P.E.I. and New Brunswick. We also provide Japanese-speaking guides to Prince Edward Tours.

We employ a dozen drivers and a dozen guides each year. We are a unique company to P.E.I. We service a niche market to P.E.I. We're the only ones who service the Japanese industry. Because of the nature of our business, our clients are all Japanese, and that requires specialized staff. Our staff need to be fluent in Japanese and English, have a good understanding of Japanese culture, and have knowledge of P.E.I. and Anne of Green Gables, which is the best-known attraction to the Japanese people.

As we have proven in the past with our job bank search, it's very difficult to find Canadian landed immigrants to fill these positions as guides. We need these professionals to maintain the quality of our services to the industry. This job requires fluency in Japanese language, both written and oral, and it also requires an in-depth knowledge of Japanese culture and customs. We believe it is extremely difficult to find Canadians to meet these requirements or to train Canadians to learn the culture and the Japanese language. It's just difficult for Canadians to learn Japanese.

Our customers often say that it has been their dream for many years and decades to come to P.E.I. We feel obligated to supply a professional guiding service to them once they get here.

Some Japanese permanent residents do live in P.E.I. However, they are mostly housewives with children. It's very difficult to find people to work late nights and early mornings, which we do a lot of at the airports. Most of them who are looking for a job are looking for a year-round job, not something for six months.

There are a lot of Japanese landed immigrants living in the Vancouver and Toronto areas. However, it's difficult to hire them in Prince Edward Island. We do try to attract them every year for a six-month position. There are a few Japanese with working holiday maker visas. These are young people under the age of 30 who can travel and work anywhere in Canada. However, these young people often lack experience in working, or any experience, and most of them don't speak very much English at all. They're really not much good for our positions because of their youth and because they can only stay for one year.

These positions require good experience in the Japanese tourism industry, with good customer relation skills and fluency in English. Once we hire these people and train them, it's very difficult to get the working permits to get them back for the next season, which means we just spent effort, a lot of money, and a lot of time by Ms. Masuda here to train these people. There was a lot of effort on their part to learn how to professionally guide on P.E.I. and learn all about Anne of Green Gables and Lucy Maud Montgomery.

Here's one thought for our tourism industry, though. Our biggest draw is the Anne of Green Gables place in Cavendish. This place closes on December 1, and it doesn't open until April 14. We've asked them on numerous occasions to open for us, and they just won't. If Parks Canada could find it in their heart to let us open by appointment, it would help us stop turning down our customers in Toronto and Vancouver who are asking to come in the winter months. We might be able to bring more of the tourism industry partly to P.E.I. in the wintertime. We could actually grow this industry a little bit if that house opened for us. Anyway, that's just a thought, if that could ever happen.

Our immediate problem, however, is the guide problem. Each year, we have some experienced guides willing to come back and work with us for the season. As a result of hiring these skilled foreign workers, there will be more Canadian jobs created in the tourism industry. As I said, right now we are hiring 12 full-time and part-time Canadian drivers, and would like to hire more accordingly. If more Japanese people come to Canada and P.E.I., then they will utilize more restaurants, accommodations, gift shops and other tourism attractions. They'll also leave a lot more yen in Canada than they usually do.

They are very good spenders, by the way. The Japanese leave a very small footprint here, and they're very cordial, nice tourists. I think P.E.I. would miss them if they didn't come here every year.

If we don't have skilled guides, we will have to turn some business down, as we did this year. We had to turn down some business, because we didn't have our guides. The guides we do have here, we actually brought them to the point of working a lot of overtime, which is very costly for me. They like to enjoy P.E.I. and don't like to work 50-60 hours per week, either. It's all because of a shortage of young ladies who are willing to come here. I just can't get them here. We understand why the government put such laws and regulations into place to protect Canadian jobs. However, because of the nature of our business and the uniqueness of it, it forces us to import temporary foreign workers for these positions.

Currently, the temporary foreign worker program is not reliable and is very unpredictable. This spring, we applied for three temporary foreign worker permits and got approved within two weeks for one of them, but the other one took four months. By the time we got the girl to P.E.I., it was July, and we missed two or three of our busiest months by overworking our other girls and actually turning down some business.

The temporary foreign worker program has been our problem consistently for 10 years now, and it costs companies thousands of dollars in applications and time. These are costs that are really difficult to chew up every year for a small company that runs for six months of the year.

In closing, this application process takes too much time and is very unpredictable. We at PEI Select Tours are expected to provide professional guides who are fluent in Japanese for these clients. We rely on these experienced guides to work with us, and if the visa is not issued in time, it leaves us no time to hire or train new guides. It takes a year, by the way, to train a guide, not to mention that airline tickets skyrocket in June. When we finally know we can get a ticket, it has actually doubled in price from the time when we could have bought one.

These people know what I'm talking about for the temporary foreign worker program. I'm sure you know what I'm talking about. The way the system stands right now, it's very difficult for P.E.I. and our business.

Thank you very much for your time. From Katsue and me, thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Kelly.

In fact, I met the Japanese ambassador to Canada last week, and he talked about the hours and that Anne of Green Gables was not open in the wintertime.

For the first round, we'll go to Mr. Fergus for seven minutes.

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

Thank you, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

If you can put on your headset for translation, it will come through for you.

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

First, I would like to thank all the witnesses for their presentations, which were very interesting. I would like to discuss a few things further.

I absolutely have to ask you a question, Mr. Durant. You said you would like to receive $50 million to invest in the activities of the Atlantic Salmon Conservation Foundation. Would that be a one-off contribution?

Would that amount be enough to address your industry's concerns or needs?

[Mike Durant]

Mr. Chair, I would like respond. Thank you.

Yes, it is a one-time contribution that we were looking at. It would be an increase in the trust fund. Currently, ASCF receives approximately twice the capacity in terms of what it can fund for project proposals. The invested value of the current endowment fund is somewhere in the realm of $45 million. An additional investment of $50 million would enable ASCF to provide approximately $2 million to $2.5 million annually. That would double the current project capacity that it could fund.

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

Thank you very much.

Mr. Corkum, I heard your first recommendation about shared custody.

I would like to further discuss the truckers issue with Mr. Schut and Mr. Kelly. This is a very serious situation, and it is not the first time the committee has heard about it. As I understand it, you need immigrants to make up the shortage of workers in your industry. Is that correct?

[Mike Schut]

This is correct, yes.

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

That reflects what the Charlottetown Chamber of Commerce said about the need to change the classification not only to attract more immigrants, but also to make things financially easier for their spouses so they want to stay in the region.

[Mike Schut]

Yes, that's correct. What we find—and as far as I'm aware, this does exist in one of the provinces across Canada now—is that when the individuals come in on NOC level C, which is low-skilled worker, temporary foreign worker program, they are able to obtain their work permit immediately, obviously at the port of entry, upon coming to Canada. The spouse, especially in the long-haul trucking industry, has to sit in the apartment with the children, unable to work, while the husband is away on the road for five to seven days at a time.

Allowing spouses to obtain a work permit, an open work permit, at the time of entry for the same time period as their spouse's work permit would not only increase retention rates within the area, but decrease turnover rates because of frustrations and because of the cost of moving to Canada. It would also put more tax dollars into the system, with one more person in the household earning money, paying tax dollars and having more disposable income in the household.

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

Mr. Schut, I have another question for you, but I'm not sure if you will be able to answer. I am definitely in favour of welcoming more immigrants. My parents came to Canada and created wealth and prosperity not only for themselves and their family, but for the whole country. I think their example is typical of most immigrants to Canada.

This is a special case involving a shortage of workers. Do you think you would say the same things if the economy were not doing as well as it is right now?

[Mike Schut]

Yes. There is a definite shortage. We need drivers to keep the Canadian economy moving. I am a first-generation Canadian, as well. My parents immigrated from Holland in 1954. When I got into the transport industry in 2000 and started into this program in 2004, I saw the need, definitely, when I saw the numbers at that time on where the shortage was going to be. We simply aren't producing the number of long-haul truck drivers in Canada, through the schools here, that is needed to sustain the economy, the way it's going.

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

I heard the same thing in Quebec and Ontario, so I sympathize with you.

Ms. Evans and Ms. Walsh-McGuire, I am very interested in your fifth recommendation regarding NAFTA, as well as the need to diversify our economic dealings with other countries, specifically through the Canada-European Union Comprehensive Economic and Trade Agreement, and the free trade agreement Canada is seeking with certain Asian countries.

We had those negotiations and the framework is there. What can we do to encourage your members to take advantage of the opportunities in Europe and Asia? We know full well that our neighbour to the south is so close and that it is an easy market to access. Thinking outside the box takes effort. Can you suggest what we might do to encourage your members to direct their efforts to other markets in addition to the United States?

[Jennifer Evans]

Thank you very much for the question.

I think the Province of P.E.I. has always had a great working relationship with our trade team Canada and with our federal partners here through ACOA in terms of providing our P.E.I. businesses with an opportunity to see outside our borders and perhaps outside of just the United States.

This is, I think, a wake-up call for all of us, with regard to the recent negotiations. The United States was always our easiest point of entry, because it's safe, it's close and we can drive there often. It's a culture that we can identify with.

I think what we have learned in recent months is that we have to see a much broader picture, and that the rest of the export markets are going to have to be a third and fourth choice for us because we may not have a choice in the future.

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

I agree with you—

[The Chair, Liberal, Wayne Easter]

I'm sorry, Greg. We're out of time.

Mr. Kelly, go ahead.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you.

I'm going to start with you, Mr. Corkum. Thank you for raising the issue of shared custody. This is an issue that I suspect many of my colleagues have heard about in their constituency offices in regard to the unfairness that is inherent. It seems to me that there is inconsistency between the Divorce Act and the Income Tax Act. Would you agree?

[Blair Corkum]

I don't think there is, actually. The Divorce Act makes it clear that children come first. I was on the federal advisory committee to the deputy ministers of the Department of Justice back when the new child support legislation was introduced in 1997. The focus is on the children. The issue arises, in my opinion, because the Income Tax Act section I quoted, subsection 118(5.1), was introduced in 2007 to fix a problem with shared custody.

Because of the wording of the act.... Of course, the judges have to interpret the legislation as it is worded. It's tied to the wording of “a legal obligation to pay”. When the separation agreements are drafted, the drafter happens to say, “Well, instead of you writing each other a cheque, why not just write the net amount?” Just because the agreement says to pay just the net amount, all of a sudden there's only one obligation to pay the net amount. If that simple little wording is left out of the agreement.... That's the wording.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Thank you.

Ms. Evans spoke of the reasonableness test as being “invasive and impractical”. As a tax planner and a tax expert, do you agree?