Finance Committee on Oct. 5th, 2018

[Dr. Rhonda Lenton]

I did mention in my remarks that although Canada brags, and rightly so, about having such a high proportion of our population who has some higher education, it is significant that we only rank seventh in terms of the percentage of our adult population who actually have a university degree. If you look at where jobs are going, just the impact of AI on the labour market alone, you see that having a higher education is incredibly important.

York has taken the access agenda very seriously and we are ensuring that our entire vision is one where we are providing access for, not leaving behind, any talented students to higher education. A great deal of that, frankly, is economic, through ensuring that we are providing the proper financial support for our students.

We have also made a whole range of pathway programs to try to ensure that we start to decrease the percentage of students who are actually dropping out of high school. Those pathway programs address everything from pathways for young boys to educational programs. We actually have a serious issue with boys dropping out, especially from various diverse groups. Educational programs include going out into the high schools, ways to come back into the higher educational sector, and pathways between colleges and universities. It's a very laddered approach. There are policies that are thoughtful about proper financial support for young people, but also that really encourage collaboration between colleges and universities, and also incentivize partnerships among the private sector, the not-for-profit sector and high schools.

I'll just tell you about one partnership with Shopify. They are not only paying for the tuition fees, but also giving placement opportunities so that the students will be working with the company. There are conditions around that partnership, of certain goals around the diversity of the students who are in that partnership. If we could multiply that kind of collaboration, which is what we're exactly trying to do.... We passed that model through the Senate, and we are bringing in people to talk about precisely that kind of model. That kind of incentivization can take place.

Increasingly, higher education is becoming more porous. We're partnering to provide that kind of education. Those kinds of initiatives can be hugely helpful with encouraging that so that a broad spectrum of diverse, different students are in fact accessing higher education.

[The Chair, Liberal, Wayne Easter]

Thank you all.

Before I go to Mr. Sorbara, with regard to the question that Mr. Julian asked, really that relates to the CRA.

Ms. Laidley, what's the fix for that? I think in your submission you mention repealing paragraph 122.6(e) of the Income Tax Act. What I think you'll find, every one of the members around this table, in dealing with the CRA and people's problems with the CRA, is that, one, you can never get a live body to talk to and, two, you can never go into an office and talk to somebody. Before I was an MP, you used to be able to do that. I know I had to do that on the farm.

What's the fix that you'd propose, either you or Ms. Marrone?

[Mary Marrone]

I'll take that.

There are two fixes. One is with regard to the problems faced by people who are ineligible. The Income Tax Act should be amended to ensure that everybody who's a resident for the purposes of the Income Tax Act is also eligible for child benefits. That would assist the woman who is stuck in the relationship because she is going to put her immigration status and child benefits at risk.

Second, we are seeing more and more social benefits being delivered through the tax system. I think we need to move dispute resolution out of the CRA into a separate dispute resolution process that looks more like the Social Security Tribunal or something that is actually designed for low-income people to be able to resolve those disputes, whether it's a rapid appeal process that's easy to use, where you don't need lawyers involved, or staff that answer the phone, where you can narrow the issues—do you really need 15 documents or do you need one—and get people back onto their benefits so they don't lose their housing.

[The Chair, Liberal, Wayne Easter]

I know that even for us in getting advice at the CRA, we'll talk to one person one day and get one opinion, and then we'll talk to a different person the next day and get a different opinion. We all have had that experience, I'm sure.

Mr. Sorbara, you have seven minutes.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Welcome, everyone.

I just have a general 30-second comment.

We live in a beautiful country, and we're blessed with a lot of natural resources. We're blessed with a lot of human capital as well.

On the natural resources front, yes, we are a producer of oil and gas, uranium, potash and a number of other things. Right now, we suffer from a discount of anywhere between $20 to $40 U.S., depending on the time of the year. This is called the Alberta discount and is a measure of WTI versus WCS. That really equates to anywhere, depending on where the discount is, between $15 billion to $25 billion that is lost for the Canadian economy. That $15 billion to $25 billion could be used for a lot of programs: funding hospitals, funding improvements to seniors programs, funding improvements to women's programs and under-represented youth groups.

As a person who grew up in northern British Columbia and who paid his way through university by working at a grain elevator and a pulp mill, I think that Canada's resources have served us pretty well. They've served me and my family pretty well. So, to listen to one of my colleagues from another party comment on how we should use our resources.... I just look back at all those good union jobs that are created from those resources all over British Columbia and Alberta, and I'll stand up for those folks and for the people who want to use our resources effectively.

I'll stop there and ask my questions.

This question is for the Business Council of Canada.

We don't want to be in a situation where the United States is fiscally with a deficit-to-GDP of 5%. We want to use what's called the shotgun approach and have targeted measures to ensure that we remain competitive, which I think we are. We don't want to have a race to the bottom. We don't want to have an LCD, a lowest common denominator.

Can you give your two top recommendations for this budget, Brian?

Please keep it to 20 seconds, unlike myself.

[Brian Kingston]

Number one is to introduce immediate expensing, and then number two is to launch a comprehensive review of the tax system.

With regard to your point on the fiscal situation, we by no means recommend doing what the U.S. has done. I've just come from New York, from meeting with U.S. business leaders. There's a real concern about the fiscal situation. We don't think we should go down that road. That's why we recommend a comprehensive review so that we can get rid of inefficient deductions, for example, the small business deduction, which is extremely expensive and not very effective.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Okay. Thank you.

First, to CARP, I had a seniors' forum last year, a town hall. Anthony Quinn, from CARP, came and blessed us with his presence.

I was there the day that the Prime Minister visited CARP headquarters, not very far from here, during the last election. We've fulfilled nearly all our commitments to seniors. We'll see. I think there's a seniors index that we're looking at.

From my prior background, I know the Indalex case, and you know what I'm speaking to, on defined benefit pension plans. Their jurisdiction falls between the province and the federal government. Therefore, when we are talking about super-priority status, the Supreme Court has ruled on this case. In fact, when a company gets into trouble, when you grant seniors super-priority creditor status in a defined benefit pension plan, no one is going to lend to the company, when you go into a debtor position in financing. Right?

To me, there has to be another way where we get to where we protect defined benefit pension plans—that is, not allow the company to underfund it in the beginning, so avoid the problem in the first place.

One thing I want to ask you about is the clawback rate on GIS. Can you focus on your recommendation 5? I think that would help a lot of seniors.

[Laura Tamblyn Watts]

I just want to offer that we agree it's better for companies not to get into the problem to begin with. We would certainly support having a lack of ability to underfund a pension plan to begin with.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

You have 20 seconds.

[Laura Tamblyn Watts]

We're concerned about the clawback rate, really just up to the top 50%, to provide respite for the poorest seniors who are trying to alleviate poverty by earning small amounts of income.

Older adults are living longer, people are in the workforce longer, and they need to be in the workforce longer. Let's make sure that when we have our GIS, it's responsive to the needs of older adults, particularly middle-income and low-income older adults. Thus, we recommend reducing the clawback rate.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you.

To Ryerson University and York University, I'll lump this in: I love that kids are going to get their education. My education, my one year of master's degree at the University of Toronto, 26 years ago, or so, cost me $4,000. The return on investment on that has been amazing for a small-town kid from northern British Columbia, the son of immigrant parents. Whether they're from Europe or not from Europe, I don't care. All I know is that this country has given me and my family everything.

However, I do want to talk about parity of esteem. I learned from the Germans that a person going to work as an automotive technician for Mercedes-Benz or BMW is as valued as the person going to get their Ph.D. As much as we like to get more Ph.D.s in our country educated, I also want to get those bricklayers, masons and drywall people to do those jobs, because there's a shortage of them. I think that's a big balance that we have.

My question is going to be, first, to York University. Is our government's commitment to fundamental research and investments in the university system across the country, with the U15, and so forth, going in the right direction?

[Dr. Rhonda Lenton]

Do you mean our investments into fundamental research?

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Yes.

[Dr. Rhonda Lenton]

All the universities at this time are of the view that the investment in research needs to encompass and incorporate both fundamental and applied research. You wouldn't get any argument. I could point out that a huge number of incredibly important inventions in this country have started with fundamental research. Therefore, to some extent, differentiating between those two is a bit problematic.

I want to talk about one incredibly important thing regarding investing in research. That is the direct correlation between that investment in research not only contributing to global knowledge transfer for Canada, but also contributing to experiential education for the actual student learning experience.

Research activities and students having those abilities of research and having exposure in research labs to the very best research that is going on is a continuation of that hands-on learning, that experiential education opportunity, the precise type of skills that students need today to be successful. On average, they will have seven different jobs over their lifetime. They need those research skills, those broad-based, transferable skills. An investment in fundamental research is not only an investment in research and development, it's also an investment in learning.

Research infrastructure is one of the primary problems. If I were to list them, faculty complement, research infrastructure and technology are the three big challenges facing universities. Increasingly supporting and making sure that we don't stop that support for fundamental and applied research for universities is incredibly important.

[The Chair, Liberal, Wayne Easter]

Do the folks from Ryerson have anything they want to add?

[Dr. Steven Liss]

I would certainly echo the comments that have been made, but I think it's important to really understand that there isn't a polarization with respect to a view of where basic and fundamental research lies. I think you would really understand applied research by looking to the recent Nobel Prize in physics, with an esteemed colleague at the University of Waterloo being recognized for her work. It's the work that extends back to our national strengths in physics, going back to the need to support a growing nuclear technology industry, which has laid a foundation of excellence in fundamental physics in Canada. I think there's a great relationship.

The other thing I would point out, though, is that the infrastructure and investments in research create not only the opportunity to support the training of talent at the undergraduate and graduate level, but they provide a great way to create interfaces and academic-facing relationships with our industry and the world. In that respect, I think the quality of those investments is really important to attract and retain industry to grow those companies, and grow Canadian companies, in creating that research capacity in those enterprises from the relationships built on the investments made at universities.

[The Chair, Liberal, Wayne Easter]

We'll end it there.

We may have time—

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Two words, Chair: Naylor report.

[The Chair, Liberal, Wayne Easter]

Okay.

Ms. Alleslev.

[Leona Alleslev]

Thank you very much.

My question is for Mr. Kingston.

What we've learned so far about the new NAFTA/USMCA deal leads us to believe that there will be an increase on drug prices based on changes to patents. It's going to have a significant impact on supply management in our dairy industry. There's a cap on our ability to export auto that we haven't had before. There's no lifting, as you mentioned, of the tariffs; no ability to compete on U.S. government contracts; and perhaps most importantly, there's the attack on our sovereignty, where we actually don't have the sole ability to diversify our trade because we have an article that says we can't, as a sovereign nation, enter into a contract with trade without permission from the United States.

When Mr. Fragiskatos asked you the question if we wanted to go and have a free trade deal with China, we cannot, according to USMCA, have that without the permission of the United States. Yet in your opening remarks, you clearly outlined that this is a successful negotiation, that it is a really good outcome, if I'm quoting you correctly. I'd really like to understand what I'm missing. From the perspective of your members, how are you measuring the overwhelming success of this renewed agreement?

[Brian Kingston]

It's a great question. There's one key metric that we've used to measure the NAFTA negotiations, and that has to do with certainty and uncertainty. With these negotiations under way, companies were holding off making investments in new facilities or building existing capacity because there was a great deal of uncertainty regarding our ability to access the U.S. market tariff-free. That uncertainty has been eliminated by this negotiation. That was the number one priority for us and businesses in Canada, and so that's why we deem it a success.

Of course, there were some other areas where we would have loved to see a better outcome. Steel and aluminum is a good one, and frankly we've been on the record for years talking about the need to get rid of supply management, so why not go further? On things like government procurement, we've actually maintained the status quo. Yes, it would have been nice to get rid of Buy America, but it's not reasonable to assume that the Americans will ever get rid of Buy America. They haven't done it for anyone and they're not going to do it for Canada.

On autos, of course I'd like to see a situation where there are no 232 measures ever applied to Canada going into the future, but what we've secured is an insurance policy, should they ever go ahead with the 232 and introduce tariffs on autos. We sent 1.8 million units to the U.S. last year—this is light vehicles—and the insurance policy we've been given gives us up to 2.4 million vehicles in the future. This is a significant—

[Leona Alleslev]

So any deal was better than no deal.

[Brian Kingston]

No, not at all. I would absolutely not say that. If there were things in here that affected our access to the U.S. market, we would have said so. The fact is, free trade remains between Canada and the U.S., and that was the fundamental piece we had to secure.

[Leona Alleslev]

To your next point about competitiveness, we've lost $33 billion in the last year of capital investments leaving this country. I hope the certainty in this trade agreement will bring that back. However, you've given some very key thoughts on why we're challenged to do that, tax reform being one of them. You mentioned corporate and personal tax, and that fundamentally we need an overhaul of both, and to be able to look at those two together as one entity. Did I hear you correctly?

[Brian Kingston]

Absolutely.

So much attention has been focused on NAFTA, but the PwC study shows that in the event we didn't get an agreement and there was no longer free trade between the U.S. and Canada, the effect would have actually been 10 times smaller than the effect of not responding to U.S. tax reforms.

We think U.S. tax reform is actually the biggest competitiveness threat to Canada. That's why we've been making the point that, yes, NAFTA is important, but when you talk to businesses, tax is really important.