Finance Committee on Oct. 19th, 2016

[Marco Navarro-Genie]

Certainty is a huge issue for business people and investors.

We have, for example, created a little bit of a regime in this country, but particularly in this province, of uncertainty regarding energy. I have been here three years, and in those three years fracking was allowed and then was not, and now there is a legal ban on well stimulation through this technique. Anyone looking at this from the outside, whether you're in the energy industry or otherwise, would have to worry about these seemingly whimsical changes that happen in policy.

My earlier allusion to jurisdictions had to do with the fact that the pipeline is ultimately under the jurisdiction of the federal government. It is therefore up to the federal government to make sure that following the proper regulation and consultation on the environmental side doesn't hold this thing up till kingdom come. This needs to happen, and it is a federal jurisdiction to make it so.

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

Mr. Sullivan, do you have anything else you'd like to talk about regarding businesses, particularly small businesses, that make up the majority of your membership?

[Patrick Sullivan]

What I alluded to was more about consultation that took place before some of these decisions were made. Obviously, there's not a final decision, because nothing has happened in Parliament to date, as I understand it, on the two particular issues I spoke about: CPP and the carbon tax.

We need to understand the long-term implications of some of these decisions, particularly in Nova Scotia, which has the highest electricity prices in Atlantic Canada—I think that's the case; certainly it has very high electricity prices—and has had significant reductions in energy consumption over the last number of years, and planned continued reductions. It would seem to me to be a penalty to business in Nova Scotia if we implement the carbon tax as proposed.

Again, certainty is a very important thing for business. We need to have a longer time horizon, rather than just the one, two, or three years that we seem to talk about consistently at the provincial and the federal level.

[The Chair, Liberal, Wayne Easter]

Thank you all.

Go ahead, Mr. Grewal.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for coming today. This is my first time in Halifax. I went for a run yesterday. It's an absolutely beautiful city.

My first question is to Ms. Pasher. You're advocating for the elimination of federal rent for airports of less than three million passengers. What is the cost to the federal treasury of making such a move?

[Monette Pasher]

I actually don't have those numbers in front of me right now. It's not all of the airports in the country; the tier one airports would still pay rent, but not the tier two and below. Sorry, but I don't have those numbers in front of me right now.

[Raj Grewal, Liberal, Brampton East, ON]

Just going forward, everything on the finance committee is dollars and cents. When you're asking for a recommendation, it's always good to cost it out. It carries a lot more weight. There are only so many revenue sources for the government, and there are always expenditures.

I'd be more interested to know about the operation of the airports and how much the government charges in rent. It's an interesting discussion, but it's a valid point.

Mr. Poschmann, you're advocating to have tax credits for innovation, and as examples you cited two other countries that do that. Can you give us a real-life example of how that would be applicable?

[Finn Poschmann]

Sure. Thank you for the question, Mr. Chairman.

The long-standing example, I suppose, would be Ireland. We also see them in Luxembourg, although they've been changed a couple of times. A number of European countries are home to the patent box or—

[Raj Grewal, Liberal, Brampton East, ON]

I don't mean the countries. Let's say there's a company in Canada. How would you assess the innovation, and how would the tax credit be implemented?

[Finn Poschmann]

Oh, okay. Thank you. I hadn't understood “companies”.

You look at the qualifying expenditure or qualifying activities related to acquiring a patent or other forms of intellectual property, your investment in building know-how, which in agricultural markets probably should include trade secrets. That establishes the expenditure base as a share of your total expenditures.

Then you look at the income that's derived from the activity associated with the intellectual property—in other words, royalties you subsequently earn through exploiting the IP that you have developed, created, or purchased. That portion of your income would be taxed at a lower rate than the general corporate income tax rate. A typical ratio would be that the preferred rate—the patent box or the innovation box rate—would be half of the general corporate rate.

[Raj Grewal, Liberal, Brampton East, ON]

You're advocating for these to replace the existing tax credits.

[Finn Poschmann]

Generally, they would work alongside them.

Personally, I would look to shrink the SR and ED at the same time. However, this is something I would proceed with very carefully, because we have a lot of business processes or mechanisms that are funded through the SR and ED, so I would address this very carefully and over time. We ran some very rough numbers a few years ago, and looked at a static revenue hit for Canada of somewhere between $1 billion and $1.5 billion. That sounds like a lot of money, but I suspect it would prove to be otherwise when you look at the investment activity and the spillover activity we would expect to generate.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you.

My next question is for Melissa. That's phenomenal work. I didn't even know Ladies Learning Code did such great work.

You mentioned that a lot of your funding comes from the private sector right now, and you mentioned some of the biggest companies in the world. Are they continuously funding you this year as well?

[Melissa Sariffodeen]

Yes, we already have about half a million dollars committed from those partners.

[Raj Grewal, Liberal, Brampton East, ON]

How many of the people who sign up for your classes end up going to work for these big corporations?

[Melissa Sariffodeen]

That's a good question. We don't have those stats. We do track, and it is a selling feature for companies. There's a lot of mobility, which is interesting for people. I know anecdotally that people have gone to work for Telus and Scotiabank.

That's definitely a selling feature and something we build into contracts with these partners. They continue to support us. They know they find a value. I think what they find more valuable is sending their employees to participate in our programs as learners and mentors, because it's professional development for them. I think that's the biggest value for these corporations, that development opportunity.

[Raj Grewal, Liberal, Brampton East, ON]

Are you partnering with the high schools? I would assume that the younger we could target a program like that, the better off Canada would be.

[Melissa Sariffodeen]

So far, our work is definitely extracurricular. We are having conversations with ministries of education across the board to start piloting curriculum even younger. We teach kids as young as four years of age. High school is important, but it's a tough group of girls to engage. We're focusing on even younger than that to get them hooked.

[Raj Grewal, Liberal, Brampton East, ON]

Perfect.

To the Canadian Association of Physicists, I want to thank you for your testimony. I don't have particular questions for you, but I do understand, and the government does understand, the importance of science. We recognize that funding was cut significantly by the previous government. I remember the first day in question period when we came back and we said that the war on science had ended. The government is looking forward to having science as a big part of the innovation agenda.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Raj.

I have a couple of questions, and if anybody else has a quick one, we will have time.

On Energy East, I'm surprised we haven't heard more about that in New Brunswick.

If the Energy East pipeline were to come into being, what would it do for economic growth within the region? Does anybody want to take that on? I know we have to get it through Toronto and across Quebec.

[Marco Navarro-Genie]

I'd be happy to comment, and Finn has things to say as well.

This is, as the cliché goes, a shovel-ready project. If we're looking to provide a stimulus to the economy, this is one that is ready to go, provided of course that the proper environmental safeguards are in place. Oil coming from Alberta, Saskatchewan, and Manitoba, three provinces out west, finding tidal water here in Atlantic Canada would allow exports and would create a significant number of jobs, many of which are technical jobs.

It would also allow us to become less dependent on oil coming from foreign markets. In the eastern part of the country, we are still dependent on foreign oil, which means that wars in the Middle East and situations in Africa make the pricing more difficult and more undependable. There are a myriad of benefits for this region alone, not to mention the fact that western Canada, which at this point is hurting in the oil patch, would be able to find markets for its product.

[The Chair, Liberal, Wayne Easter]

Go ahead, Finn.

[Finn Poschmann]

As I recall, we pegged the New Brunswick share of the capital expense at approximately $3 billion. That would be absent another refinery or a refinery upgrade. If those things were part of a business plan, you'd see a bigger number. The primary number I'd look for is a $3-billion spend in New Brunswick.

[The Chair, Liberal, Wayne Easter]

On airports, Ms. Pasher, how do we compare with the United States? I think Francesco mentioned, and we've heard this before, that quite a number of Canadians slip across the border to fly out of U.S. airports. How do we reduce that number? Is it government regulations or government fees that are causing those people to go to other airports? How do we compare, and how do we better balance that from a government policy point of view?

[Monette Pasher]

One of the studies that was done in the last two years showed that we lose about five million passengers across the border. There's a drastic difference between Canada and the U.S. The U.S. government invests in airports, they invest in infrastructure, and they're federally run, whereas in Canada our airports actually pay the government through airport rent, so there's a big difference in the cost-competitiveness of aviation in Canada. Our airports are run by community not-for-profits, so all of the money is going back into the system, but our passengers are paying too much to travel because government is actually making money from airports, rather than investing in our infrastructure.