Finance Committee on Oct. 21st, 2016

[Scott Collier]

It depends on how they are going to execute their criteria.

What we specifically asked for today.... We believe a minimum of $20 million puts us well on our way towards driving the productivity we need to be a global competitive hub. There are also requirements for capital. That $60-million number was about something that one of the other gentlemen talked about—CATSA plus, investing in new technology, the European and Asian-style lines that we saw in Rome. That would reflect the numbers they need across the Toronto airport over the next couple of years to create that dynamism of increased head count and officer count, coupled with new technology to achieve the numbers we desire.

[Raj Grewal, Liberal, Brampton East, ON]

I don't disagree with it. CATSA plus seems like the way of the future.

The question comes down to this. For the $20-million investment by the federal government, what is the economic impact that we'll see? Is there a study done on how the economy will become more efficient or how the economy locally will benefit from something like this?

[Scott Collier]

That's a good question. Here is the way I would answer it. The multiplier effect that the airport generates every single day through driving flow is extraordinary. You think about the $36-billion contribution we deliver today. It's going to effectively double in the next 18 years. If we continue to add three million to five million passengers a year, the numbers are in the billions for growth. We have to decide whether we are going to stop it or not. I will tell you that, within Pearson specifically, for each major screening point—we have six—the opportunity cost of one minute of wait time is $2 million in sales that passengers would spend in the airport. That's foregone, and we've proven that number. Think about it. Within retail alone, it's multi-millions every single year.

[Raj Grewal, Liberal, Brampton East, ON]

Switching gears, I would also highly advocate for infrastructure around the airport for the 49,000 people who work there, because it's an absolute nightmare trying to get to Pearson up Airport Road, for sure. I will definitely make that recommendation.

Mr. Speer, in your testimony, you made it clear that you want a path towards a balanced budget, so let's put that aside for a second. Do you ever see a need for the government to go into deficit in order to stimulate the economy?

[Sean Speer]

It's a great question. The short answer is yes.

I think few would argue that the 2008-09 circumstances justified, if not a stimulus, at minimum not cutting spending to try to balance the budget in the context of dramatically declining revenues. The real question is, under what circumstances should we be in deficit? Is 1% growth or 1.5% growth a reason to adopt fiscal stimulus? Is 0.5% contraction in the economy a circumstance to justify—

[Raj Grewal, Liberal, Brampton East, ON]

It's a stagnant 1% growth to 2% growth over the last 10 years.

You also mentioned that the argument on when we should go into deficit spending should be at this committee. With all due respect, it happened in the last election. The current government party and the party opposite made the case for investing in infrastructure to grow the economy and going into deficit. That choice was made to the Canadian people. I think that's where that discussion should happen.

[Sean Speer]

I'm sorry if I have left the impression that I am quarrelling with the government's having a political mandate to run deficits. I don't quarrel with that.

[Raj Grewal, Liberal, Brampton East, ON]

No. Absolutely not.

[Sean Speer]

My point is that there is now some onus on the government to send a signal to Canadians and the market about its long-term fiscal plan. That's all I'm saying.

More important, the more useful thing would be to have a serious policy discussion—as I said, I think this committee is well placed to contribute to that discussion—about the circumstances under which it should be the deliberate policy of the Government of Canada and other governments to adopt extraordinary fiscal stimulus measures. That's all I'm saying.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Speer.

Mr. Watt, you've also advocated stimulus, and even in the current government fiscal framework, you're still advocating stimulus. What do you think would be the most prudent stimulus that the Government of Canada could use in budget 2017?

[David Watt]

Right now, I think we have several aspects to it.

To go to Sean's point, I'd say the starting point is, why would we run a deficit? I think we need a long-term goal. What's our strategy? What do we want to see the economy being in 10 to 15 years from now? I have a particular view on that. I'm thinking about how we're going to benefit our export sector, how we're going to ease transportation across Canada to make Canada a hub, not just for exports in general but a global trade hub. That involves a lot of infrastructure, trade infrastructure, in order to ease the movement of goods and people across Canada. That is one aspect of it.

The other aspect is, how are we going to make Canada a draw for foreign direct investment? That's when I get to the small business tax credit. To try to make Canada a hub for foreign investment to come into Canada, reform the small business corporate tax backdrop to encourage growth.

We also have immigration aspects, which have been talked about elsewhere.

When we're doing stimulus we have to have that idea: what is our goal, where are we going forward, what do we ultimately want to see, and what are the benchmarks we're going to use for success? I think there was room to do more stimulus in the last budget, with the proviso that we had a long-term goal. What is it we want to see for the economy 10 to 15 years down the road? As opposed to being an energy superpower, do we want to be an innovation superpower? How are we going to do that? We use the leverage of the government in an environment of low interest rates...people willing to invest in Canada. We have this generally sluggish growth backdrop, which seems to suggest that if somebody can step up to provide growth opportunities, they should. In Canada, I see that being the federal government.

That provides the structure that suggests why we should run government and what we should aim for.

[The Chair, Liberal, Wayne Easter]

We'll have to end it there.

Am I hearing, Mr. Speer and Mr. Watt, that basically you're saying the government needs to lay out a plan on how the government would get back to balance? Regardless of the time frame, that plan needs to be laid out. Is that what I heard you saying? We've heard it from others as well.

[Sean Speer]

Yes, sir, and I'd go so far as to say that I would attach to that some type of regime that allows for this committee and parliamentarians more generally to hold the government accountable to that plan.

[The Chair, Liberal, Wayne Easter]

With that, we'll have to end it there. I thank each of you for your presentations. I'm sure some of the committee members might want to talk to you for a minute following.

For the committee's benefit, just so they know where we're at next week in case you have to do some planning, on Monday, starting at 3:30 we'll hear from the Governor of the Bank of Canada and the parliamentary budget officer. On Tuesday, Wednesday, and Thursday, we have two panels of eight each day, for each of those three days. On Thursday, we will hear from Dominic Barton, and the BDC, and EDC. Next week should be a fairly busy week.

With that, we will suspend for 10 minutes. I know people are waiting for the open-mike session. We will reconvene in 10.

[The Chair, Liberal, Wayne Easter]

We will reconvene for the open-mike session.

I'll explain how this session works. We will give you two minutes at the open mike. Your information will go on the record. There will be no questions from the members, but this does give individuals the opportunity to make a point in terms of where they believe the government should be going in terms of the budget.

Mr. Hershaw, you have the floor, for two minutes, please.

[James Hershaw, As an Individual]

Thanks for the opportunity to speak before the finance committee.

My name is James Hershaw, and I'm the managing director of WATT Capital.

I'm here today to highlight the merits of a proposed 10% equity crowdfunding tax credit. This proposal has been posted on the finance committee website for public review, and you also have a copy of today's comments for the record. The tax credit would be available to all Canadians who invest in new equity issues of public and private companies with a market value of $50 million or less.

In 2005, the federal government eliminated the foreign property rule that caps foreign investment in Canadian pension plans at 30%. The rationale for this major policy change was to allow greater investment diversification. The tax-free status of pension plans and RRSPs cost an estimated $41 billion in annual 2016 expenditures. From 2004 to 2015, the Ontario Teachers' Pension Plan reduced Canadian equity holdings from 20.6% to 2.1% of net investments.

The primary beneficiaries of this major asset reallocation were foreign companies and select Canadian real estate companies. A recent Boston Consulting Group study showed that an estimated $100 billion in Canadian equities is now held by the top 10 Canadian pension plans. This is down from an estimated $200 billion to $300 billion in Canadian equities—if the foreign property rule had not been eliminated.

For all pensions and RRSPs, Canadian equity holdings may be down by an estimated $600 billion to $700 billion. This policy change has caused a major reduction in new equity funding for smaller Canadian companies. We need to create some type of fiscal incentive to offset the negative impact of a major funds outflow from Canadian equities.

I know from personal experience that there's been a substantial reduction in the number of Canadian small cap investment funds and related research and dealer infrastructure. This is negative for the Canadian economy and for capital markets. We need to re-engage all Canadian investors, large and small, to have them realize that new equity funding for smaller Canadian companies will create economic growth, innovation, and jobs throughout Canada.

The equity crowdfunding tax credit is a modest fiscal incentive for all Canadians to invest in local companies. New technologies, such as crowdfunding platforms, can make these investments accessible to all investors. The top Canadian pension funds manage a substantial portion of Canada's net wealth. The proposal would be an incentive for the large pension funds to hire small cap expertise and participate as lead investors in small cap equity funding.

I urge the committee to consider the merits of the equity crowdfunding tax credit. You have the proposals on the website. I also ask the committee to request that the finance department review the impacts of the elimination of the foreign property rule on Canadian capital markets infrastructure, with an emphasis on the negative effects of the substantial reduction in equity funding for small cap Canadian funds in all sectors of the economy.

I would be pleased to provide the federal government with additional information and research from the small cap entrepreneurs, shareholders, and stakeholders that are important innovation engines for all parts of Canada.

I should mention, just off the record, that this is a bit of a new proposal. I've started some discussions with the TMX Group—obviously, you know the Toronto Stock Exchange, and I've been speaking to people there—as well as the National Crowdfunding Association, because I've been involved in a few projects with those groups.

This is a simple concept. I've been involved in flow-through shares. I've been involved in the buy side and sell side. This would be a simple way to issue a simple tax credit to investors in Canadian companies.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Hershaw.

Mr. Masters, please.

[David Masters, As an Individual]

Good afternoon, committee members. Thank you for hearing me this afternoon.

As treasurer of the not-for-profit group, Land Over Landings, I'm requesting financial support for our agricultural economic study of the remaining Pickering federal lands northeast of Toronto. Our study is expected to cost between $75,000 and $100,000. Over half of this publicly owned site is now protected within the Rouge National Urban Park, but the rest—more than 9,000 acres of mostly farm land—still risks development. Our study aims to show the full economic potential of the site, if reserved for agriculture, agribusiness, and research and innovation into farming matters.

Agriculture researchers and farmers desperately need land on which to study climate change mitigation and adaptation. The study will also analyze the potential economic impact of tourism that could be generated on the land with a large national urban park right beside it. Our study supports a transformative vision for the federal lands, one that would offer many varied, long-term employment opportunities and trigger the economic and social rebirth of a long-depressed area. We believe that we can create jobs immediately.

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you very much, David.

On the mike, Peter Venton.

The floor is yours.

[Peter Venton, As an Individual]

Thank you, Mr. Chairman, for the invitation to speak to this very important House of Commons finance committee.

It's important to give my bias as a former senior economist in the provincial treasury for a number of years, from which I've now retired.

We have an anemic economy because of the relatively slow growth of labour income in the economy for the last several decades—some would say stagnant growth. This has reduced the current aggregate consumption in the economy, and one result is that business is not investing as much as it otherwise would. These circumstances are likely to prevail, in my view, for at least the next four or five years. Other advanced economies are in a similar situation.

In this context, I think the government should double its planned annual expenditures on infrastructure over the next few years. The increase should be financed by increased taxes that will make the tax system fairer.

The brief of Canadians for Tax Fairness to this committee in August outlined three important areas for raising taxes, with an estimated total annual additional income of $20 billion. These include, for example—and these are just examples—limiting the capital gains tax deduction on the sale of investments or on other assets, so that income from capital investments is taxed at the same rate as employment income. That estimates at $10 billion a year. Secondly, stop corporate offshore tax dodging, for example, by applying a 1% withholding tax on Canadian assets held in tax havens. The estimate for that is $2 billion a year. Finally, eliminate stock option deductions that allow corporate executives to pay tax on stock option income at half the statutory rate of employment income.

I think the timing of these tax changes would obviously be different than the timing of infrastructure spending, which I think should be immediate. However, over the intermediate term, the two should balance out.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Venton, and thank you for your years of work in the public service.

Mr. Cheung, you're on the mike.

[Brian Cheung, As an Individual]

Thank you very much, Mr. Chair.

Members of the committee.

I want to welcome you to Toronto for this final public consultation.

My name is Brian Cheung, and I am here on behalf of Engineers Without Borders, Ingénieurs sans frontières, along with two other members, Imad and Hailey, who will be speaking later.

As Mr. Easter mentioned during the break, I'm sure you haven't heard from us at all during this process.

We have made a submission to the committee. I believe you've heard statements from other EWB members in seven of your previous eight stops—we regret not hitting Charlottetown—so you've heard our message by now. We are asking you to raise the amount of the international assistance envelope by 10% per year over 10 years, approach the 0.7% of GNI target that has been suggested for several years by both the OAC and UN.

Canada is a global country, from our people, to our economy, to our interests. If the standard of living across the world increases, thus do our fortunes. The vastest sources of growth are and will be the global south, and that's best served by a stable foundation of education, health, laws, and economic mobility.

I'm also going to echo the previous speaker in terms of cracking down on tax havens, because that certainly is an outflow that is unfortunate, both for us as well as for developed countries.

I believe that Canada certainly has an ability to contribute knowledge and experience and resources in these interests, these fields, these sectors.

According the words of our Prime Minister, Mr. Trudeau, we are Canadian and we are here to offer our help. The words sound good, but are we offering anything besides words?

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Cheung.

Go ahead, Imad.

[Abdülkadir Ates, As an Individual]

Good afternoon. My name is Imad Abdulkadir, and I am a second-year engineering student at the University of Toronto. I am also an active member of the Engineers Without Borders Canada chapter at my university.

I am very proud of the direction in which the Liberal government has gone thus far. I was thrilled to hear our Prime Minister tell the world “We're Canadian and we're here to help” during the United Nations General Assembly. I believe his words are being manifested through our commitments to the sustainable development goal agenda and through various organizations like the Global Fund.

I am speaking with you today, however, because I am concerned that our international assistance envelope funding levels are the lowest of any modern Canadian Prime Minister, and are lagging behind in comparison with our G7 counterparts, hindering our ability to implement the 2030 agenda for sustainable development.

As a Canadian of Ethiopian origin, the topic of foreign aid is for me personal. Having witnessed first-hand the disparity of wealth and opportunity that sets Ethiopia and many nations apart from the world we are privileged to enjoy here in Canada, it pains me to know that we aren't doing everything we can to help those less privileged than us.

In budget 2017 I'd like to ask that Canada commit to predictable increases to the international assistance envelope of 10% annually to the end of the 42nd Parliament in order to aid implementation of the 2030 sustainable development agenda; and that Canada aim to meet the UN and OECD funding target of 0.7% of gross national income by 2030. Making a strong ODA commitment aligns with the ministerial mandate and is a decisive stepping stone towards early progress in the sustainable development goals.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you.

Hailey, you're on.