Finance Committee on Oct. 25th, 2016

[Raj Grewal, Liberal, Brampton East, ON]

I'm sure we can continue our discussion off-line, but thank you for your comments.

To the Sport Matters Group, I could not agree with you guys more, not on the amounts but the fact that we should be supporting sports and athletes. I think the social benefits are tremendous. I think Canadian athletes are at a disadvantage, especially compared with our neighbours to the south.

I run a free drop-in clinic in my riding every Sunday that I pay for out of my personal pocket, and about 150 kids show up. I see the benefits of it on a weekly basis.

Thank you for your testimony today. I don't actually have a question for you, but I am a strong advocate for increasing funding in that area, and whatever I can do to help you out, please let me know.

To the Canadian Federation of Students, I was a recent graduate not too long ago. I like to mention that time and again to keep me young.

I couldn't agree with you more on some of your suggestions. While I was in school, I used to be a big advocate of eliminating tuition fees. I still have student debt, so I'm still a big advocate on managing tuition fees, but then I did some research. The argument goes that no Canadian child should be making the decision on whether they should go to school or whether they should go into the workforce based on the cost of tuition.

The resulting research actually indicates that the percentage is very low. Tuition and the size of tuition isn't dictating whether people are making the decision to go to university or not.

I would like your comments on that, because it kind of kills your argument.

[Jenna Amirault]

I'd like to read the research paper that you're citing, because I speak to students every day. I work as a teaching assistant at the university. I hear from students every day who come to me in tears talking about how they cannot afford education and how it's hindering them, or how they come from bigger families, who themselves have had the opportunity to get post-secondary education, but they are fearful that their siblings won't have the chance to do so. As well, our research certainly suggests otherwise.

[Raj Grewal, Liberal, Brampton East, ON]

Okay. We'll agree to disagree.

[The Chair, Liberal, Wayne Easter]

Thank you, Raj. You're a little over time.

Mr. Deltell is next.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you, Mr. Chair.

It has been a long time since I graduated. I am very pleased to be here, malgré tout.

Ladies and gentlemen, welcome to your House of Commons.

I would like to make my first question to the spokesperson of Manufacturiers et exportateurs du Canada, M. Martin Lavoie.

Mr. Lavoie, thank you very much for your testimony and your expertise. In fact, I want to greet and thank all of you for your testimony and expertise.

From our perspective, as manufacturers and exporters, you are the creators of wealth in Canada. When you produce goods or services and sell them abroad, foreign money is paid to our country and fuels our economy, and truly creates wealth.

I went to Vancouver with another parliamentary committee, the Special Committee on Electoral Reform. I was in a hotel where I had an extraordinary view of the bay. I counted no less than 27 container ships, all headed for Asia.

When we sell our products, they are manufactured in Canada and leave the country to be sold abroad, and this brings back yens, euros, American dollars and pounds sterling to our country and creates wealth. That is what your association does. As a Canadian, I thank you for that.

I would like to know what you think the impact of maintaining the tax on production, the 11% tax enterprises have to pay, will be? It is being kept at 11%, although others had committed to lowering it to 9%.

[Martin Lavoie]

Are you talking about the corporate tax on small and medium businesses?

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Yes, that's it. I'm sorry.

[Martin Lavoie]

We had said we were in favour of reducing that tax.

Like other associations, we were a bit disappointed. In fact, on the topic of taxation revenues in general, Mr. Deltell, we were always in favour of cuts proposed in the past by other governments.

We think it is one way of lowering the employment rate and increasing corporate investments in Canada.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Tax cuts mean more production, the sale of more products abroad, the creation of more jobs in Canada.

What do you think of Bill C-26, the government bill we are in fact debating in the House of Commons? It aims to increase the Canada Pension Plan by increasing the ratio from 9.9% to 11.9%, which is equivalent to an average $1,000 increase per year, per employee, for each enterprise. When you add the contribution of employers of approximately $1,000 per employee, and that of the employee of about $1,000 more per year, you get a total of $2,000 per worker, even though the increases will only begin in 40 years.

In your opinion, how will this impact our manufacturing businesses, which create jobs and wealth?

[Martin Lavoie]

We had a similar debate in Ontario recently. It is true that employer contributions represent a considerable tax on labour. On the other hand, everyone is entitled to a minimum pension. Basically, what we are saying is that we would like it to be recognized that companies already have pension funds. We would also like those companies to be entitled to certain deductions for the funds already invested in their own pension funds, rather than having universal contributions that apply in the same way to everyone.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

The impact this will have on a small businesses with 25 employees has been quantified at around $25,000. What can a business do with an additional $25,000 a year?

[Martin Lavoie]

As you know, our sector of the economy is probably the one that spends the most on capital assets. We could not manufacture much without machinery and equipment. With $25,000, for instance, you could buy an industrial-quality 3D printer. I would say that capital asset expenses are the most important after labour.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

As you know, there is a new tax on the way, the liberal tax on carbon, which will affect all entrepreneurs. We know that originally, this was supposed to be debated and approved by all of the provinces. When the announcement was made unilaterally three weeks ago, three provinces that were not at all happy with the news left the meeting and slammed the door.

What does a carbon tax mean to an entrepreneur?

[Martin Lavoie]

The carbon tax is one of those taxes that has repercussions because the companies we compete with on other markets do not have one. So this represents an additional cost for our companies, as compared to those they compete with elsewhere.

That said, in theory we are not against a carbon tax, if it is applied in most other countries. Moreover, if we must do so anyway in Canada, we would really like to see the revenues from that tax be reinvested in the companies to help them purchase greener machinery and equipment. We don't want this to become a regular tax that will be used for other purposes that have nothing to do with the environment.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

When you say that you—

[The Chair, Liberal, Wayne Easter]

Sorry, Gérard.

Mr. Caron, you have the floor.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much.

Thank you to all of you. I have seven minutes and there are eight witnesses. This is going to be rather difficult.

First, Mr. Lavoie, that you for your honest answers. It would have been easy for you to say that you were opposed to the increase in contributions for the pension plan, but in actual fact it is true that there will be more invested in premiums by individuals and companies. Ultimately, this will mean increased financial security for our retirees. And also, this money will be spent; in the medium or long term, it will come back to your members.

I will start with you. I have a specific question to ask you about the patent box, which in French is “le régime favorable au revenu de brevet”. There is no French term for it.

I understand the concept. There were debates in the past on innovation and research and development. You can understand my support for this type of thing.

According to one argument we heard, this could in theory be good for innovation, but it could also be a a tax avoidance mechanism. Often, people talk about innovation, but these can also be measures to counter what is being done in Ireland.

In Ireland there are favourable rates for intellectual property. It's not that the Irish have become extremely innovative overnight; in fact, companies the world over are using Ireland to lower their taxes.

Isn't there a risk that the debate on the patent box might branch off in that direction?

[Martin Lavoie]

We have certainly noted that companies from several countries were registering their patents in these countries, precisely to reduce the taxes they pay on intellectual property.

I expect these countries feel that it is preferable to have a certain percentage of something rather than 100% of nothing. As you said, this could create a race to the bottom. There are two ways to fight this problem.

First, there could be a time limit on the patent box. A maximum limit could be placed on it, a certain number of years, for instance. We could say, for instance, that during the first three years a product is marketed, the tax rate would be at a certain percentage, and then after that period income would resume being taxed at the set rate. It would be harder for the company to change its production constantly. That is probably the best way of solving that problem.

You know, some countries like the Netherlands, rather than limiting this measure to patents, also apply it to products that were developed through research and development, without necessarily being patented. So a second way of solving the problem would be to broaden the measure's application.

For instance, in Canada, companies that invent a new product and ask for the scientific research and development credit for the two years during which workers and scientists developed the product could be eligible for the patent box.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much.

I would also like to talk about research and development, but I'd like to refer our listeners to the questions and answers that came up in the past, under the previous government. We discussed this matter often.

Mr. Littler, regarding the retail trade and the de minimis level you referred to, it is rare that people come to meet us without asking the government to do something. In general during the pre-budget consultations, people ask that something be done.

Is the risk of the government going in that direction real? Is the United States, or the American lobby, exerting pressure to have the additional sales tax exemption applied in Canada?

I agree with you; the idea is not to give an advantage to our retailers, but to maintain a level playing field.

[Karl Littler]

Significant pressure is being brought to bear, and some of it was brought up in the TPP discussion. I know that a number of members travelling in the U.S. would certainly have heard some of that pressure. It comes at a congressional level, but it also comes through trade emissaries. It is, frankly, a universal push, or maybe a near-universal push.

There's a concurrent push in Europe to raise the rate from 22 euros to 80 euros. It's a very well-coordinated and very well-funded effort. Part of that is private sector, but there was certainly U.S. government involvement in pushing this, because they would be the clear net beneficiaries of the change.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Fine. Thank you very much.

I'm told I only have a minute left. I thought we had seven minutes, but it seems it is five.

[The Chair, Liberal, Wayne Easter]

We'll give you a question. Go ahead.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much.

Ms. Eng and Mr. John, thank you for coming to meet with us.

You mentioned the amounts that were promised for home care, palliative care and mental health care. The government made that commitment during the election campaign, but nothing concrete has been done to date.

In fact, the ministers of Health met recently, but nothing seems to have come of that meeting as regards these issues. There was a lot of talk about transfer payments, but not necessarily about that commitment.

If the government decides to act eventually, what would the position of the provinces be regarding those needs?

Do the provinces agree that there is a need when it comes to home care, palliative care and mental health treatment?

[Susan Eng]

Yes, Mr. Caron, there is an absolute need now, immediately, for home care, palliative care, and mental health care.

Some $3 billion has already been promised to be spent in this category. None of it has been spent and none of it was proposed in the last budget. We surmise it was to be used as a bargaining chip for the current discussions with the health ministers of the provinces. Be that as it may, the money should flow as soon as possible.

However, it is important that the money not be sent out without conditions. Part of the problems with the sector at the moment has been that despite billions being sent out after the health accords in 2004, directly directed at post-acute home care and chronic care, the sector has not benefited very well, largely because the money was sopped up by administration, the hospitals, and the doctors. Unless you solve those structural problems beforehand, even $3 billion will not be enough. A complete package has to come forward, a proper strategy, specifically to deal with home care and targeted at seniors.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Ms. O'Connell, you're next.