Finance Committee on Oct. 25th, 2016

[The Chair, Liberal, Wayne Easter]

I call the meeting to order.

Pursuant to Standing Order 83.1, we are holding pre-budget consultations in advance of the 2017 budget.

I welcome the witnesses here. As you know, in the letter that went to each of you, we outlined that we would like people to hold their presentations to about five minutes, and especially to emphasize anything you have to say about how we may better achieve economic growth in this country.

With that, we will go to the first witness, Ms. Cianfarani of the Canadian Association of Defence and Security Industries.

[Christyn Cianfarani, President, Canadian Association of Defence and Security Industries]

Thank you. Good afternoon, Mr. Chairman, honourable members.

Thank you for inviting me to meet with you today.

My name is Christyn Cianfarani. I am the president of the Canadian Association of Defence and Securities Industries, CADSI.

CADSI represents some 800 Canadian-based defence and security companies in Canada. Our industry accounts for some 63,000 jobs, contributes $6.7 billion to the GDP, generates 60% of its revenue from exports, employs 30% of its workforce in the engineering, research, and technologies fields, provides employee compensation that is 60% above the manufacturing sector average, and is diverse, with significant representation in every region of Canada.

These statistics are important in the context of Canada's Innovation Agenda and the Defence Policy Review, two measures that will be implemented at about the same time as Budget 2017.

CADSI has been urging the government to consider the defence review, the innovation agenda, and the recapitalization of the Canadian Armed Forces as an important opportunity to drive innovation-led growth in Canada. This is my essential message to you today.

What this requires is the development of a defence industrial policy tailored to Canada's unique security challenges and industrial base capabilities. To our knowledge, we are the only G7 nation that does not practise one.

What exactly do we mean by “industrial defence policy”?

A defence industrial policy does not necessarily require additional funding or even new programming. It does require that the government set goals and priorities for defence sector growth in areas of key industrial capabilities. These capabilities could be ones at which Canada already excels—such as quantum computing, for example—or that confer major economic and scientific returns to the country. They could also be in areas that are important to Canada's sovereign interests. They would, of course, need to be derivative of the planned acquisitions of the Canadian Armed Forces, which some estimates put at over $200 billion over the next 15 to 20 years. This is the starting point for a defence industrial policy.

Once these overarching goals have been established, we would need to better coordinate and connect the existing policies, programs, and instruments scattered across the government, notably national security exemptions, industrial and technological benefits, the Build in Canada innovation program, the strategic aerospace and defence initiative, and export supports like the Canadian Commercial Corporation.

The aim is to align and apply the various elements in a more coherent fashion along the chain, from R and D to procurement, to better achieve outcomes with respect to innovation, manufacturing, supply chain growth, and the scaling-up of firms. It's also important to note that defence procurement is largely exempt from the trade agreements.

One implication here is that Canadian prime contractors could and would be considered more strategically in procurements for major capital projects. Primes or OEMs do the bulk of the manufacturing in the defence industry, and they own the intellectual property, which is essential to getting innovative and sustainable manufacturing services and high-wage employment in the technology fields. When Canada has not done this, strategically important assets have been hollowed out through sales, transfers, or mergers.

lncentivizing intellectual property transfer from foreign primes into Canada is also important. We need to go beyond just raw investment dollars. This allows Canadian companies to engage in activities that come with owning and exploiting intellectual property over a long period of time, well beyond any initial acquisition phase.

When supply chain growth is the primary objective, the government needs to ensure that when foreign primes win contracts in Canada, Canadian firms are driven into the global supply chains of those primes.

These are but some of the essential elements that need to be included in Canada's industrial defence policy.

In closing, Mr. Chairman and honourable members, I'd like to reiterate that there is an important and rare opportunity now to drive innovation-led growth in the Canadian economy through the planned defence acquisitions, the value of which is large by any historical standards.

I urge this committee to highlight this growth opportunity in your report and to recommend that the government commit to working with industry to develop a made-in-Canada defence industrial policy.

The potential to leverage defence procurement to create innovation and growth in every region of Canada is very real and achievable.

Thank you for having given me this opportunity to speak to you today.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

We now turn to the Canadian Gas Association and Mr. Egan.

[Tim Egan, President and Chief Executive Officer, Canadian Gas Association]

Thank you, Mr. Chairman.

CGA, the Canadian Gas Association, is the voice of Canada's natural gas delivery industry. Our companies meet the needs of more than 6.7 million customers, representing well over half the Canadian population and using over 450,000 kilometres of underground delivery infrastructure and storage facilities.

Over the past decade, we've invested over $17 billion in this system to ensure that Canadians have the affordable, clean, safe, and reliable energy all of us have come to expect. My focus today is on what we call the natural gas opportunity, and about how we build on that foundation to help our country to stimulate technology innovation; to deliver affordable energy to more of our fellow citizens; to build stronger northern and remote industry in communities, including indigenous communities; and to support clean transportation fuelling for the heavy-duty, return-to-base, off-road, and marine transportation sectors.

Three attributes of our industry explain how we can help.

First, our product is affordable. High energy costs mean that families have less money for essential needs and that businesses have difficulty operating, much less expanding. Affordable energy has long been a competitive advantage for Canada, and natural gas can help us maintain and build on that advantage.

Second, natural gas is an efficient and clean-burning energy choice. It has fewer emissions than many other fuels, and it is an important partner for renewables in emerging low-emission technologies.

Third, natural gas delivery companies are innovators. Our utilities have a long history of supporting energy efficiency programs and driving innovation in energy and use. With these national priorities and attributes in mind, let me quickly summarize the five components of the natural gas opportunity and how the federal government can support it.

The first component of the natural gas opportunity is in connecting communities. Communities with no access to natural gas are dependent on more expensive, less reliable, and, in many cases, higher-emission energy options. According to ICF International, connecting rural communities would result in significant cost savings, emission reductions, and revenue for governments. Our recommendation to the federal government is to allocate $250 million in clean energy infrastructure funding to support the construction of new natural gas delivery infrastructure for homes and businesses not currently serviced by the pipeline system.

The second component is LNG for remote communities in the north. These communities not on the energy delivery system are looking for ways to replace their aging diesel power generation systems and reduce their costs. LNG offers a cleaner, more affordable, and more reliable energy option, and there are excellent precedents in place for its use in the Northwest Territories, Quebec, and elsewhere. According to ICF International, by 2025, at least 16 power generation and 47 industrial customers in Canada's north could convert to LNG, resulting again in costs savings, emission reductions, and government revenue.

The third is to use natural gas as an alternative transportation fuel. Market adoption of natural gas vehicles in Canada has been growing at only a modest pace because of the higher capital cost, the lack of widespread LNG and CNG supply and refuelling infrastructure, and the uncertainty regarding taxation. In the last federal budget, funding was allocated to support the construction of alternative refuelling stations, and our understanding is that project proposals around natural gas are currently being considered. This is an excellent first step. Our submission this year recommends allocating funding over five years to help cover a portion of the incremental cost of natural gas engines to encourage deployment. As well, we recommend allocating further funding in clean energy infrastructure funds to support the development of new infrastructure.

The fourth is renewable natural gas. This CO2-neutral energy source produced from organic waste is captured, cleaned, and delivered for use in the same way as any other natural gas supply. RNG is a locally available product that can assist communities and governments in meeting their GHG emission reduction and energy sustainability targets.

It should be noted that RNG can be produced, cleaned, and injected into the natural gas distribution system at a cost often more affordable than other renewable options. Canada's natural gas utilities just set a voluntary target of 10% RNG in the system by 2030, equal to the energy needs of 3.1 million homes.

Our recommendation is for targeted assistance to advance the development of RNG technology by focusing on biomass gasification and for an amendment to Canada's renewable fuels regulation to include RNG as a compliance option, as is allowed in the United States.

The fifth is to drive efficiency in innovation. Natural gas utilities have a long history of supporting energy efficiency programs and technology innovation that have resulted in customer savings of $1 billion in natural gas costs and reduced emissions of 50 megatonnes. Last week, my association announced the intention to create the natural gas innovation fund to build on that success. Examples of opportunities we want to pursue include high-efficiency combined heat and power systems, micro combined heat and power systems for residential and commercial use, power-to-gas systems to store renewable electricity, new natural gas vehicle engine technologies, and renewable natural gas technologies.

In a submission to the government's clean technology for Canada's natural resource consultation, CGA recommended that the Government of Canada allocate funding to partner with utilities and others on natural gas innovation.

In conclusion, our industry looks forward to working with all interested parties and stakeholders on the opportunities noted above, which we think serve a number of national priorities.

Mr. Chairman, thank you for the opportunity to present at committee here today. I'll stop now and look forward to questions afterwards from committee members.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Egan.

Next we have Canadian Manufacturers and Exporters and Mr. Lavoie, director of policy, innovation, and productivity.

[Martin Lavoie, Director, Policy, Innovation and Productivity, Canadian Manufacturers and Exporters]

Thank you, Mr. Chair.

Good afternoon, lady and gentlemen members of Parliament. I am very happy to accept your invitation today to represent Canadian Manufacturers and Exporters and to submit our pre-budget consultation brief.

Canadian Manufacturers and Exporters represent about 10,000 manufacturing and exporting companies from everywhere in Canada. The association, which was created in 1871, was the first Canadian industrial association.

In a few words, what is the manufacturing sector? It is made up of a variety of sectors that include companies that exploit and process natural resources, aeronautics, automotive and agrifood processing companies, and it also includes 22 manufacturing subsectors of the Canadian economy.

The manufacturing sector generates approximately 10% of Canada's gross domestic product. It also produces two-thirds of Canada's yearly exports. The sector employs 1.7 million Canadians, who earn an average annual salary of $72,500, whereas the average salary for all industries combined is $57,900.

The sector has impacts in a multitude of other economic sectors, such as services, finance, logistics, transport, and many others.

Last week, Canadian Manufacturers and Exporters, our association, unveiled an ambitious plan to double manufacturing output and export by 2030. The plan, called Industrie 2030, is the result of about 100 round table consultations with manufacturers across Canada and the result of CME's biannual management issues survey. In our view, the next federal budget should implement a national industrial strategy based on Industrie 2030 that will accelerate innovation, increase investment, and help manufacturers reduce the carbon footprint.

Our two recommendations include, first, the creation of national clusters dedicated to the development and the adoption of digital manufacturing technology—for example, additive manufacturing, 3D printing, automation and robotics, and industrial Internet.

Second, we recommend increased direct investment in fast-growing companies by the creation of a risk-sharing loan program that will help companies innovate commercialized new products, both domestically and internationally.

Our third recommendation is to reform the scientific research and experimental development tax credit by conducting a complete legislative review of its legislation.

Number four is to implement the patent box tax regime to increase commercialization of intellectual property in Canada. A patent box tax regime means that we would reduce the corporate income tax rate on revenues associated with products that were commercialized with Canadian patents.

Fifth, we would like the federal government to expand the Atlantic Canada investment tax credit to nationwide coverage.

The sixth recommendation is to adopt a strategic procurement policy for all the federally funded infrastructure projects. This would emphasize the need to maximize domestic economic benefits for the manufacturing sector, including in particular fabricated steel products that are used in about 80% of our infrastructure projects, while respecting our current international trade obligations.

Finally, we would recommend that the federal government expand the green investment fund that will be implemented in Ontario soon that to support manufacturing investment in green technology.

I look forward to your questions.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

I would like to mention as well, because witnesses find it distracting, that all the briefs that have been presented are on our iPads, so if you see members looking at their iPads, they're likely trying to find out where you're at in your brief.

Now we have the National Pensioners Federation, and Mr. John.

[Herb John, President, National Pensioners Federation]

Mr. Chair and members of the committee, my name is Herb John and I'm president of the National Pensioners Federation. With me is our counsel, Susan Eng.

The National Pensioners Federation is a national, non-partisan, non-sectarian organization of 350 chapters, clubs, groups, organizations, and individual supporters across Canada, with a collective membership of one million seniors and retirees. We are devoted entirely to the welfare and best interests of aging Canadians.

Seniors and those who care about them welcomed the measures announced in the previous federal budget, but more needs to be done. An estimated 665,000 seniors live under the poverty line today, and this is not expected to change unless more is done to provide better income supports and to reduce their critical expenses, such as home care and drug costs.

Single seniors, especially women, face far greater rates of poverty compared to their counterparts in couples. The guaranteed income supplement for single seniors increased in July 2016. That will benefit 900,000 single seniors across Canada. While absolutely welcome, it is a maximum of just $2.60 per day. Much more needs to be done to prevent poverty among seniors.

To prevent and reduce poverty among seniors, we recommend that the government increase the rates of OAS and GIS, starting with single seniors; implement the promised seniors' index, but tie it to wage rates rather than prices to keep better pace with living standards; and immediately provide housing assistance.

The promised $200 million over two years to support the construction, repair, and adaptation of affordable housing for seniors is welcome, of course, but will not have immediate effect on people now unable to both pay rent and have enough money for food and medicines. Medication and home care costs are a major source of financial strain for seniors and their families. There exist proposals to address those needs, but there is nothing immediately available to families right now.

To address the immediate health care needs of seniors, we recommend that the government, first, implement the promise to invest $3 billion in home care and palliative care. There is an immediate need for sustained funding and national standards on home care. The patchwork of palliative care must be addressed immediately, and this new funding will be a major first step.

Second, the government should implement the promise to remove the requirement for a terminal diagnosis to qualify for the EI compassionate leave benefit and increase flexibility in how the benefit may be used. The requirement for a terminal diagnosis has, in the past, stopped people from applying for the compassionate leave benefit. In addition, the flexibility in using the benefit would better reflect on how chronic illnesses play out.

Third, development of a comprehensive national pharmacare system is necessary in order to ensure that every Canadian is able to access needed medications, regardless of income and postal code.

I will now turn it over to Susan Eng, who has further recommendations for the committee.

[Susan Eng, Counsel, National Pensioners Federation]

Thank you.

Mr. Chair and members of the committee, while seniors today need several measures to help them with their health and financial concerns, they are also concerned about the financial security of tomorrow's seniors. Without reservation, the National Pensioners Federation commends the federal and provincial governments on reaching a historic agreement to increase the CPP.

We welcome the proposals in Bill C-26, which is being debated now, to implement that increase and to amend the Income Tax Act to facilitate deductions for the contributions, but we especially commend the addition of the increase to the working income tax benefit to allow lower-income Canadians to participate in the pension plan, so we encourage speedy passage of Bill C-26.

The CPP and previous availability of workplace pensions are largely responsible for the large drop in seniors' poverty over the past two decades, but the effect is finished and workplace pensions are disappearing, so poverty is creeping up again. As recently reported, seniors' poverty has increased from a low of 3.9% in 1995 to just over 11% today, or one in nine seniors. Fully 28% of single female seniors and 24% of male seniors are living in poverty in this country. In human terms, that's 665,000 Canadian seniors living in poverty, mostly the oldest, mostly single, mostly women.

This issue of financial security is exacerbated by concerns about increasing income inequality, and there has been quite a lot of discussion around a guaranteed minimum income. This committee itself has actually recommended that an expert panel be established so the issue can be properly examined, and we encourage you to do so.

Those are our recommendations. We'd be pleased to take your questions.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Now we have Mr. Littler, from the Retail Council of Canada.

The floor is yours, Karl.

[Karl Littler, Vice-President, Public Affairs, Retail Council of Canada]

Thank you, Mr. Chairman.

On behalf of the Retail Council of Canada's 45,000 storefronts, I'd like to bring a retail perspective to your pre-budget deliberations.

In the Tour de France, the last place cyclist is traditionally referred to as the lanterne rouge, and in recent years we've appeared at, or very close to, the end of these hearings, so we're delighted to be included today, close to the finish.

RCC made a written submission on August 4, providing somewhat greater detail on our proposals. In the time constraints imposed by a committee appearance, I'd like to restate our support for two measures in the last budget, notably the middle-class tax cut and the boost to the child tax benefit.

These provide major benefits to families, of course, but they're also important to retail merchants, both through increasing disposable incomes for our consumers and through providing higher take-home pay for the two million-plus Canadians who make up the retail workforce—and by the way, that is the largest private sector workforce in the country. Keep it coming, we say, and if members are looking for ways in which to provide further assistance to Canadian families, there are over four billion dollars in customs tariffs and five billion dollars in excessive credit card interchange fees that could certainly stand to be addressed. We've spoken to those in our written submission.

The matter I would like to address today is that of the de minimis rate on imported parcels coming in by post and courier. Merchants are deeply concerned by efforts to eliminate the level playing field between retailers operating here in Canada, whether in stores or online, and those who sell from outside Canada and ship parcels cross-border. In a nutshell, the foreign online sellers' lobbying effort is asking our government to provide a tax incentive to shop literally anywhere else but Canada. Under a de minimis regime, no sales taxes are collected on imported products. This means that all other things being equal, the final price of an imported parcel will automatically be 13% lower than that same item sold in Ontario, or 15% if it is sold across the river in Quebec. That's not a matter of debate; that's simple arithmetic.

In addition, foreign online sellers would be exempt from the customs duties that we pay on imported goods. The importance of this distinction cannot be overstated. A price differential of 13%—and in some cases upward of 20%, once duties are factored in—will lead to an inevitable shift away from Canadian retail. That could be devastating to our operations, to our investment plans, and to employment in our industry.

This tax advantage that the other side would gain is never, ever mentioned by the proponents of increased de minimis despite its being the obvious elephant in the room. It isn't simply a matter of fiddling with the level, hiking it to $40, $60, $80, or what have you; the effects of the de minimis level bite very differently throughout our industry, depending on its subsector. A $40 level puts most of our bookstores and toy stores in jeopardy, for example. A $60 level affects those selling shoes and apparel. At $80, think about the impact on your local hardware store and so on. What might seem like relatively minor adjustments, in fact, put tens of billions of dollars worth of goods in play. Of course, these are the very areas in which many local small and medium-sized retailers tend to specialize.

We also take huge exception to our adversaries' attempt to portray this as a move benefiting information technology investment in Canada. If you think about it for a moment, their argument makes no sense. Our Canadian and our many transnational members are investing heavily in IT here to serve the market here. Even our opponents on the issue need to invest here, because as the current rules operate, they can't simply service the Canadian market from outside.

One of our Ottawa area members put it very well. They've just invested $200 million in a distribution and IT centre in Prescott, 60 miles down the road, but if de minimis were to be increased significantly, they would have been better to go one mile further, across the St. Lawrence River and into New York State, and locate their plant and jobs there. If they did, they'd gain a 13% advantage for any sales into Ontario. Surely that cannot be the kind of policy that we want to introduce—a tax incentive not to shop here and not to invest here.

By all means, let's work together to diminish stickiness for processing times and brokerage fees at the border, but don't presume that bricks and mortar stores in our communities or investments in .ca websites are inevitable or that they're invulnerable. For clarity, when people talk about raising the de minimis threshold, what they're really talking about is giving foreign sellers a tax-free sale advantage over Canadian merchants on all sales under that level, and they're talking about giving themselves a duty-free advantage as well, which Canadian merchants will have already paid.

So, yes, it would be about creating a new advantage for foreign merchants, an unlevel playing field that clearly disadvantages Canadian retailers, be they bricks and mortar or online, and an advantage for the U.S. for jobs to move there from Canada.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Littler.

Then we have joint presentations, I believe, by Sport Matters Group, with Mr. Elliott, and Canadian Parks and Recreation Association, with Ms. Noble.

Go ahead, Mr. Elliott.

[Robert Elliott, Senior Leader, Sport Matters Group]

Thank you, Mr. Chairman and members of the committee, for the opportunity to present here today. I think you're going to hear a bit of a change of pace from what you've already heard from the other presenters here on the panel.

I'm going to begin our presentation, and then I'm going to turn it over to my colleague, as you suggested, Mr. Chairman, from the Canadian Parks and Recreation Association.

Our comments, as with the others here before the committee, are a reflection of our full submission made in August.

The Sport Matters Group is a coalition of over 80 sport, physical activity, and recreation organizations. The recommendations that follow are the result of a consensus developed by representatives of all of those organizations.

My recommendations highlight the priorities and actions that support Canadians, both able-bodied and those with a disability, who want to be active, as well as those pursuing high-performance endeavours. Our overall goal is to improve health, wellness, and excellence through participation in sport and physical activity.

The performances of our athletes at the recent Olympic and Paralympic Games, where Canada met its objectives and finished 10th and 14th respectively, will hopefully inspire a new generation of Canadian children to take up a sport and become active.

As you might be aware, sport and physical activity participation levels have declined in recent years. Watching our athletes compete at the highest levels is part of the solution to seeing this trend reversed.

Children need role models. Seeing our athletes strive for the podium not only provides inspiration but also helps to instill a sense of national pride. In 2010, 90% of Canadians said the performance of our athletes at the Vancouver Games had a positive impact on Canadian pride.

If Canada is to maintain or increase its national ranking against the rest of the world, additional strategic investments will need to be made. Our recommendations are as follows.

The most important support we can provide is an increase in direct financial assistance to athletes through the athlete assistance program. AAP provides a monthly stipend and tuition support primarily to those athletes ranked highest in the world in their Olympic or Paralympic sport. This stipend has not increased since 2004, whereas the CPI has increased by a cumulative 23.25%.

According to the 2014 status of the athlete survey, athletes receiving AAP support reported an average annual income of $25,616, with an average of $15,200 of that $25,000 coming from the federal and provincial assistance they receive. That was the average annual income of our high-performance athletes. It is 15% lower than it was in 2009. This is not adequate to sustain training for 30-plus hours per week to represent our country.

We are recommending an increase of 24% in the monthly support provided to our carded athletes. This individual increase should be done without reducing the number of athletes funded and would therefore increase the athlete assistance program budget from $28 million to $34.72 million, which is an increase of $6.72 million.

In addition to providing direct support to our high-performance athletes, we are also suggesting funding increases to improve our coaching landscape and to better support the facilities in which these athletes train.

Lastly, with two new team sports being added to the program for Tokyo 2020, we're seeking additional support for team sports. Our total investment request for high-performance sport is therefore $16.22 million per year.

Our sector, though, also believes strongly in the need to invest in active healthy living initiatives that encourage more Canadians to be more active. The individual benefits of being more physically active and less sedentary are well documented. Reductions in the incidence of chronic disease and premature mortality, along with an increase in productivity, will lead to long-term health care benefits for the country.

The Canadian Institute of Actuaries has predicted that by 2037, fully 69% of our government budgets will be consumed by health care costs—a scary number. Clearly, preventative health care, including physical activity in sport, can play a role in mitigating this eventuality.

While our submission spoke to the need to establish a national physical activity plan that would align with existing plans and frameworks, we have now been included in a process to do just that. We recommend that once completed, however, this plan needs to be implemented.

I am now going to turn it over to my colleague, Cathy Jo Noble.

[Cathy Jo Noble, Executive Director, Canadian Parks and Recreation Association]

Thank you.

If we're going to encourage Canadians to participate in sport and recreation, we need to ensure that there is the infrastructure necessary to allow them to be active. Existing sport and recreation infrastructure is in a deteriorated state at this point, such that it is now becoming a barrier to Canadians' being active. For this reason, we're recommending that the government commit $12 billion over the next 10 years to a dedicated sport and recreation infrastructure fund. These funds would be divided between a repair fund and a new-build fund.

The key word in our recommendation is “dedicated”, so that infrastructure needs for sport and recreation aren't trumped by other infrastructure categories. This has been a common scenario for many municipalities. While $12 billion may seem like a significant ask, it represents 10% of the government's promised commitment to a $120-billion infrastructure fund. The $12 billion is not significant when you consider that the estimated cost to repair existing sport and recreation facilities is $16 billion. This does not include a single new build to address a growing and aging and diversifying population. It's simply for repair.

The 2015 FCM infrastructure report card showed that of all the infrastructure categories examined, sport and recreation faced the most immediate and critical need for repair. In fact, the report card showed that 47% of existing sport and recreation facilities are in fair, poor, or very poor condition.

Sport and recreation facilities are community economic drivers, they are job providers, they are an entry point for new Canadians, and they are the heart of rural and remote communities.

On behalf of Sport Matters, thank you for this opportunity to appear.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Next is the Canadian Federation of Students and Ms. Amirault.

[Jenna Amirault, Vice-President External, Carleton Graduate Students Association, Canadian Federation of Students]

Thank you, Mr. Chairman.

Good afternoon. My name is Jenna Amirault. I am a graduate student at Carleton University here in Ottawa. I am involved in my campus as vice-president external of the Carleton Graduate Students' Association and I am a proud member of the Canadian Federation of Students.

The CFS is Canada's oldest and largest students' union, representing more than 650,000 students from coast to coast. Today I am happy to speak not just on behalf of those students, but also out of hope for the next generation of students and workers.

I am grateful for the opportunity to address you today and excited to tell you about our vision for post-secondary education in Canada.

Students are responding to skyrocketing tuition fees and mounting student debt with action. On November 2, in 30 cities across the country, we are hosting rallies and talking to our communities about universal access to education. Students, educators, administrators, and policy-makers are all in agreement that a strong system of public post-secondary education is key to Canada's current and future success. It generates billions of dollars of annual economic activity, drives growth and innovation, and trains and retrains a skilled workforce that can compete globally, foster civic literacy, and promote responsible citizenship.

All students have a right to education, and Canadian society benefits from the skills people gain in getting there. We need universal access without upfront costs. By eliminating tuition fees and fully funding indigenous students, you can build a strong foundation for growth and ensure access to education for everyone, no matter what province they were born in or what their parents' income is.

We need a new approach to post-secondary education. In 2017 a skilled trade college diploma or university degree is required for a decent income and a just society. Today, 70% of jobs require some form of post-secondary education, and for the “precarious employment” category predominant in the remaining 30% of jobs, people want pathways to a better future.

Our system is failing young people. In 2011, 42% of Canadians between the ages of 20 and 29 lived in their parents' homes, up from 27% in 1981. In 2013 and 2014 more than 200,000 graduates couldn't make a single payment on their Canada student loans, and making this claim requires reporting pre-tax income of less than $20,000 a year.

In May 2016 Canada's parliamentary budget officer noted that post-secondary education is disproportionately accessed by higher-income Canadians, with 60% of students coming from the upper 40% of income earners. Those who are left behind include indigenous and racialized people, people with disabilities, young people from low-income families, and too many who are recently unemployed or folks working in minimum-wage jobs who simply want skills to improve their lives.

The income barriers that prevent highly qualified students from accessing public education interact with related forms of discrimination. For indigenous students it means broken promises. The federal government works to fulfill our treaty obligation to education for first nations and Inuit students through the post-secondary student support program, or PSSSP. In 1996 annual funding increases to the PSSSP were capped at 2%. For the past 20 years successive federal governments have continued this trend by choosing to maintain the 2% funding cap.

As a result of this restrictive cap, funding has fallen far behind the growing demand for post-secondary education, rising tuition fees, and increasing living costs. The Assembly of First Nations has estimated that last year more than 10,000 students were on a wait-list because of the backlog in funding.

In August 2015 Justin Trudeau and the Liberal Party made an explicit election promise to not only lift the 2% funding cap on the PSSSP but to invest an additional $50 million per year for the next four years. However, in its first federal budget, this government failed to deliver on the PSSSP funding promise to indigenous students.

The federation is calling on this committee to follow through on its recent and historic commitment to indigenous students. The Canadian Federation of Students supports the demand of the Assembly of First Nations to invest an additional $141 million per year into the PSSSP to fully fund all students. This student support must be tied in with reliable public spending. With federal spending on public services now lower than it was in the 1940s, it's time to reinvest in public education. The current lack of federal funding or provincial accountability has encouraged our colleges and universities to adopt exploitative labour practices and devastating tuition fees, treating international students as cash cows.

Recently, provincial governments in Ontario and New Brunswick have taken note of the barriers of high tuition fees and have taken steps to fully offset those costs for students from low-income families.

As the federal government, you can bring provinces together and enable access to post-secondary education through a dedicated federal transfer. By Statistics Canada's own numbers, our colleges and universities took in $10.2 billion in revenue from tuition fees last year. A return to a cost-sharing model of our past can split the spending between the provinces, eliminating tuition fees, ending precarious work on campus, and ensuring a well-functioning, high-quality post-secondary education system.

The federal government should ensure that standards are put in place to ensure that further investment in post-secondary education is not misused. A statute similar to the Canada Health Act would serve this purpose. To finance this shift, we support the proposal in our 2016 alternative federal budget to increase the federal corporate tax rate to 21%. This would restore our tax system back to where it was in 2006, and would raise $8 billion in revenue.

Canadians for Tax Fairness has also identified over $15 billion in funds for federal spending with the closure of tax loopholes and the creation of new mechanisms to generate revenue. We endorse all of these ideas, along with the additional proposal to cancel the federal tuition tax credit and the federal tax expenditures for RESPs.

Canadian businesses will benefit from a society where people are empowered to develop their capacities to the fullest extent possible. A skilled, curious, and vibrant public lies at the heart of any functioning economy. Maintaining the high-tuition, high-debt, diminished-funding model for post-secondary education does not serve the interests of our society or the entrepreneurs who create within it.

[The Chair, Liberal, Wayne Easter]

Thank you, Jenna.

We will go to five-minute rounds, which tightens it up somewhat, but to get everyone in, we have to go to five minutes. We will start with Mr. Grewal.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for being here today. I would like to ask each of you a question, but that's not going to be possible, because the chair is only giving me five minutes.

I will start off with the Retail Council of Canada. You spoke at length about de minimis. Recently the United States raised their de minimis. Then you spoke about the argument for keeping our de minimis amount at $20. Every increase from $20 to $40, from $40 to $60, would have negative effects on the Canadian economy—job losses, the closures of book stores and small businesses....

What happened in the United States when they raised the de minimis?

[Karl Littler]

First, the United States is a really poor analogue for Canada, because it has no federal sales tax. The principal issue does not apply in their case. They also do not collect state and local taxes at the border and, indeed, did not used to collect them on interstate shipments.

The big issue for us, even bigger than the duty issue, is the tax advantage that would be created. That does not exist in the U.S. because they don't have an inbound federal sales tax.

I think it's also worth noting what are loosely called “Amazon taxes” in the U.S. A lot of state authorities have starting imposing taxes on interstate shipments because their local merchants were being ground down, in effect, by certain merchants shipping interstate without collecting any taxes.

In many ways, they have gone in the opposite direction that eBay and Amazon and others are advocating here.

[Raj Grewal, Liberal, Brampton East, ON]

Is it correct to say that 94% or 95% of all sales are done at the retail level?

[Karl Littler]

Pardon me?

[Raj Grewal, Liberal, Brampton East, ON]

Are 94% of all transactions, retail transactions, done in-store in Canada?

[Karl Littler]

It's of that order. It's a little deceptive because, of course, when you look at retail numbers, which are a little over $500 billion in Canada, about $100 billion of that is auto, about $50 billion is gas, and it's hard not to do that in-store. With groceries, it is a similar situation. The numbers will be more inching into double digits on what you might call general merchandise.

[Raj Grewal, Liberal, Brampton East, ON]

Even in your humble opinion, even in your most objective opinion, don't you think a $20 de minimis should be revisited at a certain point?

[Karl Littler]

I don't, and I'll tell you why. The advocates will tell you that we're at Ugandan levels. Actually, we're the same level as the EU, which is 22 euros, or the U.K., which is 16 pounds. Just to be clear, in value-added tax jurisdictions, this is actually quite a standard level.

Second, when the de minimis level was introduced in 1985, there was no GST. At the time, the de minimis level was really about collecting duty on paper clips. In the intervening period, the HST came in. In a sense, yes, the level has been frozen, but the disadvantage is actually greater now than it was in 1985.