Finance Committee on Oct. 27th, 2016

[The Chair, Liberal, Wayne Easter]

I call the meeting to order.

I welcome the witnesses. The committee is in the home stretch—that's what we call it in the horse racing industry—on pre-budget consultations. We have two last panels today.

Pursuant to Standing Order 83.1, we're continuing our pre-budget consultations for the 2017 budget. As I think all the witnesses know, we're trying to emphasize what proposals would improve economic growth within Canada.

I welcome all the witnesses here today. We're attempting, not always successfully, to hold people to five minutes for their initial presentations. We have the presentations that were forwarded, even the late ones, on our mobile devices. You'll see members looking at those devices from time to time.

Before we start with witnesses, I understand Mr. Albas has a notice of motion he wants to present, which shouldn't take too much time.

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

I appreciate that, Mr. Chair. I just wanted to make a notice of motion, specifically, that the Standing Committee on Finance undertake a study of de minimis and give recommendations to the Minister of Finance of what the appropriate level should be.

[The Chair, Liberal, Wayne Easter]

We have the notice of motion. The motion will be printed, delivered to members, and we'll debate it at another time.

With that, we will start with the Canadian Construction Association, Michael Atkinson, president.

Welcome, Michael. The floor is yours.

[Michael Atkinson, President, Canadian Construction Association]

Thank you, Mr. Chair and honourable members. On behalf of the some 20,000 member firms that the Canadian Construction Association represents, I'd like to say that it is, indeed, a pleasure to be here with you today.

Since I do only have five minutes and I don't want to go over time, I'm going to get right into it. We have five recommendations for you to consider.

The first is with respect to labour mobility, and my comments here are specific to EI-eligible unemployed. A mobile workforce is critical to the country's future, particularly in our construction sector. We need to encourage the unemployed to travel to where the jobs are and not limit their job searches to just their local market. But as we all know, money is tight when you are unemployed, which is why most unemployed Canadians limit their job search to their local labour market.

To overcome this challenge, the Canadian Construction Association recommends that current El policy be amended to permit the unemployed to access an advance of up to $2,000 from their approved EI benefits to help offset their job search costs outside their local market. This could be done through the existing El claim process without the federal government incurring any significant, new administrative costs.

Moreover, it would encourage the unemployed to broaden their employment search outside their local market without incurring significant expense at a time when they can least afford it. Should they find work as a result of this expanded job search, repayment terms could be negotiated between Service Canada and the El recipient.

A second way we can help create additional employment opportunities for groups currently detached from the labour market is to incentivize employers to invest in their training. The Canada job grant is one important initiative, but its focus is on short-term skills only, making it too limited for most employers to consider when training someone with specific employment challenges.

Furthermore, no employer is going to move a bookkeeper into a comptroller position just because the bookkeeper took a week-long course on accounting, so it's unrealistic to think that short-term upskilling will lead to additional hiring. Recommendation number two is that the program needs to be expanded to encourage more longer-term skills development.

A third solution is to create greater financial incentives for employers to participate in workforce development. Our members are particularly interested in apprentices. We believe the government has it right with respect to the apprenticeship job creation tax credit. This program helps many medium-sized employers take on apprentices by subsidizing their wages for the first and second years of their program. Unfortunately, however, the credit is limited to a maximum of $2,000. For most small and micro-businesses, which make up 99% of the companies active in the construction industry, it is not a substantive enough incentive to encourage them to hire apprentices.

Recommendation number three is to expand the credit. Right now it only applies to apprentices in their first and second years of apprenticeship. To try to incentivize apprenticeship completion, we'd like to see it expanded to years three and four. We'd like to see the $2,000 limit increased to $5,000. The current credit only applies to apprentices in Red Seal trades. We'd like to see it applied to all provincially recognized apprenticeable trades.

Fourth, we believe investments in infrastructure and the strategic use of tax policy can best contribute to business growth in all regions and sectors of the country. Infrastructure is an economic enabler. The better our infrastructure is, the more efficiently we, as Canadians, can export our goods and services to international markets. With all the effort Canada has put into trade diversification through free trade agreements, we must not limit our potential growth opportunities due to infrastructure limitations. Unfortunately, that is the situation we face today. Much of our trade-enabling infrastructure is operating at near capacity, with limited ability to accommodate any significant additional growth.

I'll leave it to my colleague at the Canadian Association of Petroleum Producers to quantify this problem in his sector, but let me just say this. If we are going to continue to permit the extraction of natural resources in Canada, does it make sense to deny ourselves the best possible price for those resources because of infrastructure limitations? We need to prioritize the development of trade-enabling infrastructure so as to ensure we continue to receive the best possible global price for Canadian natural resources.

That is recommendation number four. To that end, we recommend that the federal government establish a public-private advisory committee to help prioritize and direct investment decisions related to critical trade-enabling infrastructure. As part of this effort, the federal government should ensure that these identified assets receive priority funding from either an expanded national infrastructure component under the current new building Canada plan or through the proposed federal infrastructure bank.

Number five, and the last one, is capital cost allowance. The allowable capital cost allowance, or capital depreciation, on mobile diesel-powered equipment and machinery in the construction industry does not allow us to write it off over the useful life of the equipment. We are at a disadvantage when it comes to the tax treatment of that equipment in the United States.

The newer forms of equipment have better emission controls. The newer engines are much more environmentally friendly in that respect, so we feel that trying to encourage a turnover in that equipment to go to the more advanced machinery is also good for the environment.

I'm sure my five minutes are up, or just about up, so I'll stop there.

[The Chair, Liberal, Wayne Easter]

Thank you very much, Mr. Atkinson.

Next is the Canadian Supply Chain Food Safety Coalition, Albert Chambers, executive director.

Welcome, Albert.

[Albert Chambers, Executive Director, Canadian Supply Chain Food Safety Coalition]

Thank you, Mr. Chair.

It's a pleasure to be here. I'd like to thank the committee for inviting us. It's not our first submission, but it was our first time asking to come before you.

The coalition was formed 16 years ago. Our membership is composed of 32 national, provincial, and regional associations that represent businesses at every link in the supply chain, from input suppliers, primary producers, transportation, processing, manufacturing, distribution, and importing, to final marketers in export, retail, and food service. Our vision is that Canada’s agriculture, aquatic, and food industry will have a world-class reputation for producing and selling safe food. In brief, our mission is to facilitate the development and implementation of a national coordinated approach to food safety.

For this presentation, our members have two objectives. The first one is to ask the government to set out a five-year funding plan for its own food safety initiatives and for incentives to the private sector to invest in theirs. The second one is to ask the government to develop a comprehensive national food safety strategy in collaboration with the provincial and territorial governments, with industry, and with other stakeholders. Before I go into detail about these requests, I'd like to set out some of the broad context.

Canada is in the midst of modernizing its food safety legislative and regulatory systems, so as to catch up to our major trading partners and to assure comparability and equivalence in the future. The first step of this initiative was completed in 2012 with the passage of the Safe Food for Canadians Act. It replaces four acts and 13 sets of regulations with one act and one regulation. It dramatically expands CFIA's active surveillance to thousands of currently unregistered farms, manufacturers, importers, and exporters. It replaces a prescriptive regulatory approach with one that's focused on outcomes, prevention, and shared responsibility.

We expect to see the first official version of the new regulation within a few months and for it to come into force within the next year. This will complete the second step.

The third step is implementing this new food safety regime, which will require significant investments by both government and industry over the next three to five years.

To complete modernization, officials in industry have identified a fourth step for further changes. These include adding segments of the supply chain excluded from the current proposals, amending section 4(1)(a) of the Food and Drugs Act to bring it into compliance with the food and drugs act in the U.S., and consolidating the Safe Food for Canadians Act and the food components of the Food and Drugs Act within one statute.

Since our foundation, the coalition has been a strong supporter of food safety modernization, but we remain disappointed that over the past 16 years no federal government has articulated a clear national food safety strategy. The coalition firmly believes that Canadians, no matter where they reside or purchase their food, are entitled to the same level of assurances about its safety. In July, the provincial and territorial ministers of agriculture pledged co-operation in implementing the new regulations as part of the next agricultural framework. The time appears to be ripe to develop a comprehensive national food safety strategy.

As noted earlier, implementation will require significant new investments. The next budget presents a timely opportunity to make these investments possible. Our submission provides considerable detail, but I'll just cite a few examples. For food businesses, they're going to have to develop, implement, and update new preventive control plans; they're going to have to train their employees on the new requirements; they're going to have to establish traceability systems to facilitate recall; and there are going to be, in some cases, new capital investments required. For CFIA, they have to retrain their inspectors, recruit new staff with new competencies, ensure the regulations are uniformly applied, establish a monitoring program to assess effectiveness, and establish capacity to assist thousands of newly regulated businesses, particularly small and medium-sized enterprises. Health Canada has requirements to maintain its strong scientific capacity. The Public Health Agency also has requirements that we've set out in the document.

[The Chair, Liberal, Wayne Easter]

Mr. Chambers, we'll have to get you to wrap up in about a minute, if you can.

[Albert Chambers]

I'm just about to finish, Mr. Chair.

To meet these challenges we believe the next budget should provide for the development of a national food safety strategy and set out a five-year plan for food safety funding. This would involve providing financial incentives for food businesses and providing increased funding for federal agencies and departments to carry out their new responsibility.

Thank you very much, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

With the Government of Nunavut, Ms. Tungilik is our next witness.

[Theresie Tungilik, As an Individual]

Hello, my name is Theresie Tungilik. I'm from Rankin Inlet, and I'm an artist. Addressing the artist's resale right for Canadian artists would be a huge step for Canada to take. This would touch on all artists in all walks of life, and people who are well or have disabilities, to gain financially.

Some 93 countries have laws that support for the artist's resale rights, when the dollars are given back to the real artists after a resale. These rights, in turn, not only benefit the Canadian galleries, museums, auction houses, and the artists, but our country as a whole. Countries that abide by the artist's resale right will be able to pay our Canadian artists from their countries when their art has been resold. Making the artist's resale right a law in Canada can only be a win-win situation for both the artists and our country.

My father, Mark Tungilik, carved nearly every day. This was his income. This was his way of providing for the seven of us, along with his hunting. My father's carvings have been and are in many Canadian and European art galleries. Since his passing in 1986, I have become his beneficiary for his artwork. Yet, for the last 30 years I have not received a nickel, though there are records of his carvings being resold through galleries, museums, and auction houses, both in Canada and abroad. This is our reality as Canadian artists; we are forgotten.

If the Canadian government takes action to make it law to have the artist's resale right, this would greatly increase the art business world. As an example, I would like to take Kenojuak Ashevak with her The Enchanted Owl. When she made this print in Cape Dorset, Nunavut, she received an embarrassingly measly $24 for the print. After her passing, this same print fetched over $34,000 at an auction house, meaning she could have received over $1,700 had the artist's resale right been in place.

As Inuit art is well known nationally and internationally, this artist's resale right can grow our economy due to the fact that much Inuit art is sold and resold to galleries, museums, and auction houses in our country and abroad. This would be an expansion of our national economy as most of the art is due mostly to their communities, meaning that the money stays in our country after it has come in from other countries. Art among Inuit is a big business. It brings in more than $30 million annually just into Nunavut. Many northerners cannot find jobs due to the lack of job availability.

When you look at urban, rural, and remote communities, art brings in cash and supplements low income. The artist's resale right will have a positive financial impact as 10% of Canada's export is Inuit art. Imagine how much more the other Canadian artists who sell within the 93 countries would bring into Canada. The remote communities would really benefit from the artist's resale right as we in Nunavut have the highest cost of living.

For many, jobs are hard to find and living on social assistance is not their choice, but some people need to have it, because families need to feed their children. If they are artists, the artist's resale right would increase their household income and there would be less dependency on the government and it would help to bring about self-reliance.

Foreign visitors and dignitaries are usually given art as a gift, because art is thriving in the northern communities of Canada and is beautifully created. This shows the importance of Canadian identity.

Since the creation of Nunavut on April 1, 1999, Inuit have become sought after by more countries. France, England, Germany, and Japan remain the strong buyers of Inuit art.

Though I am Canadian, I am a northerner. I feel assured that I can speak for artists from my region. With Canada legislating the artist's resale right, I know it can only help and not hinder our northern economics. I know every dollar counts, and I can only imagine how happy an artist will be upon receiving his or her first-ever royalty cheque. With this kind of expectation, this can lead to more innovative creations of the art. How important the artist will feel that his or her art is worthy enough to be sold and resold again. The amazing thing would be that he or she would be paid again and again from those pieces.

The artist's resale right isn't going to cost the federal government anything, yet would put cash into the hands of its artists. Now is the right time for our great nation to make that move.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Just for our records when we do the report, we have you both down as Government of Nunavut and as an individual in your own right. I suspect your presentation is as an individual.

[Theresie Tungilik]

Yes. I do work for the Government of Nunavut. I'm the adviser for arts and traditional economy with the Department of Economic Development. However, I'm also an artist. I'm also on the council in Rankin Inlet, and on the status of women council.

[The Chair, Liberal, Wayne Easter]

Yes. That's just so we get it right in our details as we record it in the report.

[Theresie Tungilik]

Yes, independent.

[The Chair, Liberal, Wayne Easter]

That's great, not a problem.

With the Canadian Artists Representation, we have Madam Teitel.

[Darrah Teitel, Director of Advocacy, National, Canadian Artists Representation]

On behalf of the Canadian Artists Representation—le Front des artistes canadiens, along with our seven provincial affiliates and our partner in Quebec, RAAV, le Regroupement des artistes en arts visuels du Québec, I want to thank everybody for having us here today.

I want to begin my presentation with three quotes. The first is from the APTN article that announced the death of Annie Pootoogook, the Inuit artist who drowned in the Ottawa River, several kilometres from here:

Pootoogook used to compose her ink and crayon drawings that once raised her to international acclaim in the contemporary art world before she was swallowed by the darkness in the alleys and riverbanks of the capital city that have also obscured her last moments on earth.

Pootoogook was selling drawings on the streets, four blocks away from the National Gallery of Canada where her work hangs on the walls. She was 46.

This next quote is Daphne Odjig, an indigenous artist from the Odawa Nation:

it was not until later in life that I have achieved a semblance of success, and at 92 years of age [I am] surviving on a small pension and returns on dwindling investments

It's worth noting that Daphne Odjig's art now is rapidly resold all over the world. In 2012, the 12 pieces that were sold at auction would have given her over $7,000 of income had the artist's resale right existed.

The third quote is from Peter Taptuna, the minister of economic development and transportation for the Government of Nunavut. He's now the premier:

Inuit artists have brought their vision of the world to an international audience and built an economic sector that creates jobs and contributes tens of millions of dollars every year to Nunavut’s economy.... Today, we add our voice to support artist's resale right and encourage Canada to address this critical piece of legislation.

It is critically incumbent upon the members of this government, settler artists, and all peoples in Canada and across the world who enjoy indigenous arts to, once and for all, erase the false distinctions between indigenous artworks, their lives, and their lands. This point was made in spades, again and again, by the Inuk artist Billy Gauthier this past week, whose hunger strike brought about nation-to-nation negotiations for his land in Labrador. He consistently spoke of the intersectionality between the health of his body, his land, and his art.

What is ARR, the artist's resale right? It's very simple. It's a 5% royalty of all public sales of art, not private, and it gets kicked back to the artists themselves in recognition of the fact that the value of their work has increased the value of the art throughout their careers.

The artist's resale right works to protect and empower all artists, but particularly, it raises the most vulnerable of them out of poverty, and mostly indigenous artists. In Australia, two years after implementing the ARR, statistics were taken and it was found that over 65% of the artists receiving royalties were aboriginal or Torres Strait Islanders and that they had received 38% of all royalties collected. That's hugely disproportionate to the demographics in Australia.

In Canada, indigenous art is not an insignificant industry on first nations reserves, in Inuit communities, and in Métis settlements. Just ask the woman sitting next to me how many people in Rankin Inlet make their living from art. Ask the fewer than 2,500 members of the Haida Nation, whose art is ubiquitous in Canada, around the world, and gracing the bicep of our Prime Minister. Then ask yourselves to critically assess the industry that has arisen that brings so much indigenous art to the professional art market, where the work is highly valued. These middlemen, who call themselves art dealers, go onto reserves in the north, buy up tremendous amounts of art at wholesale prices, and resell the work immediately on international art markets where they get double, triple, or quadruple the amount of money they originally paid for it. None of this money goes back to the artists themselves.

No artist currently has the right to protect himself or herself from middlemen who prey on remoteness or poverty in order to make a quick buck. There is only one way to ensure that artists profit equitably from the value of their labour, and that is by implementing the artist's resale right.

Why have I brought the ARR to the finance committee and not the heritage committee today? There are three reasons. One is that the ARR has tax implications. The sale of art is considered a capital gain and is therefore only 50% taxable, but the ARR takes 5% of this and turns it into artists' income, which is 100% taxable.

Ladies and gentlemen, I will be the only person here begging you not to give us money but rather for us to give you money. This will add money into the treasury, and it will cost the government nothing to do it.

The second reason is the ARR is proven to reduce poverty. It is an income generator for artists, who are some of the poorest labourers in Canada. The average visual artist pulls in $18,000 a year, while the value of their labour creates profits for governments and the communities around them all the time.

[The Chair, Liberal, Wayne Easter]

Darrah, can I get you to sum up in about a minute?

[Darrah Teitel]

I just want to make the point that these are not struggling or insignificant artists who are earning $18,000. These are our best artists, our brightest minds. What other industry can boast such success for the people around them while ensuring that next to no profits go the labourers themselves?

Thirdly, and most important, the lack of ARR is actually a trade barrier. Ninety-three other nations in the world have the artist's resale right, and some since the 1920s. This isn't a new idea; it isn't a risky scheme. It's a “why haven't we done this already” right. That's why the UN has actually recommended that every nation in the world adopt the ARR before 2012. We're late, but we're not too late.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

For the Canadian Association of Petroleum Producers, we have Mr. Ferguson, vice-president of policy and performance. Welcome, and the floor is yours.

[Alex Ferguson, Vice President, Policy and Performance, Canadian Association of Petroleum Producers]

Thank you, Mr. Chair and honourable members.

I'm pleased to present a few comments and highlights of our submission on the federal budget. I want to let you know, we've been working with—it's kind of unusual for us—Fort McKay First Nation on some of the ideas and concepts that we bolted into our overall submission. I know the chief had hoped to be here today co-presenting with me, but is instead attending, along with many other Canadians, the memorial service for the Honourable Jim Prentice tomorrow. He does express his regrets.

I've read through many of the other presentations made to you over the past few weeks and I'm struck by the wealth of ideas provided, mostly in the spirit of growing the Canadian economy for the benefit of all Canadians. I'm also here today to tell you that our sector has participated in and supports much of the work that is being done by the advisory council on economic growth. We look at that as a very important piece of work that provides a longer-term view of economic growth pathways for government to consider. Equally important, the longer-term approach, such as defined in there, helps provide context for shorter-term actions for economic growth.

First, I want to emphasize what we already know. Much of Canada's historical, present-day, and future economy includes our ability to take advantage of one of our foundational strengths, our ability to develop and trade our natural resources. That requires an ability to better attract foreign direct investment into Canada. As noted by the advisory council on economic growth, Canada has fallen behind comparable jurisdictions in terms of FDI growth over the past several years. We certainly welcome the government focus through that advisory council recommendation on that activity.

But there are also opportunities for government to maximize benefits from the utilization of capital available within Canada. I know we've talked about this when I have previously come before this committee. Our sector has been known as one of the country's largest recipients of capital investment for some years now, and will continue to be. We believe that there are some opportunities for our government to bring real change to our tax system, for example, that will optimize the utilization of capital in Canada to increase the benefits for all Canadians.

I wanted to highlight a couple of examples we've provided and work through a lot more detail.

One specific opportunity we see is to review and implement changes to the large corporation tax rules under CRA. We believe refocusing this with a mindset towards some more transparency and efficiency will give tremendous opportunity for redeployment of underutilized capital. We believe not just from our sector, but from across sectors, that we can set a target of anywhere from $10 billion to $30 billion or more in underutilized capital to be better deployed across Canada and across sectors.

A second opportunity we've identified is reviewing and looking at the fiscal treatment under CRA of capital costs in our sector. Certainly the CRA rules for capital cost treatment have not kept up with the technology and innovation changes that have dramatically changed the nature of our business not just in Canada but around the world, but specifically in North America. We think now is the time to relook at that and find opportunities to be more efficient in how capital is treated under CRA.

A third opportunity is—you've heard this many times in previous testimony from what I've reviewed—in the scientific research and experimental development tax incentive program. There are great opportunities in that program—as I think you've heard from many others—opportunities such as broadening the program to provide tax credits for capital expenditures on clean tech and climate change mitigation. There are several other opportunities in there that I know you've heard about.

Stepping back for a moment, more broadly, we'd offer a few other recommendations as well. We certainly want to see the continued support of the development of infrastructure that diversifies the markets that Canada's natural resources can access. As you know, I'm not allowed to speak very often without mentioning pipelines at least once, so I will mention that, but there's also the opportunity for marine infrastructure in Canada and certainly the natural gas export infrastructure, which is very important for our sector.

The second opportunity we see is around the innovation agenda. We saw a great start in that in the last budget. We're looking for more definition and more specificity going forward.

Certainly, we believe our sector has been developing some good foundational strength and development of what we would call an innovation super-cluster framework. That would help lead governments' innovation agendas. We're thinking about inclusion beyond our sector opportunities in related sectors that are here today as well.

We believe government should support the opportunity that we would present as a global-scale strength in this innovation super-cluster framework, which is pretty unique and should be taken advantage of.

We also believe government should continue, as we saw in the last budget, efforts to further—

[The Chair, Liberal, Wayne Easter]

Could I get you to hold off for a minute? Our system has frozen and it will have to be reset. Talk about innovation.

[Voices]

Oh, oh!

[Alex Ferguson]

No problem. I struggle at my house as well, so it's not too different.

[The Chair, Liberal, Wayne Easter]

Okay, I think we're ready to convene. Could we come back to order, please?

Mr. Ferguson, I know you were just getting to the punchline, because you were getting to be over time.

[Alex Ferguson]

Thank you very much. I had only a few more points, so I'll be really quick and then we'll move on. I don't want to take up any more time.

I was just referring to Canada's contribution to the innovation agenda, which we're really looking forward to seeing more details on in the next budget. I wanted to highlight quickly one of the recommendations we will be making, which is to see continued efforts to further the full participation of indigenous people in Canada's social, cultural, and economic future. I was really interested in the presentation in that vein that was made just before mine.

We certainly see opportunities to review Canada's participation in the value chain in our sector, to see if there are ways for manufacturing to be incentivized to see some growth in what we see as future opportunities in the petrochemical and chemical industries. I know you've already had presentations from those sectors within this process.

I quickly want to mention that there are lots of continued efforts to optimize our workforce opportunities, which we have heard about already, so I won't go into those in detail. Certainly as well there are continued efforts to develop those international trade relationships and agreements that are so important for our present and future.

I'll stop there. Thank you very much for the opportunity, and I look forward to your questions.