Finance Committee on Feb. 4th, 2020

[James Cumming, Conservative, Edmonton Centre, AB]

Mr. Ball, have you solicited much feedback from the base of firms that you represent on the performance of the CRA, the timeliness of response times, just the general...? When I was back in the private sector, a big issue to a lot of small businesses was the timeliness of reporting and timeliness of how the call centres worked. Can you give us some feedback on that?

[Bruce Ball]

Definitely. Thank you for the question.

One thing I can comment on happened yesterday. We had a meeting. We have a framework agreement with CRA where we have some joint committees. Yesterday, we were talking to CRA appeals, the area where it handles objections, tax appeals and that sort of thing. We were given an update on the status of turnaround times. It has sped up lower and middle complexity tax appeals. Now it is starting to address higher-level ones. One of the main things I took from the meeting yesterday—and a lot of other meetings, I'm just using this as an example—is that things are starting to improve. The turnaround time for appeals and objections has improved. We've heard that the turnaround time for taxpayer requests have also improved.

Another thing the CRA is implementing, which we have been helping on, is a system where taxpayers can track the requests they've made. The idea is that the CRA will log in your request, confirm you've made it and then give you status updates in terms of how it's going and when you can expect a response. That one will still take a little while to roll out, but I think, by and large, it is improving.

The phone system remains a challenge. That one, I'll be honest with you, I don't have as much background on in terms of data and that sort of thing.

[James Cumming, Conservative, Edmonton Centre, AB]

Ms. Saab, with your members, do you get any feedback from them on the infrastructure program related to debt capacity? Many municipalities I hear from have no more latitude. Is that an issue? Do you hear from those municipalities, through their taxpayers, that they're concerned about the ever-increasing rate of property taxes and competitiveness being tied back to those additional debt payments?

[Daniel Rubinstein, Director, Policy and Research, Federation of Canadian Municipalities]

Let me answer that.

All of our members, especially when speaking about major capital expansion projects, tap in typically to their debt room. The debt room is typically set at the provincial level. Some cities have the ability to cap it as well. It's always within a prudent percentage of own-source revenue. That said, the more predictability you have, whether it's through the gas tax or an allocation-based transit fund, the easier it is to smooth out your planning in terms of how you're going to maximize that debt room and utilize it. I think you'll find, if you look city by city, our major, bigger members, who have the largest capital projects, are trying to be as creative as possible to use that room, but at the end of the day the availability of predictable funding is really key to doing more.

[James Cumming, Conservative, Edmonton Centre, AB]

Thank you.

[The Chair, Liberal, Wayne Easter]

Do you have a question, Philip? Go ahead.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you. I have a question for Mr. Ball.

I think all Canadians want to see more innovation and ideas, from the single mom in Orono into listing on the TSX Venture Exchange. On that, Mr. Ball, when we look forward, I'd love to hear if you have ideas on how we can make the tax system more favourable to and easier for entrepreneurs to be successful. Specifically, maybe if you could reference the small business grind on passive income, as well as the TOSI rules.

[The Chair, Liberal, Wayne Easter]

You have a minute.

[Bruce Ball]

I have a minute? Yes, so at a really high level, maybe I'll start with the TOSI part first, because Mr. Goodis made some comments.

I would agree with the comments made in terms of complexity. I think there were easier ways to do it. I think the investment rule was made more simplistic, so we were happy to see that, but there are a lot of issues. The main thing, really, as was mentioned, is that a lot of guidance does have to come out from the government and it does appear to us as well that it's really going to be a tough go. I think the rules do need to be simplified.

Just more generally, you mentioned innovation, and one other thing that we think needs to be worked on is the scientific research and experimental development credit. It needs to be improved, maybe both in terms of application but also in the administration. I know the CRA is working on it, but it needs to be improved. We keep hearing that companies, large and small, need certainty in terms of whether they will get the credit and in terms of the amount of work they have to go through to get the credit.

[The Chair, Liberal, Wayne Easter]

Mr. Fragiskatos, we'll have to give you about four minutes.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Mr. Chair, and thank you to the witnesses. I apologize for not being here for your testimony. I sit on another committee and had to be there this morning.

Ms. Saab, if I could, I'll speak with you and Mr. Rubinstein. I come from London, Ontario. I'm a member of Parliament there, and yesterday we heard from our mayor, Ed Holder. By the way, hello from Josh Morgan, one of our councillors, who I know is very active in the FCM.

London now has embarked on a discussion about electrifying our bus fleet. I know that other cities have moved in this direction and I think it would be really appropriate, to say the least, for the federal government to assist cities as they transition their fleets from diesel to electrification. The emissions cutback alone would be very significant, along with the financial savings for municipalities across the country, which obviously, in terms of fuel not being spent, are going to be significant as well.

Does the FCM have a position on electrification? Certainly your positions on transit are well known, and thank you for all your advocacy on that, but on the electrification of bus fleets, do you have a particular view on that and any ideas on how the federal government can assist municipalities with some of the costs? Admittedly, they are expensive.

[Carole Saab]

Thank you very much for your comments.

Certainly, we do have a position on the electrification of fleets, and we watched with interest Mayor Holder's testimony here. I think London is a great example of the kinds of investment that cities are trying to gear up to make in terms of converting their diesel transit fleets towards electric. This is happening in communities across the country and is an increasing priority with our members, both in big cities and in medium-sized and smaller communities across the country.

You're right to say that the emission reduction possibilities through the electrification of fleets, particularly diesel transit, is really significant. FCM's position, which we will be presenting as part of the federal budget submission that we make to the committee, is to invest particularly in the electrification fleets. A target that FCM is reaching for is 50% of the municipal fleets to be converted over 10 years. That's about 7,000 diesel buses.

Again, the emissions targets that we'd be able to meet are 13% of the gap for the Paris target, so it's quite significant and in line with the direction that we've seen coming from your government. It's certainly a big priority in communities across the country, in both large and mid-size communities in particular, to be able to advance and meet our climate targets in such a substantive way.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Do you think it would be appropriate and wise in the upcoming budget for a specific program to be created for the funding of electric buses?

[Carole Saab]

Yes, absolutely. That's the position of FCM, and again, with the targets that I've just mentioned.

[Peter Fragiskatos, Liberal, London North Centre, ON]

I asked that because I know that some municipalities worry that, yes, they've received funding already under different phases of the infrastructure plans we've put forward, but they want to put the money they have on the table towards maintaining their existing transit systems and making upgrades. While there are benefits from taking that money and shifting it towards the purchase of electric buses, that obviously would take away from their ability to maintain a strong transit system. That's why I wanted some insight on that.

[Carole Saab]

Yes, I appreciate that. We agree with you that a complementary program to the permanent transit fund would be the way to address this.

As part of the program around fleet electrification, it's really important to consider as well both the upfront costs of bus purchases but also the other costs associated with charging stations and other core infrastructure that would be required to support this kind of system. We would of course advocate that this be done in a way that provides cities and communities with maximum predictability.

[The Chair, Liberal, Wayne Easter]

We'll have to end it there with the exception of you, Mr. Fletcher. In response to Mr. Lawrence's question, I think you wanted in, and I missed you. Go ahead.

[Braden Fletcher]

Thank you, Mr. Chair.

This is just to expand on Mr. Ball's comment on scientific research and experimental development credits. There are two pieces that I thought would merit a little extra attention here.

One is that these credits, as they are structured today, do advantage those companies that have the resources to hire consultants and go through the process of filing for SR and ED credits, and that also have a full year's worth of funding in order to be able to wait patiently for these SR and ED credits to be returned to them. That's a lengthy period of time for any start-up company that's typically living month to month.

The other piece there is that if you think about the flow-through tax credit program we were just discussing, it's a very efficient way to be able to allow companies to access private sector funding almost immediately, under the same premise of SR and ED credits, which is that you're taking those tax advantages and are able to bring them to the present day.

The second piece was in our fairness for growth discussion when we talked about the two-thirds of Canadian public companies that have less than $50 million in revenue and under 500 employees qualifying as SMEs under a Stats Canada definition. The refundable nature of SR and ED credits is lost when you go public, which is just another example of how our current structures are disadvantaging companies that elect to leverage public venture capital to continue funding their growth.

[The Chair, Liberal, Wayne Easter]

Thank you, and you can send us that note you mentioned earlier. That will be great, Mr. Fletcher.

I thank the witnesses for their presentations and their responses to questions. We will suspend for five minutes while the next group of witnesses comes forward. Thanks to all of you, especially for coming in on such short notice.

[The Chair, Liberal, Wayne Easter]

We will reconvene. I call the meeting to order. As the witnesses know, just for the record, pursuant to Standing Order 108(2), we're continuing our study on pre-budget consultations 2020.

I want to thank the witnesses for coming in on fairly short notice. We'll go to all the individual presentations and then to a round of questioning. We are going to have to try to stop between 10 and five minutes to two o'clock, because some people have Standing Orders and whatnot that they have to go through.

We're starting with you, Mr. Lee, associate professor at the Sprott School of Business, as an individual. The floor is yours.

[Dr. Ian Lee, Associate Professor, Sprott School of Business, Carleton University, As an Individual]

I thank you, Mr. Chair, for the invitation to appear before the finance committee, but first I'll state my disclosures. I do not consult to anyone or anything anywhere in the world, directly or indirectly. I do not belong to or contribute to any political party or post lawn signs for any political party.

Unlike almost all the witnesses before the finance committee for pre-budget consultations, I'm not appearing on behalf of any organization, any interest group or any lobby, and not my university and not my school. Consequently, I'm not going to argue that the government ought to provide a particular benefit for some particular interest group, such as an environmental group or a business group, etc., because I'm not a lobbyist.

Indeed, my presentation in the next few minutes could be characterized as an “anti-lobbyist presentation”, for I'm going to argue that the government should do less and spend less—not more—in the 2020 budget.

Now I'll provide the logic. Canada, as with all western countries, is facing an aging tsunami coming straight at us in very short time, one that is inexorable, inevitable and transformative, and not in a good way. We are transforming very rapidly from about 12%—roughly one in 10—of the total population over 65, which is very manageable, to 25%—or one in four—over 65, which is extremely challenging and may not be manageable.

Worse, the dependency ratio of workers to retirees or, as I like to colloquially refer to it, millennials to boomers—not completely accurate, but good enough—will drop from what it was in 1970, at seven to one, or seven workers to one retiree, to two and a half to one in about 10 years or less. These driving forces will significantly reduce the overall Canadian economic growth rate. Note that from 1981 to 2016 per capita income grew on average by 1.3% per year for all of us, but it is forecast that from 2017 to 2045, per capita income is only going to grow by 0.9%, which is a roughly 50% reduction from what we're used to.

In plain English, the growth of all government revenues will significantly decline relatively, while government expenditures, principally health care, will skyrocket, per CIHI stats. Very quickly, the average per person government spending on people from ages 15 to 64 is $2,600 per person per year, but for us over 65, our annual average per capita health care cost is $11,600 for every person over 65. That's 4.4 times bigger than it is for younger people. Also, the number of taxpayers to pay the bills is going to collapse from 7 to 1 to 2.5 to 1, meaning that we cannot continue to steadily increase taxes.

For the first time in Canada since the Depression, we're going to be faced with very hard choices due to the emergence of relative scarcity. Yet in the last election, every political party competed with promises to spend far more money, but with no serious meaningful discussion concerning the funding of these promises of very large permanent future commitments, such as universal pharmacare.

Moreover, there was no serious discussion of the very high standard of living in Canada that already exists, notwithstanding that Canada is one of the 10 wealthiest countries in the world on a per person basis amongst 200 countries; notwithstanding that Canada has an average income per person higher than Germany's, which is the wealthiest country in the EU, which is one of the two wealthiest regions in the world; notwithstanding that poverty in Canada has collapsed to the lowest level in Canadian history at 8.8%; notwithstanding that elder poverty, once the core and face of poverty until the mid-1960s, has collapsed in Canada today; notwithstanding that Canada has a sharply progressive income tax system, unlike the U.S., where, contrary to another urban legend that the top two quintiles don't pay their fair share, the top two quintiles, per Philip Cross of StatsCan, pay approximately 80% of all personal income taxes, while the bottom quintile, after transfers, pays less than 5%; notwithstanding that the OECD data reveals that Canada is below—I'll repeat “below”—the OECD average for income inequality and below all other English-speaking countries; and, finally, notwithstanding the steady rise in real incomes of the middle class for the last two decades, per Stats Canada and Professor Stephen Gordon's multiple op-eds in multiple media—newspapers.

However, the aging tsunami, an enormous iceberg in a very strong current, is coming straight at us in less than 10 years, and it's going to change everything. Yet successive Ministers of Finance—Liberal and Conservative—steering the ship have told us repeatedly that we have nothing to fear, that Canada, like the Titanic, is unsinkable because, as we are told, we have the lowest federal debt-to-GDP ratio in the G7. But they have neglected to tell Canadians that we have the worst total government debt— federal, provincial and municipal—in the G7 as a percentage of GDP, at roughly 90%, and two of our provinces are de facto insolvent: New Brunswick and Newfoundland and Labrador.

Going forward, ministers of finance must provide leadership by preparing Canadians for the inevitable collision with the monster iceberg just in front of us by lowering, not raising, our expectations concerning the false belief that the future will be just like the last 70 years, and confronting uncritically unanalyzed promises for extraordinarily expensive programs such as universal pharmacare, which will provide free drugs for such high-income Canadians as professors like me, MPs like you, senior public servants and superior court judges making a third of a million dollars a year and, worst of all, medical doctors making half a million to a million dollars a year.

We cannot continue to go forward like this.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Lee.

We'll turn now to the Assembly of First Nations Quebec-Labrador, with Chief Ghislain Picard.

Welcome.

[Chief Ghislain Picard, Assembly of First Nations Quebec-Labrador]

[Witness spoke in Innu-aimun]

Thank you very much, Mr. Chair and distinguished members of the finance committee.

I certainly want to acknowledge the Anishinabe nation, since we are their guest today on their unceded traditional territory.

I’d like to start by thanking the committee for this last-minute invitation. In particular, I’d like to thank the Bloc Québécois for the opportunity to appear before the Standing Committee on Finance. It means that the voices of Quebec’s first nations and Inuit communities can be heard when it comes to important issues that concern our region.

The Assembly of First Nations Quebec–Labrador, or AFNQL, is a regional consultation body made up of the Chiefs’ Assembly as well as a political and administrative office. The assembly is composed of the chiefs from the 43 communities of the first nations of Quebec and Labrador, and represents a total of 10 nations: Abenaki, Algonquin, Atikamekw, Eeyou—or Cree—Innu, Huron-Wendat, Maliseet, Mi’kmaq, Mohawk and Naskapi.

The Chiefs-in-Assembly elect the AFNQL chief for a three-year mandate. I am the elected chief, and I was re-elected in January 2019. The Chiefs-in-Assembly created a regional body to assist and support the regions, which includes regional administrative organizations for all the first nations. They are the First Nations of Quebec and Labrador Health and Social Services Commission; the First Nations of Quebec and Labrador Economic Development Commission; the First Nations Education Council; the Institut Tshakapesh, an institute for the Innu nation of eastern Quebec; the First Nations of Quebec and Labrador Sustainable Development Institute; the First Nations Human Resources Development Commission of Quebec; and finally, the First Nations of Quebec and Labrador Youth Network, which ensures representation of a vital group, youth.

The contribution of the AFNQL and its commissions is intended to benefit, first and foremost, Quebec and Labrador’s first nations governments. Given how closely connected our network is, we are in the best position to provide direct support to our communities. Despite that closeness, there is a need for strategic investment in knowledge building, an area where we can make an even greater contribution to all first nations governments, as well as to the federal and provincial governments.

Our interdependence supports the case for key investments that will have a positive impact on the health determinants of our population. I want to stress that the issues facing first nations are transpartisan. While we have a collective responsibility to improve the long-neglected living conditions and welfare of Canada’s first nations, we above all have a duty to give our children, our youth and our families a future with dignity. And that dignity will only come once full and total self-determination has been achieved.

An area where the neglect is most visible is housing. It’s an area where key investment is needed. In the year 2000, the state of housing was deemed a crisis. Today, 20 years later, nothing has changed: we still face a housing crisis. The underfunding of the first nations housing sector in Quebec is alarming. The population is growing, the sector is underfunded, and the gap between needs and actual construction is widening. The links between housing and other spheres of society have been demonstrated. Investing massively in first nations housing would contribute to reducing the social problems observed, while benefiting all partners seeking to stimulate economic and social development.

Over the years, federal budget allocations have not kept pace with needs. On average, between 225 and 250 housing units are added to the communities’ housing stock each year. Existing federal programs meet less than 15% of on-reserve housing needs. In a 2019 analysis, the AFNQL estimated that an investment of $3.9 billion was needed over 10 years—in other words, $390 million per year—to build new units, renovate, repair and decontaminate existing units, and service land in order to address the current backlog and respond to the growth of first nations households and families.

The federal government must help first nations develop and manage new regional housing entities accountable to first nations for managing housing and related infrastructure programs.

Child and family services is another key sector—and this is not in order of priority. An act respecting first nations, Inuit and Métis children, youth and families received royal assent on June 21, 2019 and came into force on January 1, 2020. Sustainable and predictable federal funding over the long term to implement the act is paramount if we are to exercise our inherent right to self-determination and self-government.

It will be essential to establish a regional authority to support communities and organizations wishing to develop their law. This will involve legal and technical aspects, negotiations and any other costs related to the full implementation of this new law and the creation of an independent entity to advocate for children's services.

The current annual budget for child and family services in Quebec ranges from $100 million to $105 million, $50 million of which covers child placement. This is the minimum required, and more accurate cost estimates using tangible data will need to be established.

Education is another key sector. The first nations policy proposal to transform first nations education was adopted by resolution by the Chiefs-in-Assembly and cabinet in 2019. It calls on the minister to take the necessary steps to strengthen first nations elementary and secondary education through regional models that provide adequate, predictable and sustainable funding, while promoting good student outcomes.

Now I'll turn to public safety. It's impossible not to mention the National Inquiry into Missing and Murdered Indigenous Women and Girls or the Public Inquiry Commission on relations between Indigenous Peoples and certain public services in Québec, known as the Viens commission, which calls into question public authorities in relation to the safety and security of first nations women. That safety and security hinges on the development and implementation of a legislative framework that recognizes first nations policing as an essential service, with equitable funding and capacity support. It is essential that robust and culturally appropriate policing services for local first nations governments be adequately funded.

On a regional scale, the funding needs are as follows: $200 million over five years to enhance and expand first nations policing services; $50 million over five years to modernize safety infrastructure in first nations communities; and $50 million over five years to create safety and security programs for first nations communities.

Impossible to overlook, indigenous languages are another key area of focus. First nations want to ensure the survival of their ancestral languages, in accordance with the UN guidelines set out in the resolution proclaiming 2019 the International Year of Indigenous Languages.

Bill C-91 gave rise to the Indigenous Languages Act, which seeks to reclaim, revitalize, maintain and strengthen indigenous languages in Canada. It received royal assent on June 21, 2019, and funding is necessary to implement the act.

Lastly, I'd like to mention an extremely important issue. On January 21, we found out that the number of indigenous inmates, especially women and youth, had hit a historic high; they account for 30% of the federal inmate population.

We have to talk about justice. The federal government must act swiftly to end the overrepresentation of indigenous people, youth and adults alike, in the criminal justice system. That's what Minister David Lametti indicated in a letter to the Assembly of First Nations Quebec–Labrador on April 1, 2019, and that is our position as well.

The First Nations of Quebec and Labrador Health and Social Services Commission conducted a study culminating in the report entitled “Portrait of the Criminalization of the First Nations in Quebec: Providing Impetus for Change”. The findings are troubling. First nations populations are decidedly more criminalized, primarily those under the age of 25. The rate of criminalization is five to six times higher in first nations communities than in all of Quebec. Adequate funding of justice initiatives and community justice programs such as justice committees in our communities can only result in a reduced prosecution rate of our members.

The justice committees already in existence in our communities are underfunded because there has been no increase in the federal budget since 2008. In addition, it is important to consider that the provincial budget is also capped. The lack of resources—causing inadequate working conditions—in the existing justice centres in our communities is at such an unacceptable and unsustainable level that it impedes the exercise of our right to develop our own justice systems.

I would say more, but I will leave it at that for now.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Picard.

We are substantially overtime, but we have only five panellists this time.

We'll go to the Canadian Alliance of Student Associations with Mr. Brown.

For your information, Ms. Petrevan, you'll be next after the Canadian Alliance of Student Associations.

Go ahead, Mr. Brown.

[Adam Brown, Chair, Canadian Alliance of Student Associations]

Good afternoon, Mr. Chair, honourable members of the committee and witnesses.

I would like to begin by acknowledging the traditional and unceded territory of the Algonquin and Anishinabe people, where we have the privilege of gathering today.

My name is Adam Brown. I am the chair of the Canadian Alliance of Student Associations, or CASA. I'm also the vice-president external of the University of Alberta Students' Union and a fifth-year student completing a bachelor of commerce degree, focusing on business economics and law.

CASA is a non-partisan, not-for profit organization that represents over 360,000 students at colleges, polytechnics and universities from coast to coast. Through a formal partnership with the Union étudiante du Québec, we are a trusted national student voice.

I'm thankful to have been invited to appear before the committee, representing students at a time when there are ongoing challenges to student autonomy and organizing. I am hopeful that in the future, students will continue to have opportunities like this one to be included as respected partners and stakeholders and to have their voices heard.

A public opinion poll commissioned by CASA in March of 2019 highlighted that dealing with climate change and the environment is a top concern on students' minds. It was equal to creating good jobs for young Canadians and making colleges and universities more affordable. Not only are students in Canada concerned about climate change but we are a crucial part of the solution. In order to tackle the climate emergency that is facing our country and the world, we need an accessible, affordable, high-quality education system that produces graduates with the skills to create the innovative solutions our society needs. Unfortunately for Canada and its students, many barriers to acquiring the type of education needed continue to exist.

For example, graduate students are key to driving an innovative economy. Their research has the potential to find sustainable solutions to transition to a strong low-carbon economy. Unfortunately, thousands of students in Canada every year choose not to pursue graduate-level education because of their debt levels. The average student with debt in Canada is carrying about $28,000, and four in 10 graduates report that debt prevents them from pursuing further education. The federal government can reduce financial barriers and anxieties about debt loads by allowing graduate students to access Canada student grants, which are a form of up-front, non-repayable financial aid at a cost of $58 million per year.

CASA also envisions highly skilled tradespeople to be part of the solution. A low-carbon economy is going to require new technologies and new infrastructure that will require new skills. There is already a strong market demand for these skills. In Ontario, 41% of employers report requiring a skilled tradesperson. In the transition to a low-carbon economy, one can only assume that this demand will increase.

That being said, apprentices in trades training face significant financial barriers to completing their education. An apprentice in their first year can have start-up costs for equipment of as high as $8,000. The Government of Canada provides apprenticeship incentive grants of $1,000 a year, but the first year of apprenticeship is not covered by this grant. Extending the apprenticeship incentive grant to cover the first year of an apprenticeship would reduce barriers for students in the trades. We estimate this would cost $72 million a year.

CASA further views Canada's international students as a source of potential skills development in the fight against climate change. Every year Canada attracts thousands of bright, talented students from all over the world. According to a 2018 report, international students make up about 13% of all post-secondary students in Canada. Canada is a country in need of skilled individuals, and it has a vested interest in retaining these students when they graduate.

In 2020 a high-quality education includes work-integrated learning opportunities, but international students face unnecessary barriers to participating in these experiences. In addition to applying for a study permit, international students must apply for a no-fee co-op and internship work permit to be eligible for many work-integrated learning opportunities. The processing times for these permits differ in length, a situation that has led to international students missing out on valuable hands-on experience during their time in post-secondary.

Easier access to work-integrated learning opportunities would increase our ability to retain more international students in Canada and foster a broader community of innovative thinkers, which is needed to combat the climate crisis. We recommend that the government allow international students to participate in an internship or co-op under their study permit rather than requiring them to get a separate permit.

Thank you once again for the opportunity to participate in this pre-budget consultation.

As you plan for the effective transition to a low-carbon economy through the forthcoming budget and beyond, I would urge all members of Parliament to consider the massive potential of Canada's students in addressing our global challenges.

I look forward to your questions.