Finance Committee on Nov. 13th, 2023

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

When we're talking in particular about amortization, one thing governments have done in the past is give carrots for a short period of time. You get to amortize your equipment quicker, but then it's taken off, put back and taken off.

My belief is that Canada is desperate for new equipment. Our manufacturers are, unfortunately, falling behind. We should have a permanent program for allowing rapid amortization in order to encourage the purchase of new equipment. Would you agree with that?

[Véronique Proulx]

Of course that would make a lot of sense. You are right. We are lagging in terms of investment. We're way behind.

When you look at the growth of investment in the OECD countries, some of them are very positive, but the difference between the two is growing. That would certainly be a welcome measure in our industry.

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

Another issue in that respect, which you talked about, is SR and ED. It's now over 30 years old. We've heard numerous complaints and academic evidence that it is not working efficiently and effectively enough. We're heard that many countries around the world—not the least of which is our neighbour to the south—are giving better incentives with less red tape. In fact, I've heard that as much as 30% of SR and ED dollars go to consultants, as opposed to where they're supposed to go.

Perhaps you could comment on that on behalf of your members.

[Véronique Proulx]

Absolutely. It's the same comment I mentioned earlier concerning the IRA. These programs are difficult to access. In this case, it's a tax measure, and it's difficult to have access to it.

On this specific recommendation, we mentioned expanding the list of eligible activities beyond early stage R and D to include capital improvements and product and process innovations, because now more and more in manufacturing you do R and D, pure R and D, and you are looking to improve processes and include technologies in existing operations. We want this to be included. Also, increase the refundable portion of the tax credit to incentivize these companies to go ahead and do R and D and streamline administration to improve certainty in claims.

This is true in Quebec. It's true in the federal level as well. It can be difficult, and you need a lot of external support to make your claims and access the credit to which you are eligible.

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

Business owners and manufacturers are rational individuals. Just as an overall comment, I believe there has to be more subjective and objective rewards for manufacturers.

We can nibble around the edges, but if we reduce the burden on you and reduce the burden on your members.... I believe that if we reduce red tape and reduce taxes, you will do what you guys do best, which is build things efficiently and effectively, and you'll reinvest in capital if we generally reduce your taxation regulations. Would you agree?

[Véronique Proulx]

You're absolutely right. We will focus on our core business, and we need the government to do its part as well. I agree.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Lawrence.

Now we'll go to MP Scarpaleggia, please, for five minutes.

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

Thank you, Mr. Chair.

It's an honour and a pleasure for me to be sitting in on the Standing Committee on Finance, of which I am not a member. I'm here to replace someone else.

My questions will be for Mr. Milliard.

The labour shortage is obviously a serious challenge, and we're looking for ways to increase the labour supply. However, it is a theoretical principle in economics that a labour shortage encourages businesses to invest in equipment that will let them continue producing with fewer employees. In this instance, we're talking about IT systems and automated equipment, for example.

Do your members have any such projects under way given the labour shortage? Do they want to make a lot of investments and so on to continue production by involving less labour and more technological resources?

[Charles Milliard]

That's an excellent question. You're right to relate this back to basic economic concepts. In order to ensure productivity, you have to have either more people producing more or better processes. Since no people are available in Canada, we have to consider investing in innovation.

Incidentally, if there is one sector that's paving the way in this field, it's manufacturing. It's making major investments in innovation. Unfortunately, that's not the case in all economic sectors. I'd even say that, in certain sectors, there's some ignorance, in the respectful sense of that term, about how to improve business processes.

The government, of course, has a role to play, but businesses do as well. It's not always up to the government to do everything, and I think businesses need to be more aware of that.

However, incentives will definitely encourage businesses to consider investing in innovation, especially in the contracting economy and surging inflation we're experiencing. If businesses feel the government is supporting them in this area, that will accelerate the transition to greater innovation.

In its recent economic update, the provincial government renewed the tax credit for investment and innovation until 2029. This is a measure that was hailed in Quebec and that I believe could provide inspiration for the federal government.

You're right to say that innovation is definitely the key to enhanced productivity and greater competitiveness.

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

We also saw tax credits for green investments, for investments in green equipment, in the last budget, or even in the previous budget.

Some of your members have introduced investment projects to increase or improve productivity. What do you think is holding them back right now? Is it interest rates? Is it the labour shortage? We still need labour even if we invest in equipment and innovation. We aren't going to eliminate it completely. Do increased input costs act as a brake? Or is it the fiscal imbalance, even though Canada has one of the best debt‑ or deficit‑to‑GDP ratios in the world? Which of those four factors are the leading or most important ones?

[Mathieu Lavigne]

Yes, those are very important factors.

I would also add that sometimes there's a lack of knowledge. People don't always know exactly where to turn or what technologies to adopt. It's a whole new world for many businesses. It's been easier for certain sectors to automate production and run their operations using robots for some time now, but it's a new challenge in other sectors. So there is a lack of knowledge.

One of the new factors that we're seeing emerge, and we briefly mentioned this in our opening remarks, is that these new technologies are highly interconnected, and that exposes us to new cybersecurity-related challenges. Consequently, some businesses have developed an entirely legitimate fear because they see what's going on in the world around us. They're being asked to invest in connecting their machines and so on, and they're willing to do it, but they also have to invest in cybersecurity.

[Francis Scarpaleggia, Liberal, Lac-Saint-Louis, QC]

In 10 seconds, would you please tell me whether the Quebec government's carbon tax is hurting Quebec's economy?

[Mathieu Lavigne]

It's a factor of the Quebec economy that businesses have factored into their costs.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Scarpaleggia.

Now we'll go to MP Desbiens, please, for two and a half minutes.

[Caroline Desbiens, Bloc, Beauport—Côte-de-Beaupré—Île d’Orléans—Charlevoix, QC]

Thank you, Mr. Chair. I'll be quick.

As we look for solutions to labour scarcity, the principle of successful immigration is central to our concerns. In any case, we of the Bloc Québécois have extensively discussed this.

What do you think successful immigration in Quebec is?

[Charles Milliard]

It will be hard to answer that in one minute.

First of all, successful immigration is geographically diversified immigration. We think that regionalizing immigration in Quebec is a challenge. People often land in Montreal, and sometimes in Quebec City, not in the other regions of Quebec, and, once again, out of ignorance. Consequently, we have to invest in better advertising the immigration options available in our regions.

Francization is obviously an important factor in the specific situation of Quebec. By the way, I would point out, for the benefit of people outside Quebec as well, that the business community agrees on this. However, we can defend the French language without destroying the benefits of bilingualism. That's where we in the business community disagree with the Quebec government.

When you're Canadian and you speak English and French, you speak two of the business languages most used around the world. We should be proud of that and promote it. We can't deprive ourselves of talents that will help us become leaders in certain sectors simply as a result of francization. We have to be extremely vigilant on this.

We can't have a political discourse dictating that we're aiming for 100% francophone immigration. We can pretend it's possible, but it won't happen.

[Caroline Desbiens, Bloc, Beauport—Côte-de-Beaupré—Île d’Orléans—Charlevoix, QC]

We can francize immigration.

[Charles Milliard]

We can francize immigration, but we have to acknowledge that there's exceptional talent that must come to Quebec and that can subsequently be francized. The same is true in the rest of Canada. Francophone immigration outside Quebec is very good too. The Canadian government has promising objectives in that area.

Once again, as I mentioned earlier, this requires greater co‑operation on immigration between Ottawa and Quebec City. It's somewhat like shared custody: sometimes two parents fight, but they have to come up with a solution one day or another. Unfortunately, this relationship isn't as good as it could be right now.

[Caroline Desbiens, Bloc, Beauport—Côte-de-Beaupré—Île d’Orléans—Charlevoix, QC]

Loving French doesn't mean you hate other languages; that's quite clear.

[Charles Milliard]

There, you understand it completely.

[Caroline Desbiens, Bloc, Beauport—Côte-de-Beaupré—Île d’Orléans—Charlevoix, QC]

However, we have to francize Quebec if we want to keep it alive.

[Charles Milliard]

Of course.

[Caroline Desbiens, Bloc, Beauport—Côte-de-Beaupré—Île d’Orléans—Charlevoix, QC]

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Desbiens.

Now we'll go to MP Boulerice, please.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you, Mr. Chair.

Mr. Lapointe, you look as though you wanted to answer the question on successful immigration.