Industry Committee on May 13th, 2010

[Voices]

Oh, oh!

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

But that's not part of your estimates, so I'll focus on things that I think will be of interest as we approach whenever our next election campaign is.

I think there are probably a couple of defining issues as we move forward, notwithstanding the stuff that gets talked about in question period. I think criminal justice issues, which I won't get into here, and the issue of taxation will probably be big issues whenever that next election campaign is.

We've seen that the two biggest parties in the House have very different approaches regarding the taxation issue. One of the things we see in the House on a fairly regular basis, no matter what we're funding or what program we're doing, is that the Liberals--well, the opposition parties in general--tend to ask for more. They want more programs being funded and more entities within those programs being funded on virtually every program that we have.

The spending of course has to be funded from somewhere and I think what we've seen is that the Liberal leadership has been pretty clear in terms of having to go down that road--“we will have to raise taxes” was one of their quotes--so I think it's going to be an important part as we move forward.

We've talked about things like GST hikes and, more recently, a specific proposal to raise corporate taxes, which is where I want to go with this question. We've set our corporate tax rate to go from 22% to 15%. I think right now we're at 18%, so we're more than halfway to that mark, and the Liberal Party has proposed a 20% increase in that 15%, to 18%, or three points.

Could you speak to two things?

What is the role that our approach to taxation has played in terms of Canada's leadership economically during this time of global economic slowdown? It's quite well known that Canada is regarded by most experts to have performed very strongly and to be in a very strong position right now.

Then, could you speak to the potential we have or what you think might occur if we were to reverse that trend in corporate tax rates? What are the experts saying? What are Canadian businesses saying in terms of the impact of that?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Thank you.

I think you've put on the record a very important analysis of the situation and what separates the government position from the opposition position on taxation.

There's no question that right now we have the lowest tax rate for new businesses in the G7. By 2012, we'll have the lowest tax rate for any businesses in the G7. That is an important point for our competitiveness as we seek to make it easier for domestic businesses to grow and compete, and also to invest foreign capital when it's advantageous for Canada and Canadians.

The other point I would like to make based on your remarks, which should be known by Canadians, is that the current corporate tax reductions--business tax reductions--are already booked. They've been passed in budgets, so any change is actually a tax increase in terms of the expectations of our businesses and their forward planning. It is not correct when the Liberal opposition says they are freezing taxes. They are actually increasing the taxes, because the tax rate reduction was already booked in a budget.

Having said that, I note that there's no question: our current policies are being noted around the world. I notice, and Mr. Van Loan, our trade minister, notices that there is increased interest in Canada as a safe place to invest, with business-friendly policies that can allow a business to grow and add more jobs and more opportunity.

I see that when I go to innovation conferences and competitiveness conferences. I went to one in San Diego three weeks ago, and basically Canada stood almost alone, but certainly apart, because of our policies that are going to grow businesses and grow investment into the future. That's an anecdote, perhaps, but anecdotes tell a story.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

I want to talk a little about the digital economy strategy. You spoke to it a bit in your opening statement.

Could you outline the consultations, what they involve, and what you see them likely achieving? Then maybe you could comment on the benefit that you might anticipate for Canadian consumers as we move forward.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Yes. Let me just say a couple of things about the digital economy, because the digital economy is about more than e-commerce, although e-commerce is certainly a part of it and an important part of it.

The digital economy is also about how business adopts ICT into their business processes, either in marketing or logistics, and those kinds of issues. It's also about how society does things online. It might be citizen interaction with government. It might be gaining access to government services as well as the private sector aspect of it in the social marketing and media aspects.

All of the studies I've read indicate that the more we do online as a society generally, the more productive we will be. That's why this is important for our economic future, and that's why our consultation is going to be so broad.

All Canadians are invited to participate in the consultation, online by social media or by more old-fashioned methods, and we certainly are going to take that into account with a short timeframe: to get the consultations done by July and then start considering the results.

[The Chair, Conservative, Michael Chong]

Thank you, Minister.

Thank you, Mr. Lake.

We're going to have our last committee member ask both ministers questions about the main estimates before I grant you your leave, Ministers.

So if we could, we'll just have five or six minutes with Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Chair.

Just to balance the discussion about corporate tax cuts, the reality right now is that we're actually borrowing money from the public, and we will be paying interest on it for years to be able to do that. It's a policy with the HST, as well, where $6 billion dollars is going to be borrowed and will have to be paid for until we get into surpluses and retire that debt.

So it certainly is something that Canadians think about. Businesses I know think this is a wrong type of policy, because if you're a manufacturer, for example, and you're not making any money right now, a corporate tax cut doesn't really do you any good.

But I don't want every one of my comments or questions to be an outright attack on the minister here, or to be perceived that way, so I do want to ask about the research and development review that is in the budget. There is a lot of interest in that out there, albeit quiet.

When will the terms of reference be available for that? Will the scope include the public and research councils? Has a date been selected for when that will come out for the public?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Sure. That's an important question.

I don't think we've selected a particular date, but let me give you the context. The R and D review was put in the budget because I felt very strongly that we could not simply rest on our laurels. I get a lot of positive feedback, by the way, from business on our R and D partnerships with them, via the IRAP program or SR and ED. Those are two very obvious cases in point, but I don't think we should rest on our laurels.

This is about making sure that we have the best government business programs possible to expand our innovation and competitiveness. Those are the kinds of things I'm asking about. This is good, and we know it's good because businesses tell us it's good, but is it the best? That's the kind of dialogue I want to have with the private sector on this.

[Brian Masse, NDP, Windsor West, ON]

What about the research councils? Do we have your word that they will be consulted on this as well?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Yes, I think we want to get their input. Absolutely.

[Brian Masse, NDP, Windsor West, ON]

Okay. Thank you.

We were talking earlier about the deferral accounts, an issue that I raised. I've been made aware that the CRTC will apparently receive Bell's final submission on Friday. The deferral accounts are now over $630 million. You're rolling out rural broadband announcements in remote areas. They have a mandate to use approximately one-third of that as well.

Isn't it a little bit odd that there's no connection between your department and the CRTC on how to roll out a strategy?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Well, no, I wouldn't say that. I know that we've been criticized for broadband being rather late vis-à-vis the time of the first announcement, but one of the reasons for this is that we took into account the business plans of the incumbent providers. Those business plans kept changing.

As the providers kept expanding their high-speed networks, we had to change what we defined as unserviced or underserviced areas. What we decided to do was to go to the farthest points first and then work our way down. The meant working our way down from Nunavut and the Northwest Territories, and from rural Quebec and northern Ontario, rather than trying to pick off some areas where these companies would likely invest in the near future.

[Brian Masse, NDP, Windsor West, ON]

Are you in discussions with the CRTC, though? Because they will be making the final decision about the use of those funds. Are you in discussions with the CRTC about that?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Richard?

[Richard Dicerni]

I have two points. One, the CRTC decision has been in the making for quite a few years.

[Brian Masse, NDP, Windsor West, ON]

Yes, at the least.

[Richard Dicerni]

Right.

So we thought it would be useful to just go ahead and make the announcement that the minister made on Sunday, because even when they finalize how that $600 million will be used, it will take some time to work through. They are faced with the same landscape considerations we were.

And yes, there will be some discussions with the CRTC.

[Brian Masse, NDP, Windsor West, ON]

One of the items in the budget that was pushed by this committee ages ago in a manufacturing report that we commissioned was to have the capital cost reduction allowance extended over a series of years. The budget still has that allowance in place until 2011.

Why is there no consideration being given to extending that for a longer period of time? What I hear from a lot of industries is that they need several years to plan out some of the larger equipment purchases and they're looking for stability there before they make their investments.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

I think any budget is a series of decisions and a series of priorities, and our priority is having the lowest business tax rates for small, medium-sized, and large businesses in the G7. That's the priority we chose.

[Brian Masse, NDP, Windsor West, ON]

Finally, with regard to the.... I don't want to get into a debate about the HST. We all know our positions on this. But the real issue we're going to be facing with the tourism industry in Ontario is a lower number of visits by Americans because of WHTI and the high dollar. Evidence was presented to this committee on British Columbia being affected by the HST in tourism. Two reports were submitted.

Does your government have any plans on being more assertive in the tourism sector to try to increase American visits? A lot of attention has been paid to international visits, but the reduction in American visits is crippling communities in Ontario--everywhere from Fort Erie and the Niagara Falls region to my area.

We've seen a reduction, so is your government planning to do anything? The U.S. had programs to increase passports and so forth. Has your department thought about being more assertive in American markets to help this acquisition and to expand visits in regard to tourism?

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Obviously we see a number of different markets out there. We see a great potential for new markets in China, Russia, Brazil, and India. Those are huge potential growth markets for tourism for this country. I wouldn't just particularize it to the United States of America per se.

Having said that, I note that Minister of State Rob Moore, who obviously does a lot of work for small business and for tourism, is working on a new tourism strategy. I'm sure his work will be discussed when he's ready to discuss it.

[The Chair, Conservative, Michael Chong]

Thank you very much, Minister Clement.

Thank you, Mr. Masse.

I want to thank Minister Clement and Minister Yelich for appearing in front of our committee.

[Tony Clement, Conservative, Parry Sound—Muskoka, ON]

Thank you.

[The Chair, Conservative, Michael Chong]

We'll spend the remaining 45 minutes with the officials in further discussion of the main estimates.

We'll continue with Mr. McTeague.

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Thank you.

Chair, I have a very simple question. I'm going to share this with Mr. Dhaliwal, who has some follow-up questions, as you can understand.

Mr. Dicerni and Mr. Boothe, perhaps I could address this to you. There has been over the years--