Evidence of meeting #11 for Industry, Science and Technology in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was games.
A recording is available from Parliament.
Conservative
The Chair Conservative David Sweet
Thank you very much, Madam Sgro.
Now we'll move to Mr. Holder for eight minutes.
Conservative
Ed Holder Conservative London West, ON
I'd like to thank our guests for being here; whether you are here by phone, video, or are sitting here, we appreciate your being here.
I'd like to take a bit of a different tack. I want to do this not to be harsh, but so that I can better understand your industry.
Whenever whatever level of government is asked to provide tax credits, subsidies, incentives, whatever it might be, whether or not the rest of the world offers it, we have an obligation to be accountable to the taxpayer, because that's the only place where we can get our money. It sounds like that's where you get some of yours. As I ask this, please understand I'm trying to ask this in the spirit of understanding.
With that, perhaps I could ask Mr. Henderson and Ms. Morton, why do you need subsidies and tax credits and things of that sort? Could you please help me understand that?
President and Chief Executive Officer, Interactive Ontario
Sure.
I understand that you don't want to hear about the ways other jurisdictions are handling this type of an issue, but I think I will start there anyway, which is to say that it is a global market—
Conservative
Ed Holder Conservative London West, ON
Sorry, Mr. Henderson, I'm going to ask you to be really tight, please, because I'm trying to get this opinion from everyone.
President and Chief Executive Officer, Interactive Ontario
Sure.
It's a global market that we're working in. It's a fairly new industry that is actually developing and growing very rapidly. It's the kind of industry in which governments around the world are looking to have those companies created or moved to their jurisdictions because it creates highly paid jobs, huge tax revenues, and it also ties in directly to the education system investments that these governments are making.
Conservative
Ed Holder Conservative London West, ON
Mr. Henderson, I'm going to stop you again, please, because I think yours could be the never-ending story, and as interesting as that might be, perhaps I could ask a question. What percentage of your operating capital is subsidy revenue, or let's say, non profit generated income? What percentage would that be?
President and Chief Executive Officer, Interactive Ontario
For a typical member, the tax credit is actually probably used in almost every one of their products. That tax credit—
President and Chief Executive Officer, Interactive Ontario
Sorry, for the tax credit percentages—
President and Chief Executive Officer, Interactive Ontario
—sorry, the tax credit percentage is 40% of eligible labour, which is Ontario staff expenditures on creating the actual product.
Conservative
Ed Holder Conservative London West, ON
Let me explain, perhaps, to all of our colleagues and our guests. My wife has three small businesses. They're not high tech. It's the oldest flower shop in Canada. It's a chocolate shop—Belgian, you probably wouldn't like it—and a gift basket company. Do you know how much subsidy she gets? Zero. Do you know how much she has ever received? Zero. She's hanging on. She's doing her best. I'm not cranky about that, but it seems to me that in my area of southwestern Ontario we've lost a lot of industry, and the most common denominator in the industry that we've lost is they've had somewhere else to go, and often with subsidies.
Are we on a slippery slope with this? Perhaps I could ask Mr. Moisan to answer in 30 seconds because I'm going to be cut off. Could you give me a sense quickly? Is that just the nature of the beast? Do we have to live with this subsidy as the way to go to promote this business and grow it?
Vice-President, Strategic and Business Affairs, Frima Studio
I think the day we have our own brands, we won't need as many subsidies. Garfield doesn't need subsidies. Mickey Mouse doesn't need subsidies. We need to create our own Canadian brands.
Another point is, I think that if the government does that, at least from what I know in Quebec, it's because it pays. It's worth it.
At the end of the day, taxes are collected, 37%, let's say, in Quebec, and jobs are created. Some artists, if you remove the video game industry.... In Quebec there's a street close to the Chateau Frontenac called rue du Trésor, and they sell mock copies of the Chateau Frontenac. That was the only place where some artists could find jobs at one point. Now they have full-time jobs. They create. They have families.
Conservative
Ed Holder Conservative London West, ON
Mr. Lutz, if we didn't have subsidies, would Electronic Arts be in Canada?
Vice-President and Chief Financial Officer, Electronic Arts (Canada) Inc., Electronic Arts Inc.
I think we'd struggle.
Conservative
Ed Holder Conservative London West, ON
That works for me. Sorry. I'm just going through. Mr. Shariff, you mentioned that if you got 20% of grade 9 students to a passing rate, you increase the GDP.
Conservative
Ed Holder Conservative London West, ON
That reminds me of when Gerard Kennedy was a member of Parliament. Before that, he was minister of education in Ontario, and I was on the editorial board of my city. He said to our editorial board—because he was so proud as minister of education—that what he was going to do to increase the graduation numbers is he was going to change the standards so that we would have a higher passing grade. I told him that it reminded me of when we didn't have enough grade A large eggs in Ontario. Do you know what we did? We just made the medium ones large. We just changed the size so we had a whole lot more large eggs.
Is that what we're doing with your approach? What do you think?
Chief Executive Officer, Project Whitecard Inc.
No. You can point at some studies around the world. There's one in Scotland where they did this specifically with a math game with grade 9 students. The students were failing, and then they weren't failing. They didn't change the passing grade.
Conservative
Ed Holder Conservative London West, ON
Who haven't I heard from here?
I'm going to come back and ask another question as well. You see, I get what you're all trying to do. I will tell you, I'm not really big on using the public purse to do it, and I've shared a bit of my rationale. I'm a free trader and I'm one who believes that, but I also am a realist when it comes to the nature of the marketplace. Here's my fear: any one of you could get a better deal and you're gone.
If it isn't the money, why would you stay in Canada?
Ms. Morton, we haven't heard from you. I wonder why you would stay in Canada, all things being equal, or maybe not equal, but when the money runs out, it doesn't sound like you'd stay. That's what I thought I heard Mr. Henderson say.
Director, Interactive Ontario
I'm not absolutely clear on that. I think there would be lots of companies that would certainly choose to stay in Canada. Maybe you can call it for patriotic reasons, but you know, these are people who work in these businesses and they have families, extended families, and connections to the community.
I don't know that it's quite as simple as getting everyone to move to a new jurisdiction. Also, there are many benefits to Canada that we've talked about. We've talked about the skilled workforce. Even Mr. Lutz, who acknowledges that tax credits are important, will also say to you that there's a very skilled base here, and we have skilled educational institutions.
Director, Interactive Ontario
We have many aspects of the economic environment and the public policy environment that are supportive of these businesses. I think what we are saying is that there are some.... It's not the only business in Canada, or in Ontario, that we're more familiar with, that needs some assistance in this start-up phase, whether it's for the industry getting to a critical mass, or for individual companies, or individual projects. We're not alone in that.
What we're saying is we do need the additional incentive, as otherwise these companies find it very difficult to move from a project-to-project subsistence, when they're typically doing the work for someone else, in order to have some money to capitalize their company, and in particular tax credits, with which I am very familiar as a method, to enable them to have that capital that they use for their companies.
Conservative
