Thank you, Mr. Chair.
Mr. Gagnon, the president of the Fédération des producteurs de bois du Québec, and I were delighted to take you up on your offer to discuss with you the unique challenges and opportunities surrounding the forestry sector. We were particularly pleased to be invited because we represent private woodlot owners and, unfortunately, the voice of those that we represent is not being properly heard at this time of crisis.
There are some 450,000 woodlot owners across Canada. I am the secretary and treasurer for the Canadian Federation of Woodlot Owners, an organization that represents eight provincial associations. Private woodlots make up around 10% of Canada's forestlands and supply around 15% of our industrial wood requirements. Woodlots, therefore, play an important economic role.
I would like to begin by apologizing for not having submitted a written brief. I hope that you will accept our apology and believe me when I say that this is indicative of the difficulties that we are currently facing. Our resources are limited and somewhat thinly spread. We try to focus on putting out fires, and, consequently, we were not prepared early enough to submit a brief to you.
Woodlot owners face multiple challenges.
Firstly, they must try to weather the current storm. The woodlot owners that we represent are facing declining market share and a significant drop in prices. The crisis is seriously affecting families, communities and businesses that depend on woodlots for their livelihood. As we have said in our press releases and in communiqués that we have sent to members of Parliament, woodlot owners are the forgotten foresters. It is imperative that they be provided with support immediately. I will address solutions in which you could be involved later on in my presentation.
You must also keep in mind the challenges that the industry will face when the crisis is over and normal activities resume. There will be two major challenges for woodlot owners. Firstly, how to make both a bigger and better contribution to Canadian society. Woodlot owners can contribute in a number of different ways: We are involved in the production of traditional forest products, with which we are all familiar; we could supply the new industry that Mr. de la Roche discussed; and we could be able to play a role in providing Canadians with forest-based environmental goods and services.
One such example would be carbon sequestration, which has already been mentioned. It is a little-known fact that the forests with which Canadians are the most familiar, the ones that they visit most regularly, are private woodlots. Private woodlots are generally situated near inhabited areas of Canada.
The second major challenge is to implement a legal, administrative and economic framework to encourage the woodlot owners active involvement in developing and managing their land, and looking for ways to use both land and the resources it provides sustainably. The federal government could help develop a legal framework to this end.
What can be done in a short time? You could start by simplifying tax policy to make it easier to deduct forest management expenses.
We also recommend that recognize prescribed forest management plans for woodlots be considered proof of a reasonable expectation of profit. I do not want to get into all of the details, but we have provided you with copies of the IT-373R2 bulletin. I hope it has been distributed to you. At point number 7, on page 3, you will find a list of the dozen or so factors that the taxation authorities use to determine whether there is a reasonable expectation of profit.
Growing trees takes decades, and the current taxation regime does not reflect this. I would be delighted to answer any questions you may have should you wish to give further consideration to the problems that this causes. At the end of the day, however, we are suggesting a simple amendment. Rather than using a dozen factors to determine whether there is a reasonable expectation of profit, we believe it should simply depend on whether a prescribed forest management plan for woodlots exists and is being followed. Furthermore, we have a precedent to support our argument. I believe that we provided you with documents on the matter. There is a federal regulation setting out what is required of the prescribed forest management plan that is used for intergenerational transfers of woodlots.
Our second recommendation would be to allow income averaging. Woodlot owners pay higher taxes on revenue earned compared to other taxpayers as they tend to receive a large, single payment and are restricted in what they can deduct as expenses. This means that they are often in the highest tax bracket. We would like to see income averaging introduced, particularly to deal with income shocks related to epidemics and natural disasters that force woodlot owners to harvest their forest stands earlier than expected. The pine engraver outbreak that is currently ravaging British Columbia is a very good example. It means that our colleagues in British Columbia are having to harvest their forest stands in the space of a few years rather than over the course of 10 to 20 years as would normally be the case.
My next point primarily concerns Quebec, but it is one on which you could all work together. The logging operations tax is a strange mechanism of uncertain origin. Foresters earning $10,000 or more have to pay a provincial tax and then ask for a tax credit at both the provincial and federal level. We have provided you with an example of a logging operations return. As you can see, it is a number of pages long and has to be filled out by all foresters in the aforementioned category, often with the help of an accountant. Clearly, it involves administrative costs, yet this is a tax that only earns the provincial government some $7 million. It would be both worthwhile and affordable for both levels of government to simplify this procedure, thus making life easier for these taxpayers.
With regard to the current crisis, we are aware that a sizeable trust has been set up. The money is to be used to help the forestry sector and affected communities weather the storm. However, no money has been earmarked for, or is available to, private woodlot owners. I cannot give you figures for the entire country, but I can tell you that, in Quebec, thousands of private woodlot owners are estimated to have lost almost $100 million over the past two years. What is more, 2008 is expected to be the most difficult year yet.
If you want woodlot owners to be able to step up to the table and help the industry recover by providing wood resources as well as environmental goods and services, now is the time to help them. With markets at a low, now is the time to invest in our forests so that planning and sylviculture activities can be undertaken. This would allow us to ensure that we have access to high-quality, abundant resources. This would be the best way for private woodlots to contribute to the recovery of the forestry sector.
Thank you for your attention.