Evidence of meeting #52 for Public Safety and National Security in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was industry.
A recording is available from Parliament.
11:55 a.m.
Conservative
11:55 a.m.
Executive Director, Canadian Association of Agri-Retailers
That is correct. They'll get a tax credit for that.
11:55 a.m.
Conservative
Laurie Hawn Conservative Edmonton Centre, AB
You know where I'm going. Obviously they are getting compensated to a degree.
11:55 a.m.
Executive Director, Canadian Association of Agri-Retailers
The only trouble is, unfortunately, this is an all-or-none situation where if you're going to decide to do the infrastructure upgrade you have to do it all and you have to do it well, which means it's either zero or $120,000. There is no in-between, no small co-investments, and that's the challenge.
11:55 a.m.
Assistant Director, Technical Affairs, Canadian Association of Agri-Retailers
To follow up on your question, when we met with several MPs back in November, at that time when we initially brought this issue to Ottawa, we talked about two options. We talked about the tax credit issue, as was being entertained in the U.S. In addition, we also talked about the precedent in the marine security contribution program as an option for our members too. It was probably a 70-30 split in favour of the contribution program, just because it's fast-acting, and it's pretty cut and dried too: here are the eligible expenses; if you do these, an inspector comes in to verify that you've done those upgrades, and here's your rebate. It's much quicker-acting and gets everything done, as opposed to a tax credit whereby you have to pay everything up front and then wait and file your income tax return.
11:55 a.m.
Conservative
11:55 a.m.
Executive Director, Canadian Association of Agri-Retailers
Clearly our members aren't jumping right now to make these upgrades. If they know they've already got a tax credit, that isn't providing them with enough motivation to make the investment at this point.
11:55 a.m.
Conservative
Laurie Hawn Conservative Edmonton Centre, AB
Staying in business would be good motivation for me.
Following along the same lines, to get people over that, correct me if I'm wrong, but you're talking about a temporary incentive program of some kind for two or three years and then take it away and carry on.
11:55 a.m.
Assistant Director, Technical Affairs, Canadian Association of Agri-Retailers
Yes, very similar to the marine program.
11:55 a.m.
Conservative
Laurie Hawn Conservative Edmonton Centre, AB
You're talking about one-time expenses. What about the accessibility of loans from the local or big financial institutions?
June 19th, 2007 / 11:55 a.m.
Executive Director, Canadian Association of Agri-Retailers
I'm sure our members have lines of credit and relationships with their financial institutions, but last time we were testifying in front of the Standing Committee on Agriculture, the people sitting beside us were the banking community. There is already a high degree of stress between the number of loans that are being put to the agricultural industry and whether those loans can be foreclosed and how much credit will be allowed for the industry, because it's being stretched right now. I don't want to rob Peter to pay Paul for something our members may not see as being something they're prepared to do to begin with, but to incur a substantial amount of debt to perform the upgrades is not necessarily a solution for them either.
11:55 a.m.
Conservative
Laurie Hawn Conservative Edmonton Centre, AB
Again, the cost of serving that debt is tax-deductible.
11:55 a.m.
Executive Director, Canadian Association of Agri-Retailers
Right, but the debt itself could be prohibitive in terms of operations.
11:55 a.m.
Conservative
Laurie Hawn Conservative Edmonton Centre, AB
I go back to the average of $124,000 and the average of $1 million to $5 million in gross revenues. I'm not totally convinced that's the case. Following up on that a little, if it were strictly passed on to the consumer, which is always an option, have you done any studies on what that would mean in terms of dollars or a percentage increase to the consumer for a unit of whatever? If you said to forget it, that you would do it and pass it on to the consumer, what does that mean to the consumer?
11:55 a.m.
Executive Director, Canadian Association of Agri-Retailers
It would go through the value chain through the grower. You'd obviously have to look at not only the acquisition costs and the growers' fertilizer cost at that point, but also if there were any closures of retail sites, the added cost of transportation to the growers, fuel costs, and what have you. I don't know how you could quantify that right now. That would be quite an economic study to perform.
11:55 a.m.
Conservative
Laurie Hawn Conservative Edmonton Centre, AB
I recognize that. I just wondered if you had done any notional what-ifs.
11:55 a.m.
Executive Director, Canadian Association of Agri-Retailers
It's a flow-through, but I think you'd see pretty substantial increases for produce at the supermarket. I'm sure 20% to 30% wouldn't be unrealistic.
11:55 a.m.
Assistant Director, Technical Affairs, Canadian Association of Agri-Retailers
With respect to directly to our members' customers, the farm community is already at a point where it can only pay so much for its input products. One of the big things we dealt with over the last couple of years was natural gas prices going up extremely and our fertilizer costs and acquiring the product at the retail site have gone up. The farmer is only able to pay for so much. The margin now is becoming whether to handle this product because of having to add another 10¢ per tonne, for example, for security upgrades. That 10¢ could put me at a break-even point or almost a bust.
Noon
Conservative
Laurie Hawn Conservative Edmonton Centre, AB
I understand, and I'm not being argumentative. I'm just trying to get my head around what it means if you go this way or that way.
Noon
Executive Director, Canadian Association of Agri-Retailers
Right. We'll try to give you the actual costs for our members, and from there we could maybe work with you more towards a study of the economic impacts.
Noon
Conservative
The Chair Conservative Garry Breitkreuz
Thank you very much.
I have two more people on my list.
Mr. Cullen, you said you had a brief question. Go ahead.
Noon
Liberal
Roy Cullen Liberal Etobicoke North, ON
Yes, I have a couple of them. Thank you.
Just picking up on the point about costs that would be tax-deductible, it seems to me that some of these cost items would be capital costs, which would be subject to capital cost allowances, and notwithstanding the generosity of the government with their accelerated capital cost allowance, I don't know if these expenditures would qualify for that or not. I haven't studied it closely enough.
In the last budget, they came out with some accelerated CCA. If they are capital costs, they would be tax-deductible, but in terms of cashflow, it's over a few years.
When you responded to the gazette—that would be the special committee of cabinet, the secretariat that supports that—you heard back, “We hear you. We'll try to work with you to try to make something work that is palatable to your sector.” As I said earlier, and stand by that, that's somewhat hollow. Nonetheless, here you are trying to get something that works for you. What I hear you saying is that when you go around to the various departments, everyone is listening and nodding sagely, but no one wants to take ownership.
I think that although some things do change, some things do remain the same. For example, if you're looking for a tax credit, that would come from the Department of Finance, and the finance department would clearly be non-receptive to that, and they would say you have to go to a sponsoring department, and it will have to come out of their A-base if there is some kind of granting provision, etc. We've all been there. We all have the T-shirts on that. So if you don't have a department that is prepared to take on the responsibility for this, because it would come out of their A-base, then everyone says “Well, you should go and talk to agriculture”, and someone else says “You should go and talk to environment”, and someone else says “You should go and talk to industry”, and someone else says “You should go and talk to public safety”. This is the dilemma I suspect you're in.
I don't know if the government has any solution for this. I haven't studied it in detail, but it seems to me that given the numbers you're quoting here, it is putting a burden that is unrealistic on the retail sector, and I would hope that the government would assign some department the responsibility to try to fix this, because that's what was indicated, as I understand it, when you gave your brief to the special committee of cabinet, and they said that the government should work with you to come up with an acceptable solution.
While there is no department that's been assigned responsibility, we have the same issue with counterfeit goods. Everyone keeps pointing at everybody else. In the meantime, some of your members are going to be in jeopardy, so I hope the government takes this seriously and assigns a department. Maybe it has to be cost-shared among a few departments, but it seems to me that your position is quite reasonable. You understand it has to be done. It's just that suddenly you just can't have something foisted upon you so that you have to absorb this cost when clearly you can't.
I don't know if you want to respond at all.
Noon
Executive Director, Canadian Association of Agri-Retailers
You are quite intuitive. We're trying to be patient. We've just recently focused on this issue in the last, say, five months, and we know that the wheels don't turn so quickly that we could walk away with instant satisfaction. So even though we do feel at times that we're sometimes passed around to various departments, we are still being listened to, and we'd like to think there is progress.
There is no question that we're not satisfied currently with where this issue lies and which department owns it. We have not been given any indication yet as to which department should take the lead on this issue, but we do see evidence that departments can work together. The marine security contribution program is a joint effort between the Department of Public Safety and Transport Canada. We have faith that we can present it to various levels of government, and hopefully it will sink into the middle, and the leadership will take hold of that and then come back with a solution, but we haven't seen evidence to date as to where that lies.