FINA Committee Meeting

37th PARLIAMENT, 1st SESSION

Standing Committee on Finance

COMMITTEE EVIDENCE

CONTENTS

Thursday, February 28, 2002

¿

0910

The Chair (Mrs. Sue Barnes (London West, Lib.))

Mr. Yvan Loubier (Saint-Hyacinthe--Bagot, BQ)

The Chair

Mr. Epp

¿

0915

The Chair

Mr. Epp

The Chair

Mr. Epp

The Chair

Mr. Epp

The Chair

Mr. Serge Nadeau (Director, Personal Income Tax Division, Department of Finance)

¿

0920

¿

0925

The Chair

Ms. Lise Potvin (Chief Principal, Personal Income Tax Division, Department of Finance)

The Chair

Ms. Jocelyne Girard-Bujold (Jonquière, BQ)

¿

0930

¿

0935

The Chair

M. Epp

Ms. Jocelyne Girard-Bujold

Mr. Epp

Mr. Lise Potvin

Mr. Epp

Mr. Serge Nadeau

Mr. Epp

Mr. Serge Nadeau

¿

0940

Mr. Epp

Mr. Serge Nadeau

Mr. Ken Epp

Ms. Jocelyne Girard-Bujold

Mr. Ken Epp

Mr. Serge Nadeau

Ms. Jocelyne Girard-Bujold

Mr. Epp

¿

0945

The Chair

Mr. Yvan Loubier

Mr. Serge Nadeau

Mr. Yvan Loubier

¿

0950

Mr. Serge Nadeau

Mr. Yvan Loubier

Mr. Serge Nadeau

Mr. Yvan Loubier

Mr. Roy Cullen (Etobicoke North, Lib.)

Mr. Yvan Loubier

The Chair

Mr. Yvan Loubier

The Chair

Ms. Pauline Picard (Drummond, BQ)

¿

0955

Mr. Serge Nadeau

The Chair

Mr. Roy Cullen

À

1000

Ms. Jocelyne Girard-Bujold

Mr. Roy Cullen

Ms. Jocelyne Girard-Bujold

À

1005

The Chair

Hon. Lorne Nystrom (Regina--Qu'Appelle, NDP)

Mr. Serge Nadeau

M. Nystrom

Mr. Serge Nadeau

Mr. Yvan Loubier

Mr. Serge Nadeau

Mr. Yvan Loubier

Mr. Serge Nadeau

The Chair

Mr. Lorne Nystrom

Ms. Jocelyne Girard-Bujold

À

1010

The Chair

Mr. Lorne Nystrom

Ms. Jocelyne Girard-Bujold

The Chair

M. Reed

À

1015

Ms. Jocelyne Girard-Bujold

The Chair

Mr. Scott Brison (Kings--Hants, PC/DR)

The Chair

Mr. Bryon Wilfert (Oak Ridges, Lib.)

À

1020

The Chair

The Chair

Mr. Yvan Loubier

À

1035

The Chair

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CANADA

Standing Committee on Finance

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NUMBER 083

l

1st SESSION

l

37th PARLIAMENT

---

COMMITTEE EVIDENCE

Thursday, February 28, 2002

[Recorded by Electronic Apparatus]

¿  (0910)  

[English]

    The Chair (Mrs. Sue Barnes (London West, Lib.)): Good morning, everyone.

    We will have witnesses this morning from 9:00 to 10:30. We are on the order of the day, which is Bill C-209, an act to amend the Income Tax Act (public transportation costs).

    Before we start, I will, for clarity's sake, state that yesterday this committee decided to hear witnesses from 9:00 until 10:30, and then go into clause-by-clause at 10:30. Just before we finished yesterday, the House leaders informed us that they are taking our room, because this room is needed for Mr. Romanow. I think all parties were represented in that. The assistant clerk then sent out a notice saying we would be in this room from 9:00 to 11:00 hearing witnesses, and then go over to 269 West Block, which is not available, apparently, until 11 o'clock. The amended notice is in your offices now, with phone calls being made by the assistant clerk, so it's clear we're actually doing what we had agreed to do yesterday. I want to make sure everybody is comfortable with that, but very clearly they are needing this room for television for Mr. Romanow. So if we are not finished, I would suggest, by 10:50, we should clear out of this room to make our way over to the other room, if necessary.

    Does everybody understand that?

    Mr. Loubier.

[Translation]

    Mr. Yvan Loubier (Saint-Hyacinthe--Bagot, BQ): I understand very clearly what you're telling us, Madam Chair. However, after the break, I intend to challenge the motion passed yesterday in our absence concerning notices of motion.

    I've been a member of the Finance Committee for eight and a half years and we have always managed to operate without stringent rules such as this. We have always manage to conduct our operations with civility and a good measure of flexibility.

    I simply wanted to let you know that I abhor this kind of restriction. Upon our return after the break, the steering committee will surely have an opportunity to discuss this new rule.

[English]

    The Chair: Mr. Epp said we'll do notices a couple of meetings ago, and I said, no, we'll do it at the standing committee. There was, as is allowed, a notice passed yesterday. There was no steering committee, because we continued through clause-by-clause, we just went through it. But we will have a steering committee meeting, and we can have a good discussion at that, probably the Wednesday or so when we get back. I'll put a notice out. I don't think we'll have any business on the table that week, as we do right now, to get a bill back.

    Mr. Epp.

    Mr. Ken Epp (Elk Island, Canadian Alliance): This is a very distressing thing. I have to say that this morning I woke up, and I just felt like staying in bed. I have become very discouraged. All my life I have worked in an environment where I was respected for my abilities, for my ability to think, for my ability to work, and now in this committee we have a new restraint on us that, basically, prevents us from doing this. As I understand it, we cannot today make any amendments to this bill. Twelve hours ago we didn't even know this meeting would be held today. How can we have 48 hours notice on a motion we might want to make to amend this bill if we didn't even know this meeting was going to take place? Therefore, Madam Chair, if we cannot make a motion to amend, why are we here? Why are we listening to the witnesses? We should just simply say, we'll report this bill without amendments, because no amendments are possible.

    I think we have totally emasculated... Yes, you wish that weren't true, but stop to think about the motion that was passed. The motion that was passed said no motions can be made without 48 hours notice. You cannot, then, in 12 hours give notice of a meeting that deals with a motion. I know we can have a meeting on less than 48 hours notice, but at that meeting you can't do anything, because there has to be a 48-hour notice of motion. If you don't have that, you're shafted.

    I think we should just quit.

¿  (0915)  

    The Chair: Mr. Epp, I really think your interpretation of the motion that was passed is incorrect, and I have been advised so by the clerk. The motion that was passed was that 48 hours notice be given to the members of the committee before any new item of business is considered by the committee, and that the notice be filed with the clerk of the committee and circulated to all members in both official languages; upon receipt of the notice, the clerk will put the new item of business on the agenda at the next committee meeting. For your information, Mr. Epp, I do respect all the members of this committee, and you know that, as I've worked with you for a number of years.The order of business is this bill today. That is not a new item of business.

    I am going to ask the clerk to give me the interpretation he has of this motion, and then we will have the discussion at steering committee.

    Mr. Ken Epp: While we're waiting, what does the motion say? The motion says any motion has to have 48 hours notice, and you cannot get around that--

    The Chair: It does not say that--

    Mr. Ken Epp: --by giving a 12-hour notice of a meeting and saying this is a meeting that deals with something. Madam Chairman, 48 hours ago we did not know this meeting was even taking place. Therefore, a notice has not been given for any motion that we deal with today, because we didn't even know the topic was up today. That's what the committee did.

    We worked fine for five years without that--

    The Chair: Mr. Epp, I would like to just say that I interpret this as meaning a new item of business, that is, if we brought in some other item of business relating to some other issue entirely, something other than the item of business that is amending this section of the Income Tax Act. It only started as of yesterday, and we will have a steering committee, so we can go through this. But you are free to make motions relating to the order of business we have before us.

    Mr. Epp, we have a disagreement, and that--

    Mr. Ken Epp: It disturbs me even more, then, Madam Chair, because it means that you can override the rule that was passed yesterday by calling a meeting on two hours notice or whatever. By the way, this has happened. We have had finance committee meetings sometimes on two hours notice, because we were collegial, we were cooperative, we worked together, we came here, we dealt with the business, and we were able to treat each other with respect and with professionalism. And now, if you call a meeting on a topic that is not known on Wednesday, you can't deal with that until 48 hours have passed, because that is now new business . You can't get around that. You can twist the words, but it's not what the words mean in the motion.

    The Chair: We do have witnesses here before us. We will have a steering committee. My recollection, I think, is accurate, that we had the notice of this meeting, we had the witnesses agreed to before that notice of motion was even tabled yesterday. The clerk has just confirmed it to me verbally.

    So let us proceed. My understanding is that the mover of this bill would like to go second, so I'm going to ask the officials from the department, Lise Potvin and Serge Nadeau. Welcome. You're both from the Department of Finance, I understand.

    Mr. Nadeau.

[Translation]

    Mr. Serge Nadeau (Director, Personal Income Tax Division, Department of Finance): I would like to make a short, ten-minute presentation on Bill C-209. I believe copies of the presentation have been distributed to members in both official languages.

¿  (0920)  

    Bill C-209 would allow individuals to deduct an unspecified portion of the public transportation costs for income tax purposes. The first thing we want to look at is what it means for the average, regular transit users. As I mentioned earlier, the bill does not specify how much could be deducted for income tax purposes, but if we assume full deductibility, the bill would reduce federal income tax of regular transit users by $85, on average, and $125 if we include the provincial income tax deduction. If we assume that the average cost of a transit pass is about $600 a year, this means, approximately, a 20% reduction in the cost of transit passes.

     The objective of Bill C-209 is to provide a tax deduction so as to increase ridership on transit and, by extension, to improve the environment. The purpose of this presentation is to assess the cost-effectiveness of such a measure. The point I want to make is that this bill is not good value for the money. In other words, it's not cost-effective in improving the environment. The reason is that we do not expect this bill to significantly increase ridership, mainly because use of transit is insensitive to costs. Study after study has shown that. For example, a recent Statistics Canada study shows exactly this point. There are several other factors besides cost that affect transit use, accessibility, comfort, and so on. If we look at data provided by the Canadian Urban Transit Association, for example, they show that between 1994 and 2000 ridership has increased by 10%, while the costs have increased by 21%.

     While the impact of Bill C-209 on ridership is difficult to assess, what we know is that the cost would be significant. There are already many people who use public transit and would benefit from the tax deduction. In fact, we estimate that even if the use of public transit does not increase at all, it will cost $265 million at the federal level and another approximately $135 million at the provincial level, for a total of $400 million. So even if ridership were not to increase at all, $400 million would be spent, $400 million that does not go to improving the environment at all. With a 10% increase in ridership, the measure would cost the federal government $295 million, and you can add another $150 million at the provincial level, which means a total cost of $450 million.

     To dig deeper into the effectiveness of this measure, let's look at who would benefit from Bill C-209. We estimate that even with a 10% increase in ridership, more than 90% of the benefit would go to existing users, and only 10% to new users. Furthermore, if we assume 35% increase in ridership--and this, I must add, is not substantiated by any statistical analysis I'm aware of for this type of measure--even under this condition, 75% of the fiscal cost would go toward existing users, only approximately 25% would go to new users and, indirectly, to improving the environment. Only 10%, approximately, would be an investment in increased transit use.

¿  (0925)  

    Another way of looking at the effectiveness of this measure is to see how much it would cost per new user. If we assume a 10% increase in ridership, the cost would be approximately $1,400. Let's compare this with the cost of a pass. The average cost of a pass is about $600. In other words, it would cost twice as much as the cost of the pass itself.

     This bill also raises issues of fairness. As I mentioned earlier, most of the people who would benefit from Bill C-209 are existing users, but existing users who are in a taxable position. Therefore, by extension, those who would not benefit from this bill are low-income individuals who are not in a taxable position, and that includes many students and retired people. In addition, of course, there are individuals who are already using environmentally friendly modes of transportation, such as biking and car pooling, who would not benefit from such a measure.

     From a policy point of view, we believe there are more cost-effective ways to address environmental challenges, and these include direct expenditures on improving the environment. Here, on page 8, there are examples of measures that have been introduced in the latest budget.

    In conclusion, this measure would be costly to implement, somewhere in the range of at least $265 million. It would be an ineffective measure because most of the tax relief would go to people who already use public transportation. Finally, it is an unfair measure because low-income individuals who pay no taxes do not stand to benefit. Moreover, there are better ways, such as direct spending, to address environmental challenges.

     Thank you.

[English]

    The Chair: Ms. Potvin, do you wish to add something?

    Ms. Lise Potvin (Chief Principal, Personal Income Tax Division, Department of Finance): No.

[Translation]

    The Chair: Would you like to begin, Ms. Girard-Bujold?

    Ms. Jocelyne Girard-Bujold (Jonquière, BQ): Thank you, Madam Chair, for giving me this opportunity to speak to the bill which I tabled in the House. I would also like to thank the Parliamentary Secretary. When he gave us an overview yesterday, I realized that he has extensive experience in all matters affecting public transportation. Therefore, we are dealing with people who are very familiar with this issue.

    My bill involves addresses many issues: the environment, health, urban traffic congestion problems and the economic development of urban areas. My presentation will focus on these specific issues.

    There is no question, Madam Chair, that public transportation is extremely cost-effective for users. The cost of owning and operating a motor vehicle is well over $8,000 a year, whereas the cost of a public transit pass is only between $500 and $1,000 a year. This represents a very substantial saving for users.

    Despite this comparative advantage, the use of public transit declined considerably between 1990 and 1996. Many problems can be traced to this serious decline, notably an increase in greenhouse gases, an increase in traffic congestion, higher energy consumption and higher road infrastructure construction and maintenance costs, as well as a drop in the quality of the urban environment.

    Under the proposed legislation, only monthly transit pass holders would be entitled to receive a tax rebate. Users would also be required to submit receipts. Furthermore, these tax rebates would apply to all types of public transportation, including subways, buses, light rail and trams.

    The Department of Finance pegs the annual cost of this tax measure at $100 million. Can this be considered a justifiable expense? The answer is yes, Madam Chair, because in 1997, Canada made a commitment to reduce greenhouse gas emission levels by 6 per cent over 1990 levels. If the trend continues, emission levels will instead rise by 35% in the future.

    Last summer's smog advisories in Montreal and Toronto are telling examples of the problems affecting the country's major cities. Moreover, it is estimated that the premature deaths of 16,000 Canadians can be linked to poor air quality. Also, the number of children hospitalized with asthma increased by 23% between 1980 and 1990. Health care expenditures linked to poor air quality are estimated to be in the neighbourhood of $1 billion annually.

    Bill C-209 represents a positive, environmentally friendly initiative. There is no question that promoting public transportation is one way of ensuring better air quality.

    Just to give you an example, automobiles account for one third of gas emissions in the country. Promoting public transportation is one way of countering the harmful impact of automobile emissions. One bus can carry the equivalent of 40 to 50 automobile passengers. In terms of pollutant emissions, on a kilometre-per-passenger basis, buses emit the equivalent of only one quarter of automobile pollutants. When public transit services are unavailable in a large Canadian city, air pollution readings rise by 20%.

    When a similar measure was approved in San Francisco and public transit users became eligible for a tax rebate, ridership quickly increased by 31%.

    Air quality and less traffic congestion are also some of the substantial benefits to be derived from public transit. Already, 50 per cent of the residents of large urban centres opt to use public transit. If every single user of public transit services in Montreal chose instead to drive an automobile, the line of vehicles would stretch bumper-to-bumper from Montreal to Gaspé, a distance of 1,300 kilometres.

    Despite the popularity of public transit among city dwellers, the situation continues to give rise to some concern. Users of public transit services in Canada contribute to the overall prosperity of city cores.

    Yesterday afternoon, Madam Chair, we heard from witnesses speaking on behalf of young people, workers, Canadian transport companies, Canadian municipal associations and rail companies.They informed us that an additional $13 billion was required to improve public transit infrastructures, as well as an expenditure of $800 million to modernize the bus fleet.

¿  (0930)  

    Infrastructure projects valued at $2 billion are currently in the works. Committees are now considering proposals to improve conditions for the future.

    Madam Chair, one of the witnesses who testified yesterday, Ms. Emilia Shaw, stated that we needed vision. I believe this bill is visionary in its approach.

    Earlier, Ms. Potvin, the spokesperson for the Department of Finance, stated that this measure would only benefit current public transit users. Madam Chair, we have to think of the many young people and senior citizens, not to mention the many minimum-wage earners. There's no denying the facts. If these individuals received a tax rebate, they could use the money for some other purpose. It would represent a substantial savings to them. Some employers already give their employees receipts for downtown parking, and this expense is tax deductible.

    I believe we're dealing with a double standard here. This measure would in effect replace...The federal government doesn't invest a red cent in public transportation. I realize that such services come under provincial jurisdiction, but we shouldn't forget that in the United States, the U.S. government will over the next two years invest $47 billion in public transportation.

    While the scope of the proposed measure is minimal, it would enable the federal government to set the pattern for future urban development. Its transportation plan will benefit not only current, but future public transit users as well. The existing transportation network can absorb this increase in users. Moreover, transit company owners would immediately receive funds to invest in network improvements.

    I come from the Saguenay-Lac-Saint-Jean region of Quebec. While we do have an urban transit network, this measure would help extend service to rural areas. Families living 30 kilometres away from the Jonquière city centre often need to own two, three or even four automobiles just to get to work or school.

    Therefore, in my view, this measure is extremely important to the regions. It's also very important in terms of providing Canada with a long-term vision to reduce traffic congestion. I occasionally take my car to go home and sometimes, just getting through Montreal takes me one hour and a half because of the traffic jams. Imagine what this represents in terms of time and money. Consider the cost of maintaining road infrastructures over a one-year period.

    All of these reasons compelled me to table this bill. I realize that it can be amended and improved upon and I am open to suggestions, but I do hope the government will be receptive to this initiative. There is a need for a measure like this. I have received tremendous support from those involved in the urban transport industry as well as from residents of my region and indeed from all Quebecers and Canadians.

    Thank you, Madam Chair.

¿  (0935)  

[English]

    The Chair: Thank you very much. I think we all appreciate the hard work it takes to bring something this far.

    Mr. Epp, would you like to start a ten-minute round of questions?

    Mr. Ken Epp: Thank you.

    First, Madame Girard-Bujold, I want to say that I envy you. I have been a member of Parliament, I think, for the same length of time you have been. Were you first here in 1993?

[Translation]

    Ms. Jocelyne Girard-Bujold: In 1997.

[English]

    Mr. Ken Epp: Okay. I've been here for over eight years, and I have never yet had one of my private member's bills drawn, so I envy you on that account.

    In the finance committee I think we want to be diligent in crunching the numbers and making sure everything adds up. The first question I have is to both of you. In doing your computations, what estimate did you use of the number of people per year who use rapid transit?

    Mr. Lise Potvin: We use the numbers provided by CUTA: 1.5 billion rides per year, which translate into 3.1 million full-time users.

    Mr. Ken Epp: That's incredible. I worked backwards from the numbers you had, and came up with 3.1 million users as my estimate.

    The bill is so very short that it's easy to ask about these things. I want to ask of the officials, what is the understanding of the formula in the bill, A x B, where A is the appropriate percentage for the year? Appropriate percentage of what? What does that refer to?

    Mr. Serge Nadeau: The appropriate percentage of the costs. Appropriate has not been defined in the bill. For example, if someone buys a bus pass and if the bus pass is $600, and if the appropriate percentage is 50%, the income for tax purposes would be $300.

    Mr. Ken Epp: Okay. So it's the appropriate percentage of the cost that is presumably used for going back and forth to work. Is that it?

    Mr. Serge Nadeau: That's right. It would be extremely difficult, from an administrative point of view, to distinguish when someone takes the bus to go to work and takes the bus to go shopping.

¿  (0940)  

    Mr. Ken Epp: That was my question. You explained it: it's percentage of use for going to work.

    There's a further question I have. In proposed subsection 118.96(3) it says, “The individual shall provide supporting vouchers”. Usually, when I take the bus, I put in coins, or I buy tickets, and when I go on the bus, I have to give the ticket. I know that in Ottawa here there are some buses where you get a proof-of-payment thing, but normally we don't even have receipts. I'm just wondering about the logistics of trying to find supporting documentation for the use of the bus.

    Mr. Serge Nadeau: That's a very good question. With monthly passes, it might be easier, but with someone who uses tickets or change, that would be very difficult.

    Mr. Ken Epp: Maybe madame could answer that question. How does she envision that working?

[Translation]

    Ms. Jocelyne Girard-Bujold: Monthly transit pass holders would receive the rebate. I'd just like to clarify something regarding taxation.

    Consider, for example, an individual with an annual income of $50,000 who is taxed at the rate of 22 per cent. Let's say the cost of a transit pass is $600 a year. If we do the calculation, 22 per cent of $600 is $132. Therefore, this individual who earns $50,000 would be entitled to a tax rebate of $132 for the current taxation year.

[English]

    Mr. Ken Epp: I'm familiar with the numbers. We're going to have a stack of paper, and I think, environmentally, we need to think of the trees that are involved too, if nothing else, in producing millions and millions of receipts. So I was just wondering about that.

    Another question occurred to me even before it was mentioned by the officials. A great many people who use the bus are in the lower income brackets. One of our witnesses yesterday--who is sitting here, and we're grateful for that interest--indicated this. Many of these people are beneath the threshold, so this would not give them any reduced costs at all. Would it not be better, if we're going to spend $300 million, or whatever the number comes to, to actually reduce the fares? You reduce the fares, you provide taxpayers' money to transit systems as a subsidy. I don't personally favour this, but I'm thinking this might be better. The fares can be reduced, so everybody gets the additional money right off the bat. There's no bookkeeping, there's no fancy footwork at the income tax department. You would now give a real benefit to poor people who pay no taxes, who are out of the loop on this bill.

    Again I'd like both witnesses to answer, if they will.

    Mr. Serge Nadeau: Definitely, from an administrative point of view, that would be much simpler. As for effectiveness, we would have to look at this more closely. It's not clear how effective it would be in increasing the usage of public transit.

[Translation]

    Ms. Jocelyne Girard-Bujold: We have some data, including the statistics presented to us yesterday by Emilia Shaw of the Canadian Urban Transit Association. We have US data which shows that in the very first year in which a tax rebate applied, public transit use increased by 32 per cent in New York, Philadelphia and Los Angeles. These are factual, credible statistics. A rebate was introduced and ridership increased.

[English]

    Mr. Ken Epp: Okay.

    The last statement I'd like to make, and I made allusion to it yesterday, is that environmentally, the best way of moving yourself to and from work is by walking or by taking a bicycle. If we really are interested in addressing the environmental question, perhaps we'd be better off spending the money to build giant bicycle paths in our country, and because we live in a northern climate with snow, they should be covered paths, so that they can be used year-round. They could be elevated, so that they go above the traffic and pedestrians. The cost would be a one-time capital cost, with very little maintenance. People would get exercise, there would be no pollution, the costs of having to build additional roads would be minimized, and everyone would be in as good shape as I am.

    There are other options. I don't think I need you to comment on that. I have no further questions on the bill.

¿  (0945)  

    The Chair: Okay. Thank you.

[Translation]

    Go ahead, Mr. Loubier.

    Mr. Yvan Loubier: I'm still thinking about Mr. Epp's comments. They were intelligent as well as amusing.

    Congratulations, Ms. Girard-Bujold, on your bill and thank you for your presentation.

    I'm troubled by a number of things, three or four in particular. If I understood your bill correctly, it primarily targets new public transit users, that is those who might consider purchasing a monthly transit pass. You don't often buy monthly passes, Mr. Epp, because if you did, you would know that when you do, you also get a receipt. Therefore, no additional trees would be sacrificed in order to issue receipts. As it is, most people simply throw their receipt away. Now, these receipts could serve a useful purpose and ultimately be recycled, which would be beneficial to the environment to boot.

    I also understood that the rebate would be in the form of a refundable tax credit. Therefore, your point about low-income individuals is not valid, Mr. Nadeau, because regardless of income level, any one who applies will receive a refundable tax credit.

    Thirdly, I think we need to be forward looking. I have a question for you, Mr. Nadeau. The results of the pilot projects Ms. Girard-Bujold spoke of in the U.S. should not be dismissed lightly. Public transit use increased by 30 per cent in the very first year the rebate was in effect. These results warrant further examination. I hope that you have already looked into this, because these results seem quite intriguing, particularly since California is in the vanguard of the move to introduce rebates.

    I think we would do well to be less conservative at times and to bring in some new, more environmentally friendly initiatives, considering that Canada is one of the world's biggest polluters. This fact came to light during the debate on the Kyoto accord. On a per capita basis, Canada, excluding Quebec, emits more CO₂ than most other world countries. When the energy crisis hit in the 1970s, Quebec shifted to hydroelectric power and to other environmentally friendly energy sources. Therefore, I think we need to be more receptive to proposals of this nature which have been successfully implemented in the United States. We need to take a closer look at the US experiment.

    Mr. Serge Nadeau: I'm delighted you brought up the figures quoted by Ms. Girard-Bujold. You have to understand that the figure of 32 per cent or 35 per cent bears no relation to the measure we're discussing here today. It relates to a much narrower measure, namely employee subsidies. According to our figures, not all employees take the bus. Approximately 50 per cent of workers use public transit. Therefore, the 32 per cent increase refers only to those employees to which the rebate was offered. Apparently, the rebate was offered to only 50 per cent of all workers. Had it been offered to everyone, the overall increase in public transit use would have been about 7 per cent.

    Mr. Yvan Loubier: Let me interrupt you there, Mr. Nadeau. Even a 7% increase in ridership is nothing to sneeze at and can make all the difference in terms of making public transit services more cost effective. The economic and financial benefits flowing from this increase could be reinvested to ensure better service and to attract new customers. What matters today is not so much the linkages, but the frequency of transit services.

    Public transit services are also currently facing a cash flow problem. If ridership were to increase by 7%, as you maintain it would, this in itself would be extraordinary. Cash flow would improve, allowing companies to improve the frequency of service and attract new customers. In turn, the refundable tax credit would encourage new riders to continue using public transit.

¿  (0950)  

    Mr. Serge Nadeau: Let me also say that first of all, this 7% figure is merely a very high estimate of the potential increase in ridership.

    Secondly, the truth is that this rebate would mostly benefit current users of public transit. That's the problem with this bill. The rebates would largely go to people who already take the bus. Therefore, we could say that the money would not be used directly to improve the environment.

    As for your comment about the refundable tax credit, the bill isn't clear on this, but there are nonetheless costs associated with this initiative. The estimated cost to the federal government has been pegged at around $40 million.

    Mr. Yvan Loubier: Mr. Nadeau, your argument concerning current users can be challenged, because there are many current users, who, because of the drop in frequency, because the public transit companies do not have the means to invest in their fleets, nor to increase frequency of service, may be turning their back on public transit. We could encourage them to stay and continue to use it.

    Once again, I refer you to the American experience. You say that 7% is too high. Let us say that the figure is 3%. That is still a nice increase and there are unbelievable synergistic effects in this area. By increasing the use of public transit by 3%, one can create greater liquidity for public transit companies, create investment and increase frequency of service. There is an incredible growth generating effect. There are public transit companies in the world that are delighted with a simple 1% increase because usually the number of users is quite stable unless measures are taken to encourage use, as has been done in the United States.

    You mentioned the employee clientele. Results can be extrapolated even using your 7 or 3%. If such a measure were to bring about a 3% increase in the number of users in general, that would already be a considerable increase. In any case, we can try; it is worth the effort.

    Mr. Serge Nadeau: But there would also be an increase in costs if there were a 3% increase in the number of users. The public service transit companies would have to absorb additional costs. They would be forced to purchase buses.

    So, in terms of infrastructure or environmental improvements, direct benefits to transit companies would actually be much lower than 3%.

    Mr. Yvan Loubier: On the topic of the environment, Mr. Nadeau, if you purchase a bus, you are not purchasing 40 automobiles. That is a lot.

[English]

    Mr. Roy Cullen (Etobicoke North, Lib.): I have a point of order.

[Translation]

    Let the witness finish his comments, please.

    Mr. Yvan Loubier: Madam Chair, on a point of order, please. Why is Mr. Cullen getting involved? We are having a discussion. I let Mr. Nadeau finish his comments and when he has finished, I ask him another question and I make another comment. What is Mr. Cullen's problem?

[English]

    The Chair: Yes--

[Translation]

    Mr. Yvan Loubier: Who is chairing this committee, Madam Chair? He is annoying.

[English]

    The Chair: In about one minute you'll be finished with your time. Madame Picard has one small question, I understand, so I'm going to let her deal with that.

    Madame Picard, you can go ahead with that, because I understood you were sharing that time.

[Translation]

    Ms. Pauline Picard (Drummond, BQ): Thank you, Madam Chairperson.

    Mr. Nadeau, I don't understand what you mean when you say that the only ones to benefit from Bill C-209 would be taxpaying public transit users. When you pay taxes, you have a right to something in return; that is the reason for the existence of the federal government. It is to give citizens all transport-related advantages. It leaves a bitter taste in my mouth when you say that only the public transit users who pay taxes would benefit. I don't like that kind of comment.

    You say that low income users who do not pay taxes, such as students, would not benefit. I don't know if you come from an outlying region. Personally, I am from an area in the centre of Quebec, about an hour from Montreal. I represent 24 municipalities, one of which is a large city. The others are rural municipalities. Students benefit from school busing to go to school, but they do not benefit from public transit because in our area there is public transit only in the city of Drummondville, and the municipality does not have sufficient funds to have the buses go to every part of the city.

    Young people who would like to work in Drummondville because it is a large urban centre and because that is where the industries and businesses are cannot work, because they don't have access to public transit. As Ms. Bujold was saying, in our area, a family that lives in a rural municipality must have two or three cars to be able to function, but that being said, if you don't live downtown or in the industrial park, where everything happens, public transit remains necessary. If students had access to public transit, they could come to work in the city, pay taxes and receive their refundable tax credit.

    I am referring to individuals who are already using means of transport that are respectful of the environment. In the regions, the circumstances are different from the ones which prevail here, in Ottawa-Hull. In my area, people are hoofing it.

    I find those arguments invalid. They may be appropriate to describe your reality, but not mine and not that of the representatives of regions like ours.

    There are large cities such as Toronto, Ottawa, Montreal and Quebec, but there are also outlying regions that must be taken into account. I think that this bill takes the reality of people who live in those regions into account.

¿  (0955)  

    Mr. Serge Nadeau: Since students pay no taxes, this measure would not reduce their transportation costs. Furthermore, since the rebate does not target infrastructures directly, there is no reason to believe that students would benefit. Possibly they might, but only very indirectly.

[English]

    The Chair: Mr. Cullen, then Mr. Nystrom.

[Translation]

    Mr. Roy Cullen: Thank you very much, Madam Chair.

    Let me first say, Ms. Girard-Bujold, that I agree with you about our need for clean air. I also agree with you that we need to support public transportation. However, as you know, the government must make some choices. Indeed, that's part of its job.

    As I see it, the government cannot fund this bill and at the same time directly finance urban transit infrastructure. I also believe that direct investment is more effective than the amendments to the Income Tax Act proposed in this bill.

    Moreover, I feel that this bill is unfair because individuals who pay no income tax will not benefit from the proposed measure.

[English]

    So for a number of reasons, I admire this initiative you've put forward, but if we look at the efficiency, it's pretty well acknowledged that the increased ridership would be in the range of 10% to 20%. So in terms of the cost per extra rider, it would be very expensive, and given that the government has scarce resources, I would support more direct investments in public infrastructure.

    In the city of Toronto we do have a problem with clean air, and I think we should be making investments in urban transit. I think our government will do this, given the right conditions, and perhaps also in other major centres in Canada where this is needed. I don't know how I can support this bill, when it doesn't seem to get the bang for the buck that direct investment in infrastructure would give us.

    I wonder if you could comment on that.

À  (1000)  

[Translation]

    Ms. Jocelyne Girard-Bujold: Thank you, Mr. Cullen. I do detect a hint of something behind your objections. I'm familiar with the situation in Montreal, having lived in this city. Traffic congestion in the metropolitan Montreal region is responsible for a considerable amount of pollution. This same is true for Toronto. Imagine giving a tax credit to suburban residents who take the train or bus to travel downtown. Such an initiative would reduce the number of vehicles flooding into the urban core. Access would be improved, as would frequency of service. Yesterday, public transportation officials told us that this initiative would allow them to invest in more environmentally friendly buses and to think green.

    I disagree with your statement that young people do not pay taxes. In my region, young students have to work. When you work, you have no choice but to pay income taxes. My daughter attends university and pays taxes because she has a part-time job.

    Federal government studies show that if such a measure were implemented, the savings derived from less traffic congestion and lower infrastructure costs would be three to seven times greater than future government tax revenue losses.

    Infrastructure costs are significantly higher. I don't know if you realize the cost of building a one-kilometre stretch of roadway. It's in the neighbourhood of $1 million. Federal and provincial transport ministers have met and agreed that a $16 billion investment in our roads and highways is needed. Yesterday, urban transit representatives also listed their requirements. From a cost standpoint, the proposed measure is very reasonable. You claim the government cannot afford this measure. Admittedly, money is tight, but then everyone would stand to benefit from this measure, not just one group in particular. Money will always be available to fund an initiative if it has some merit. In this case, everyone who wants to use public transit services stands to benefit.

    Mr. Roy Cullen: What about the people who are looking for work? They need to use the bus, but they have no income because they are unemployed. Isn't it true that they will not benefit from the proposed initiative?

    Ms. Jocelyne Girard-Bujold: Rural residents must go to the city to find work. They need to take their automobile and pay for gas. An automobile is expensive to operate. Gas and insurance are expensive. Using public transit instead of buying a car translates into annual savings of about $ 8,000.

    I support this initiative because owning and operating an automobile is not within everyone's means. Young people today live in the suburbs and outlying areas and come into the city because that's where the action is.

    Congestion on the roads is increasing, as are the number of accidents. Problems will continue to escalate unless an alternative to the automobile is promoted , and that alternative is public transit. Some seniors in our region never leave their homes because public transit services aren't available. This initiative would help them to lead normal lives. As Minister Manley was saying, we need to look ahead to the third millennium. I'm saying that the future is now upon us. As Mr. Epp was saying earlier, this forward-looking initiative would allow people to have a healthy lifestyle. I would like it if everyone in my region either walked or rode a bicycle. The reality is that the temperature hovers in the -40 degree Celsius range virtually six months of the year. I can't see myself on a bicycle in -40 degree Celsius weather. Perhaps it would be possible during the summer months, but I'm a realist. Weather conditions differ sharply from one region of the country to the next.

À  (1005)  

[English]

    The Chair: Mr. Nystrom, ten minutes.

[Translation]

    Hon. Lorne Nystrom (Regina--Qu'Appelle, NDP): I have two or three questions. I seconded the motion of the Member for Jonquière in the House. I also supported a motion put forward in the House by Mr. Riis three years ago. The two motions are different. How would you feel about Mr. Riis' proposal serving as a compromise of sorts? How is your motion different from his?

    I have a question for the government officials. Fiscally speaking, what's the difference between Mr. Riis's proposal and the one put forward by Ms. Girard-Bujold? If my memory serves me correctly, Mr. Riis' proposal provided an advantage to employers. Ms. Girard-Bujold's proposed initiative is much broader in scope. Can you comment on the tax differences between the two? Would you agree that Mr. Ri is' proposal could serve as a compromise of sorts?

    Mr. Serge Nadeau: That's a good question. We estimate that a proposal such as the one put forward by Mr. Riis would cost the federal government anywhere from $40 million to $65 million. If we include the provinces, the cost rises to between $60 million and $100 million. The cost of such a proposal would be lower by approximately one third.

    Mr. Lorne Nystrom: Lower by one third?

    Mr. Serge Nadeau: Yes, by one third. However, in terms of how effective such a measure would be, we would still be dealing with the same problems.

    Take, for example, the figures presented by the association that testified before the committee yesterday. Approximately 75 per cent of the benefits would go to current public transit users. This means that only 25 cents of every dollar would go to improving the environment, and only very indirectly.

    Mr. Yvan Loubier: I'm sorry, but that doesn't make any sense. If new users derive 25% of the benefits, that's wonderful. If the remaining 75% of the benefits go to ensure that ridership levels are maintained and the frequency of service is improved, then that's wonderful too. Your logic escapes me.

    Mr. Serge Nadeau: To my way of thinking, 75% does not find its way into commission or municipal coffers. It simply ends up in the pockets of those who already use these services.

    I agree that commissions and municipalities will see 25%. However, there are costs associated with this measure in so far as buses are concerned. Any benefits to the municipalities will be very indirect.

    Mr. Yvan Loubier: Environmental costs must also be taken into account.

    Mr. Serge Nadeau: That's the point we're trying to make. If someone wants to improve the environment, surely there are more direct ways of spending $100 million or $300 million. Certain measures proposed in previous budgets can attest to this fact.

[English]

    The Chair: Let's keep our questions between Mr. Nystrom and the responder. Did you want to add anything further on that?

[Translation]

    Mr. Lorne Nystrom: No, I have nothing further to add. I would, however, like to continue with my line of questioning.

    Ms. Jocelyne Girard-Bujold: Yes, but I would like to respond to the comment concerning Mr. Riis' bill.

    Mr. Riis was advocating measures to make public transit passes supplied by employers more tax exempt. This initiative would have affected a very specific group of individuals, namely employees. My initiative would be broader in scope, extending to everyone, including senior citizens, students, those living at home, and youths. We can't continue bringing in restrictive measures.

    Your proposal is very sound and an amendment may be in order. However, I truly believe that we need a universal measure, one that benefits all strata of society.

    Some employers give their employees passes to park downtown. They get a tax break in the process. In my find, this is very harmful to the environment because it encourages people to use their automobiles and contributes to overall traffic congestion in city cores.

    I would do away with this type of restrictive measure. Everyone deserves a break. We need to be attuned to the changes in our society. People no longer live solely in urban areas. They want their quality of life to be good. Yet, initiatives that are taken only seem to lead to more congestion and more pollution.

À  (1010)  

    The Chair: Anything further?

    Mr. Lorne Nystrom: I have one final question, Madam Chair.

    Ms. Girard-Bujold, I agree with you that your proposal is more universal. However, the government overwhelmingly supported Mr. Riis' proposal three years ago. I'm trying to come up with compromise. If Mr. Wilfert, Ms. Minna and Mr. Cullen agree with Mr. Riis' proposal, perhaps you could as well. What do you think? I'm only suggesting this because of the overwhelming support for the two proposals and because a number of contradictions have emerged. Perhaps we could find some middle ground.

    Ms. Jocelyne Girard-Bujold: As I said earlier, perhaps the tax rebate measure could be extended to employee parking passes issued by employers. We could include them. I think this measure is applicable to selected persons. I can say it could benefit to that and, also to other fiscal abatements.

    Moreover, some federal studies show that if such a measure were implemented, the number of automobiles used for daily commutes would drop by 7%. Imagine a 7% decline in the number of cars on the road. That would be incredible. Imagine the positive impact on people's health.

    This is a sound measure and it could be included in the overall proposal.

[English]

    The Chair: Mr. Reed.

    Mr. Julian Reed (Halton, Lib.): I am very sympathetic with the idea madame has brought forward, but I feel this consideration we're having is more of an intellectual exercise than it is an exercise in practicality for most of us. I don't know how many of us ride public transit on a continuing basis, but I would say the percentage of people who do in this room is not very high. As it happens, I do ride public transit on a continuing basis. About half an hour from now I'm out to catch public transit to go to the railway station to take a train home. I've been using public transit for many years, because I live west of Toronto, and if I drive into Toronto, it costs me more to park than the transit fare both ways. I can ride comfortably, and I can read my newspaper and arrive refreshed.

    Yet I do not believe that financial incentives of this kind will increase ridership in any way. What has to be changed is the mindset of many Canadians, who are so accustomed to driving their SUVs or whatever it happens to be. There has been nothing, to this point, to trigger that change in mindset and the necessary difference in thinking that has to take place if you're going to ride public transit. There is some pre-planning that has to go into things, you have to think about it.

    Public transit today is cheap. In comparison with driving a car, it is cheap transportation. So I don't think--and I say this in all seriousness and speaking from some experience--doing something like this is going to change the mindset of Canadians. We have to find another way, and I'm not sure what that way is. Believe me, I really am not sure. I can see improving the equipment. I can see increased capital expenditure for rail for more comfortable kinds of equipment. With GO Transit where I live, the equipment is excellent. It's a little less up-to-date, perhaps, with OC Transpo and STO Transpo, but the service is excellent. I just don't see the logic of this kind of incentive.

    I'm also concerned that those folks who have a net income such that they pay no income tax will not be beneficiaries of this at all, they'll be missed in the process. So, Madam Chair, I want to go on record as saying I understand the spirit of this bill, but it's not going to accomplish what you may think it is.

    Thank you, Madam Chair.

À  (1015)  

[Translation]

    Ms. Jocelyne Girard-Bujold: I wish I could feel the same as Mr. Reed. I too dream of a world in which everyone is educated about such matters. However, the year is 2002. People say that we are privileged. I don't consider myself privileged to live in a world where pollution is increasing as a result of the growing number of automobiles on the roads.

    Where I live, sir, people cannot travel to town if they do not own a car. They would like to have bus service, but they don't.They have no choice but to drive to work or school or to the grocery store.

    I wish I were in your position. I'd like to live in a world without pollution, a word in which everyone has everything they need. However, I have to face reality.

    This measure would benefit average citizens and I'm advocating on their behalf. I'm not advocating on your behalf, or on my own behalf either, because we can take taxis if we want. These people, however, may only earn minimum wage. Some stay-at-home moms might enjoy going into town from time to time. Everyone would benefit from this refundable tax credit. If we don't start somewhere, or if we say that we should be investing in road infrastructures, then we will continue putting things off. This is a concrete initiative that could be implemented today, one that would provide money immediately to transport companies and tax rebates to public transit users, thereby leading to an increase in ridership.

    That is my goal, along with addressing environmental and health concerns. As you no doubt know, environmental and health issues are directly linked. People's health will improve when the number of polluting vehicles on the roads decreases. We may just get what you're wishing for, sir.

[English]

    The Chair: Mr. Brison.

    Mr. Scott Brison (Kings--Hants, PC/DR): No, I'll pass, thank you.

    The Chair: Okay. Then Mr. Wilfert.

    Mr. Bryon Wilfert (Oak Ridges, Lib.): I won't reiterate everything I said yesterday, but I'd like to thank Madame Girard-Bujold and the officials for coming, particularly Madame Girard-Bujold for her kind comments earlier with regard to my statements yesterday.

    The context of the bill is February 2, 2001. I indicated that since that time the government has been very active on a number of fronts, particularly with the Prime Minister's task force on urban issues, which will be doing an interim report in April and will, I am sure, since I'm on it, be addressing the issue of transit. There's the strategic infrastructure front, $2 billion-plus, dealing with assistance for major transit projects. There's the Green Enabling Fund being doubled to $250 million. There's the national infrastructure program generally, which again allows municipal governments to participate. There's the initiative of the Department of Finance, through the finance minister and the five big-city mayors, the working group dealing with Finance officials and their officials to look at transit strategies for the future. All of these have come about since February 2, 2001. Had they not, I would suggest that this initiative, on its own, should be examined in even further detail. The fact is that there are not unlimited dollars. We heard from CUTA yesterday, and we've heard it from others, that transit systems in places like Vancouver, Toronto, Ottawa, London, etc. are at capacity, and dollars, particularly infrastructure dollars, are really necessary.

    Part of the problem, as I said yesterday, is also the issue of municipal governments. They need to look at how they deal with their zoning issues, particularly in the GTA, where there's been a decline in density since 1967.

    I think it's an important initiative the member has brought forth. I hope it has spurred all of us to think about transit in more detail, also, I would suggest, spurring the government to look at other initiatives in conjunction with other partners, particularly our municipal friends, but obviously the provinces. I think that's an important statement, Madam Chair, but we do not have unlimited dollars and we have said where we're going to place them. I think the comments generally have said it's got to be infrastructure. Unfortunately, often it is either-or. It can't always be everything. If we're going to do it correctly, we've got to make sure we focus our dollars. I think we are doing that now, Madam Chair. But again I thank the member for her very thoughtful, and I think very instructive, presentation.

À  (1020)  

    The Chair: Thank you very much. That completes all the people on my list right now.

    We can take a short break until 10:30. The amended notice, I am told, did get to your office this morning showing the 10:30 time, as we agreed yesterday in committee here.

    Thank you very much to the witnesses.

    At 10:30 we will proceed to clause-by-clause here. Please keep in mind that at the very latest, we should be out of this room at ten to the hour, because of Mr. Romanow and the rest coming in here. If we need to, we'll be at the West Block, but it's a one-clause bill. Thank you.

À  (1024)  

---

À  (1030)  

    The Chair: Okay, we're back, it's 10:30. This is clause-by-clause. It is a private member's bill.

[Translation]

    Mr. Yvan Loubier: Could we have a recorded vote for each clause of the bill, and for the entire bill? I would greatly appreciate that.

À  (1035)  

[English]

    The Chair: You want a roll-call vote? Is this what you're asking for?

    Oh, no. If this is a fire alarm, if it stops in a minute, we'll come back here. If it continues, we go to the West Block at 11. I think we'll be able to get back here--who knows?

    The meeting is adjourned.