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37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Thursday, November 6, 2003

1330

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

Ms. Mary Webb (Chair, Finance and Taxation Committee, Ontario Chamber of Commerce)

1335

1340

The Chair

Ms. Jennifer Ramsay (Chair, Housing and Homelessness Network of Ontario, National Housing and Homelessness Network)

Mr. Michael Shapcott (Co-Chair, National Housing and Homelessness Network)

1345

The Chair

Mr. Charles Milne (Vice-President, Government Affairs, CropLife Canada)

1350

The Chair

1355

Mr. Howard Thompson (Chair of the Excise Tax Committee, President and CEO of Creemore Springs Brewery Ltd., Canadian Association of Small Brewers)

The Chair

Mr. Howard Thompson

1400

Mrs. Laura Urtrowski (President, Les brasseurs du Nord, Canadian Association of Small Brewers)

The Chair

Mr. Barry Grills (Past President, Writers' Union of Canada)

1405

The Chair

Mrs. Deborah Windsor (Executive Director, Writers' Union of Canada)

1410

The Chair

Mr. John Minister (President, Canadian Jewellers Association)

1415

Mrs. Carmen Rivet (First Vice-President, Canadian Jewellers Association)

Mr. John Minister

1420

The Chair

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance)

Ms. Mary Webb

Mr. Rahim Jaffer

Ms. Mary Webb

Mr. Rahim Jaffer

Mr. Howard Thompson

Mr. Rahim Jaffer

Mr. Howard Thompson

Mr. Rahim Jaffer

1425

Mr. John Minister

The Chair

Mr. Pierre Paquette (Joliette, BQ)

Mrs. Laura Urtrowski

Mr. Pierre Paquette

Mrs. Laura Urtrowski

Mr. Pierre Paquette

Mrs. Laura Urtrowski

Mr. Pierre Paquette

Mrs. Carmen Rivet

Mr. Pierre Paquette

Mrs. Carmen Rivet

Mr. Pierre Paquette

Mrs. Carmen Rivet

The Chair

Mr. John Minister

1430

Mr. Pierre Paquette

The Chair

Mr. Michael Shapcott

The Chair

Mr. Bryon Wilfert (Oak Ridges, Lib.)

Mr. John Minister

Mr. Bryon Wilfert

Mr. Michael Shapcott

1435

Mr. Bryon Wilfert

Mr. Barry Grills

Mr. Bryon Wilfert

Mr. Howard Thompson

Mr. Bryon Wilfert

The Chair

Mr. Gary Pillitteri (Niagara Falls, Lib.)

Mrs. Carmen Rivet

Mr. Gary Pillitteri

Ms. Mary Webb

Mr. Gary Pillitteri

1440

Mr. Howard Thompson

Mr. Gary Pillitteri

The Acting Chair (Hon. Maria Minna (Beaches—East York, Lib.))

Mr. Scott Brison (Kings—Hants, PC)

1445

Mr. Scott Brison

The Chair

Mr. Shawn Murphy (Hillsborough, Lib.)

Mr. Scott Brison

Mr. Shawn Murphy

Mr. Howard Thompson

Mr. Shawn Murphy

Mr. Howard Thompson

Mr. Shawn Murphy

Mr. Howard Thompson

1450

Mr. Shawn Murphy

Mr. Howard Thompson

Mr. Shawn Murphy

Ms. Laura Urtrowski

Mr. Shawn Murphy

Ms. Laura Urtrowski

Mr. Shawn Murphy

Mr. Howard Thompson

Ms. Laura Urtrowski

The Chair

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP)

Mr. Michael Shapcott

Ms. Judy Wasylycia-Leis

1455

Mr. Michael Shapcott

The Chair

Ms. Mary Webb

The Chair

Ms. Maria Minna

1500

Ms. Mary Webb

Ms. Maria Minna

The Chair

1510

Mr. Bryon Wilfert

The Chair

Mr. Nils Kravis (President of Kelsey's International Inc., Canadian Restaurant and Food Services Association)

1515

The Chair

Mr. Ron Bonnett (President, Ontario Federation of Agriculture)

1520

1525

The Chair

Mr. Gerry Thompson (Chief Executive Officer, Regional Municipality of Waterloo)

1530

The Chair

Mr. Don Marsales (President, Canadian District Energy Association)

1535

1540

The Chair

Mr. Rahim Jaffer

Mrs. Joyce Reynolds (Senior Vice President of Government Affairs, Canadian Restaurant and Food Services Association)

1545

Mr. Rahim Jaffer

Mr. Ron Bonnett

Mr. Rahim Jaffer

Mr. Gerry Thompson

The Acting Chair (Mr. Gary Pillitteri)

Mr. Pierre Paquette

1550

Mrs. Joyce Reynolds

Mr. Pierre Paquette

Mr. Ron Bonnett

Mr. Pierre Paquette

The Chair

Mr. Pierre Paquette

1555

The Chair

Mr. Bruce Ander (President, Markham District Energy, Canadian District Energy Association)

Mr. Pierre Paquette

The Chair

Mr. Bryon Wilfert

Mrs. Joyce Reynolds

Mr. Bryon Wilfert

Mrs. Joyce Reynolds

Mr. Bryon Wilfert

Mr. Nils Kravis

Mr. Bryon Wilfert

1600

Mr. Ron Bonnett

Mr. Bryon Wilfert

Mr. Ron Bonnett

Mr. Bryon Wilfert

Mr. Ted Cowan (Policy Analyst, Farm Policy Research Group, Ontario Federation of Agriculture)

Mr. Bryon Wilfert

The Chair

Ms. Maria Minna

Mrs. Joyce Reynolds

1605

Ms. Maria Minna

Mrs. Joyce Reynolds

Ms. Maria Minna

The Chair

Ms. Maria Minna

Mrs. Joyce Reynolds

Ms. Maria Minna

Mrs. Joyce Reynolds

Ms. Maria Minna

1610

Mrs. Joyce Reynolds

Ms. Maria Minna

Mrs. Joyce Reynolds

The Chair

Mr. Shawn Murphy

The Chair

Mr. Shawn Murphy

Mr. Nils Kravis

1615

Mr. Shawn Murphy

Mr. Nils Kravis

Mr. Shawn Murphy

The Chair

Mr. Bruce Ander

Mr. Shawn Murphy

Mr. Bruce Ander

Mr. Shawn Murphy

Mr. Bruce Ander

The Chair

Mr. Gary Pillitteri

1620

Mrs. Joyce Reynolds

1625

The Chair

Mr. Nils Kravis

The Chair

Ms. Judy Cutler (Director of Communications and Co-Director of Advocacy, Canada's Association for the Fifty-Plus)

1635

Mr. Bill Gleberzon (Executive Director, Co-Director of Advocacy, Canada's Association for the Fifty-Plus)

Ms. Judy Cutler

1640

The Chair

Ms. Rudy Ruttimann (Treasurer, Arts Network for Children and Youth)

1645

The Chair

Mrs. Rebecca Finlay (Group Director, Public Affairs, Canadian Cancer Society)

1650

1655

The Chair

Mr. John Lounds (President, Nature Conservancy of Canada (The))

1700

The Chair

Mr. John Lounds

The Chair

Mr. John Lounds

The Chair

Mr. Paul Thériault (President, Direct Sellers Association of Canada)

1705

1710

The Chair

Mr. Mauro Ritacca (Manager, Government Relations, Toronto Real Estate Board)

1715

The Vice-Chair (Mr. Monte Solberg (Medicine Hat, Canadian Alliance))

Mr. Rahim Jaffer

Ms. Judy Cutler

Mr. Bill Gleberzon

1720

Mr. Rahim Jaffer

The Chair

Mr. Rahim Jaffer

Mrs. Rebecca Finlay

1725

The Chair

Mr. Gary Pillitteri

Ms. Judy Cutler

Mr. Gary Pillitteri

Mr. Bill Gleberzon

1730

Mr. Gary Pillitteri

Mr. Bill Gleberzon

Mr. Gary Pillitteri

Mr. Bill Gleberzon

Mr. Gary Pillitteri

Mr. Bill Gleberzon

Mr. Gary Pillitteri

Mr. Bill Gleberzon

Mr. Gary Pillitteri

Mr. Bill Gleberzon

Mr. Gary Pillitteri

Mr. Bill Gleberzon

Mr. Gary Pillitteri

Mr. Bill Gleberzon

Mr. Gary Pillitteri

The Chair

Ms. Maria Minna

1735

Ms. Judy Cutler

Ms. Maria Minna

Ms. Judy Cutler

Ms. Maria Minna

Ms. Linda Albright (Executive Director, Arts Network for Children and Youth)

1740

The Chair

Ms. Linda Albright

The Chair

Mr. Monte Solberg

The Chair

Mr. Monte Solberg

Mr. John Lounds

Mr. Monte Solberg

Mr. John Lounds

1745

Mr. Monte Solberg

The Chair

Mr. Monte Solberg

Mrs. Rebecca Finlay

Mr. Monte Solberg

Ms. Linda Albright

Mr. Monte Solberg

The Chair

Mr. Mauro Ritacca

The Chair

Mr. Mauro Ritacca

1750

The Chair

Mr. Mauro Ritacca

The Chair

CANADA

Standing Committee on Finance

NUMBER 102

2nd SESSION

37th PARLIAMENT

EVIDENCE

Thursday, November 6, 2003

[Recorded by Electronic Apparatus]

· (1330)

[Translation]

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

[English]

We are with the first afternoon panel in Toronto, on Thursday, November 6, and pursuant to Standing Order 83.1, we are in pre-budget consultations. We would like to welcome the Ontario Chamber of Commerce, and Mary Webb, who is the chair of the finance and taxation committee.

We also have the National Housing and Homelessness Network, and Jennifer Ramsay, who is the chair of the Housing and Homelessness Network of Ontario. Welcome. And you have Michael Shapcott with you, who is your co-chair. So we will look forward to hearing from you.

From CropLife Canada we have Charles Milne, vice-president, government affairs. Mr. Milne, welcome, it's not your first time here, I know.

From the Canadian Association of Small Brewers, we have Mr. Howard Thompson, who is the chair of the excise tax committee and president and CEO of Creemore Springs Brewery Ltd. He has now been joined by the president, Laura Urtrowski.

From the Writers' Union of Canada, we have Deborah Windsor, executive director, and Barry Grills, the past president. Welcome to you, sir. You were with us last year and did a good presentation.

The Canadian Jewellers Association has had some substitutions. John Minister is the president; Carmen Rivet is the first vice-president; and Neil Foster is the treasurer of that association. Welcome to you all.

All right, we have six groups. You have seven minutes each, and we will commence in the order of this agenda.

After the nice evening that I attended a couple weeks ago for your chamber's business awards dinner because the London company won an award...if you do that every year I'll come to all of the dinners.

Ms. Mary Webb (Chair, Finance and Taxation Committee, Ontario Chamber of Commerce): Okay. Thank you.

I'm a senior economist at Scotiabank, but it's also my honour to chair our finance and taxation committee.

The Ontario Chamber of Commerce has over 57,000 business members and we do speak as the voice of business in Ontario. Therefore, we're very pleased to have this opportunity to present our recommendations to the federal government. We're concerned about the Ontario economy. It's been a tough year. The consensus forecast is for 1.8% growth this year, and next year we think it's going to be around 2.7%, less than the 3% that's hoped for.

In addition to the one-time events, there are also some significant fundamental problems. Every industry is facing very intense competition that's specific to their market. In the automotive industry, for example, they're facing new assembly capacity in the southeast States that is opening, which makes it harder for our parts people to service them. In steel they're facing import competition. The list goes on and on. We're also concerned that the higher Canadian dollar poses a very substantial adjustment.

Another key concern of our members has been their perception that Canadian-U.S. relations have deteriorated. Therefore the Ontario Chamber of Commerce has worked very hard to set up ongoing relationships with chambers of commerce south of the border. In fact, we are starting on Team Ontario economic recovery tours that will be going to the major centres in the States adjoining our province, including Minnesota. We will be having, on these tours, in conjunction with the Ontario government, representatives of industry and the Ontario government. We will be talking to them about the fact that Ontario is open for business and we will certainly hope to deal directly with any concerns they have.

In terms of our recommendations for this year, we certainly recognize that Ottawa is also facing a slightly tighter situation going forward, and we urge that you reinstate, when it's possible, the economic prudence factors. We're encouraged by the continued debt reduction. We would like Ottawa to aim for lowering the debt-to-GDP ratio to less than 30% by 2010. This basically assumes $3 billion per year, even with minimal debt reduction in fiscal year 2004.

We have a number of tax issues. We have several suggestions for building productivity and we have several suggestions for constraining expenditures.

On the tax measures, there's an emphasis in our membership for tax reform. We've seen the tax reduction and we applaud the five-year tax package and the additional tax measures introduced last February, but there could be some reform. There is the idea of looking at a policy inventory and a tax expenditure inventory: which measures duplicate, which measures are no longer very effective, which measures seem to be unnecessarily expensive for the outcome they're producing. When we look at the tax expenditure list, we see there is a very substantial proportion that no longer have an estimate because they cannot be traced.

We continue to look at profit-insensitive levies, and when we're talking with non-resident investors, we find those are posing a significant barrier to new investment in Ontario, but also across Canada.

Possibly the capital tax is the greatest irritant. We currently welcome Ottawa's commitment to eliminate the large corporations' capital tax by 2008, because there are a number of studies that show, in fact, that government revenue in the end would be higher if you eliminated this tax, because it would be a significant obstacle cleared. We beg you to move as quickly as possible with that elimination, possibly before 2008, and to relook at eliminating the special capital tax on financial institutions. It certainly is a barrier to building up reserves.

We're concerned as well that the withholding tax on interest and dividends is another situation where, if eliminated, the revenue and the economic activity it would generate would quickly recapture the tax information that is lost. This would be a bilateral arrangement with the U.S., although it could certainly be negotiated on a bilateral arrangement with all others. It is essential as we go forward with the NAFTA integration, if only because there are a number of deterrents to direct investment now, including the higher dollar, the potential problems at the border, and the list goes on.

· (1335)

Capital cost allowances come up with our membership, particularly with respect to IT equipment, that the capital cost allowance is not keeping pace with the very rapid pace of change in this area; and it's an area that is so key to enhanced productivity growth and lowering unit costs, which is essential with a higher dollar.

One suggestion that has been put forward by a number of our members is, for IT purchases of less than $5,000, that they be allowed to be expensed in the year they are acquired, and for those over $5,000, that they be subject to a special CCA category with a 50% depreciation rate in the first year.

On the small business taxation, in this period of much lower job creation, when private sector paid job growth has stalled, small business will be a really key component of our job creation over the next year. In Canada, our small business sector is extremely vital, but we've been less successful at growing small to medium-sized businesses. Therefore, we would like to have considered a graduated income tax rate so that no longer is there a jump from 13.1% to 22.1%, a very stiff nine percentage points, but that this would be graduated.

Turning to productivity, it is interesting that according to our latest survey of our membership, they still see no improvement in terms of streamlining regulations at any level of the government, federal, provincial, or local. We'd like to see annual benchmarks so that progress is registered. We certainly welcome the new federal committee on regulation, but if there were benchmarks, people would be more aware of what's happening. In addition, we'd like to see a five-year sunset clause on each new regulation.

In other areas, on interprovincial cooperation, we certainly look for better relationships between the provinces and the federal government, particularly in assistance when there are emergencies, but also in key areas such as interprovincial trade.

On innovation, biotechnology for Ontario stands out as a major area.

On smart spending, we'd like to have major spending reallocations, as Finance Minister Manley indicated, and that would hold spending increases to less than 5% so that we would be able to proceed with debt and tax reduction as well.

In conclusion, we think the key economic and fiscal goal for the federal government should be making Ontario and Canada more competitive jurisdictions within NAFTA.

· (1340)

The Chair: Thank you very much.

Now we'll move to the National Housing and Homelessness Network. Ms. Ramsay, the floor is yours.

Ms. Jennifer Ramsay (Chair, Housing and Homelessness Network of Ontario, National Housing and Homelessness Network): Thank you.

Good afternoon. My name is Jennifer Ramsay. I am the advocacy and outreach coordinator at the Advocacy Centre for Tenants Ontario.You can also call it ACTO. It's shorter and easier to say.

ACTO is a province-wide legal clinic funded by Legal Aid Ontario, and we engage in test case litigation, law reform, education, and advocacy on housing and homelessness issues for low-income Ontarians.

I come before you today with some hope, and it has been a while since I've said that on the housing front. The day after Ontario's provincial election, I was delighted to read Minister Mahoney's remarks that he was looking forward to rolling up his shirt sleeves and working with the new Ontario government on delivering housing units under the federal-provincial housing agreement.

I am also here in my capacity as one of the facilitators of the Housing and Homelessness Network of Ontario, a network of housing advocates, legal clinic workers, front-line groups, faith-based groups, and low-income individuals who are all around the province.

I've had the privilege to travel the province of Ontario over the past few years to see how communities are coping with the housing crisis. They're not. Family breakup, loss of social networks, physical, psychological and emotional trauma, economic hardship, loss of employment options, disruption of children's lives, confiscation of personal goods, and increased social isolation are some of the by-products of that housing crisis.

Just so we're clear, the vacancy rate has absolutely nothing to do with the affordable housing crisis.

In Sault Ste. Marie, where I've now been twice, the last posted vacancy rate was over 11%, yet their homeless committee estimates that up to 20% of the community is couch surfing. That is no way to live a life or to build a community.

The problem is the lack of affordable housing, and obviously one of the key solutions is putting resources into a non-profit affordable housing program. The federal government has the experience of running the program. It has done it before, and it did it because it made sense to the country, economically and socially.

It will cost money, but ultimately the cost to all levels of government is much higher without such a program. If you don't have stable housing, you can't hold a stable job, and if you don't have a stable job, you're not paying taxes and generating revenue for the government. It is also likely that you're costing the health care system more money, straining the education system because of displaced children, overburdening crisis intervention programs, and using up millions of dollars in short-term hostel accommodation that could be better spent on long-term secure housing. An investment in housing is an investment in the Canadian economy.

Work with your provincial partners, and if they can't come to the table, work with your municipal partners to deliver the housing units that are desperately needed.

Thank you.

Mr. Michael Shapcott (Co-Chair, National Housing and Homelessness Network): Madam Chair, on behalf of the National Housing and Homelessness Network, I'd like to complete our seven minutes of time.

This will be our third year appearing in front of the committee and urging you to adopt the 1% solution recommendation, that the federal government commit $2 billion annually for new affordable housing.

In the years since we've been recommending this to the committee, we're pleased to note, the federal government has made some commitments towards new housing. In November 2001, the Affordable Housing Framework Agreement, signed by the federal government, provinces, and territories, called for $680 million over five years from the federal government, and indeed, in the most recent federal budget $320 million was added to that. That's a total of $1 billion over five years committed to affordable housing from the federal government. So we're pleased with the progress in the right direction.

We want to say to the committee today that while that money is welcome, it's still not enough to meet the scale of the nationwide affordable housing crisis.

Madam Chair, we know from your work in London that you've been in contact with the London Housing and Homelessness Network. They've been very active. Two weeks ago I was there at a conference they sponsored, talking about the local dimensions of the problem there. It's a problem right across the country, and all members of this committee will be very familiar with the dimension of the problem.

One thing that has been different in the last year since we appeared before this committee is that not only are municipalities, housing groups, and community groups urging the government to spend the 1% solution, but now business organizations are joining. Most recently, of course, the Toronto Dominion Bank issued a report, in June of this year, urging the government to adopt a targeted national housing program. So we want to urge this committee, in its recommendations to Parliament, to adopt the 1% solution of $2 billion for housing.

I want to say very quickly also that we're very concerned about the lack of progress in implementing the Affordable Housing Framework Agreement. We think that while this is not strictly a fiscal issue, the committee should note with some concern that the federal government has put substantial money on the table, and many of the provinces and territories have refused to match the commitment, not just Ontario--although as Jennifer said, we're hopeful that the new Ontario government might come to the table--but provinces like Alberta, which certainly has the resources, and many of the Atlantic provinces.

I was just in Nova Scotia. There they've committed 15 units. That's all they've committed in two years, and many other provinces as well.

So we're here to say that we think the federal government needs to use the accountability provisions in the Affordable Housing Framework Agreement to make sure the provinces and territories do what they say they're doing, or get them out of the way and deal directly with willing municipalities and social housing providers, because we'll get the work done. We'll get the housing built.

The federal government has committed a certain amount of money and has more on the table, but if that money continues to get caught in the morass of federal, provincial, and territorial relations, the Canadians who are living and dying on the streets of Canada will not see any benefit from that housing.

So we'd urge this committee, as part of its recommendations, to say to the federal government that either they should get beyond the federal-provincial squabbling around the Affordable Housing Framework Agreement or the federal government should use the powers it has in the accountability framework under this agreement to in fact move ahead and deal directly with municipalities.

I'd like to close by quoting a member of Parliament from 1990 who said that the federal government has abandoned its responsibilities with regard to housing and that it needs to get back into the housing business. He said that leadership must come from one source; and a national vision requires some national direction. This particular member of Parliament, of course, is Paul Martin, who I understand is still on the scene and still has some aspirations in politics.

We've met with Mr. Martin and urged him to take up his recommendations. We hope this committee will join us in encouraging Prime Minister Martin, when he assumes his responsibilities, to take up those words.

Thank you.

· (1345)

The Chair: Thank you very much.

From CropLife Canada, Mr. Milne, the floor is yours.

Mr. Charles Milne (Vice-President, Government Affairs, CropLife Canada): Madam Chair, members of the committee, I thank you very much for the opportunity to testify today. I am Charlie Milne, vice-president of government affairs, CropLife Canada.

We are the trade association that represents the developers, manufacturers, and distributors of plant science innovations, pest control products, and plant biotechnology for use in agriculture, urban, and public health settings.

The technologies of our CropLife members are frequently unseen but are vital elements, ensuring that urban, rural, and remote communities are desirable places in which to live and work. The technologies of our members also play an essential role in ensuring that agriculture maximizes its contribution to Canada's prosperity. Our technologies also characterize the essence of a knowledge-based economy, which Canada strives to embrace through the innovation strategy and the ag policy framework.

We have a vision. I guess there are four points that I would like to share with you today.

We would like to see, number one, a regulatory environment that's the toughest and the most respected in the world, where technology manufacturers and developers can justify significant R and D expenditures in Canada, despite Canada's small market size. Canadian market registration is efficient, tough, and so well respected that it's as welcome as a Canadian passport worldwide.

Secondly, we'd like to see Canadian growers positioned to have the competitive advantage of being the early adopters and the first to global markets because of technology registrations that are being made here in Canada.

Number three, we'd like to see export market access for Canada's new and emerging leading-edge technologies and crop innovations being negotiated in parallel with the increasingly rapid rate of Canadian technological innovation discoveries.

Finally, we'd like a Canadian regulatory environment that's oriented to advancing and anticipating technological innovation while instilling public confidence in the rigour of the regulatory system and the acumen of those who run it.

There are some challenges and some fleeting opportunities where some vital choices need to be made immediately.

Number one, there needs to be a science-based, predictable regulatory system that supports the introduction of new plant biotechnology innovations. Specialty crops and niche crops are critical to maintaining agriculture as an economic driver in Canada. The introduction of socio-economic considerations, especially concerning market access, into the Canadian regulatory framework would undermine the scientific basis for regulation that ensures the safety of all products in Canada.

Number two, there's an absence of regulatory clarity and the corresponding policy framework for new market-ready technological innovations, such as plant-made pharmaceuticals and plant-made industrial products. Those technologies could drive the Canadian knowledge-based economy to see commercialization occur in other jurisdictions if we're not providing the clarity that is demanded right now, thereby depriving Canada of the opportunity to reap the competitive advantages of being the first to market and also those benefits of being home to further related innovations that were discovered here.

Thirdly, Canadian regulatory overburden compounds the challenge of Canada's small market status, rendering Canada less attractive for R and D investment from global-based technology firms.

A fourth point is the mixed messages that Canada is sending regarding decisions, such as the Harvard mouse and the Patent Act. They're confusing and they're disincentives to the attraction of knowledge-based industries to Canada.

Finally, there is a lack of greater clarity government wide. We need a greater synchrony government wide, both federally and provincially, within Canada's regulatory environment because right now we risk stifling the intended positive influences of initiatives like the innovation strategy and the ag policy framework.

We have a number of recommendations in this regard. We must maintain the strong science-based regulatory approach for emerging plant biotechnology innovations, as well as the niche and specialty market crops. Canada must not compromise our legislation and regulation by introducing non-scientific factors to issues such as market access. This would only foster uncertainty. The agrifood sector must have the right to buy, sell, and market products that have been approved for safety by the Canadian government.

· (1350)

We need to clarify and develop the regulatory framework for plant-made pharmaceuticals without delay. It's critical to the future of plant biotechnology in Canada.

Smart regulation needs to include government-wide departmental synchrony as well as being coordinated federally and provincially to make a meaningful improvement to Canada's regulatory environment.

Government must take a more active role and a higher-profile position to enhance public confidence in Canada's regulatory system and the scientific acumen of those charged with the responsibility to regulate.

In conclusion, it's time for Canada to walk the talk of being a knowledge-based economy and establish an enabling regulatory framework to attract, embrace, advance, and excel with technological innovation. Canadian agriculture, through plant biotechnology and Canada's emerging strength in specialty crops and niche market crops, has a chance to achieve global distinction if Canada is prepared to manage the success.

Thanks for the opportunity to share these views.

The Chair: Thank you very much. We appreciate that.

Now we'll move to the Canadian Association of Small Brewers.

Who is going to lead the presentation here?

· (1355)

Mr. Howard Thompson (Chair of the Excise Tax Committee, President and CEO of Creemore Springs Brewery Ltd., Canadian Association of Small Brewers): I will, and Laura Urtnowski.

The Chair: Okay, great. Go ahead, Mr. Thompson.

Mr. Howard Thompson: Madam Chair and members of the committee, it is good to see you again. Some of you we've spoken to before. This is the third time, or perhaps the third time, that I have been here with the small brewers representing our excise tax questions and concerns.

I also want to introduce John Hay, who has been in contact with many of the members' offices. He has been working with the small brewers' association. There are also two of my fellow small brewers from Ontario here, Ken Woods from Black Oak Brewing Company in Oakville, and John Carefoote from Amsterdam Brewing Company right here in downtown Toronto. It is good to see them out.

Currently, our organization represents 85 to 90 small brewers across the country, which is a bigger number than we have represented in the past.

With me is Laura Urtrowski, who is the president of Les Brasseurs du Nord in Quebec, who represent Boréale brands. She also co-chairs, with me, the excise tax committee for the Canadian Association of Small Brewers.

Beyond that, my background is that of a practitioner. I am the president of Creemore Springs Brewery, which is a small brewery here in the province of Ontario. We spend the bulk of our time making beer.

It is a pleasure to be able to present again today.

To begin, and perhaps most importantly, I want to thank the committee for the time and patience you have had with us over the years, and the fact that last year we did receive a recommendation directly supporting our initiative to have the excise tax reduced, which went into the finance committee's report. So on behalf of all of our group, I want to thank you for that and encourage you to repeat that recommendation in this year's report.

In support of that, I will again talk about what I've talked about in the past. This is a pleasurable business, based on the success of a lot of small businesses. It is important to think about this as a small business success story, because what we have is a group of entrepreneurs, for the most part private companies—although some of them have grown to the point where they could influence the markets and have public companies—who are at a crossroads.

The reason they are at a crossroads is that, unlike most other small businesses, if you're a small business and the business is making beer, a significant amount of your revenue generated goes back in the form of taxes. Just to put it in perspective, the federal excise rate of $28 per hectolitre is almost exactly the same amount of money we would pay to hire an employee, or to rebuild capital plant property and equipment. It is a significant chunk of change that competes directly with the other capital needs of these small businesses.

The reason we believe it is important for the government to continue to look at investing in these small businesses through the excise tax regime is that we're job creators. We are wonderfully inefficient; the important part of making beer in a small manufacturing environment is that it takes people to do it. It is a hands-on job; time and attention to detail is imperative. That means there are a lot of hands and a lot of people involved in doing it.

The research we have done shows that a small brewery will hire two and a half people for every thousand hectolitres that it produces. We compete directly with imported products in the premium beer sector, but a similar equation in the imported beer market is close to zero. We can bring beers in from other countries and not create any jobs.

Ironically, the birth and growth of small breweries in this country gave rise to the premium beer sector, which then invited a bunch of imported products from a very consolidated worldwide business. Now the imports represent about 10% of the market in Canada.

We are not here to ask you to help us compete. We are good at that; our products are good at that, and our business acumen is fine. What we do want the government to consider is that if we can take back a percentage point, or two percentage points, from imported products that compete directly with our brands, the job growth from that is simple math. It is more than 10 or 50 times...jobs per hectolitre produced.

¸ (1400)

In the last 10 years, the industry has seen considerable consolidation worldwide. That is a fact of life. The silver lining to that is that it hasn't happened within the micro side, because we identify and deliver our products to markets that identify with us locally. By definition, we are involved in the communities and the local economies where we produce, meaning that when we step out across the country there will be a bunch of little breweries. Instead of losing 4,000 jobs over the past 10 years in what would be called the major brewing category, we've created 2,000 jobs and continue to do so. In fact, in the last few years, we have changed the beer category from being a net job loss industry to one with a small net job gain.

That's all I'm going to talk about. Laura is going to continue.

[Translation]

Mrs. Laura Urtrowski (President, Les brasseurs du Nord, Canadian Association of Small Brewers): The real question is this: What do we need to maximize our growth potential? The answer is simple. We need to see a lower rate of taxation in order to invest our savings in our expansion. Our business environment has become extremely competitive. It is critically important for us to have an adequate budget for sales and marketing operations.

At present, we are being buried by imports owing to a lack of liquidity. Most beer-producing nations, including the United States, have understood the specific needs of small breweries and have responded by implementing a different taxation regime for small domestic breweries. The provinces have adopted the same approach and these policies have helped us tremendously. Tax breaks have helped some breweries finally turn a profit. Furthermore, they have resulted in net job gains and stimulated local sales. That was exactly the impact it was hoped these policies would have.

A similar thing happened recently in Britain. Jobs were created and equipment purchased. The same thing happened in Quebec several years ago.

Recent tax cuts in Ontario likely prevented the closure of four breweries. One business was forced to shut down, however, and two have ceased operations in Quebec. And while tax cuts have enabled a number of our breweries to stay afloat, we still have a way to go before we take our rightful place in the growing specialty beer market. In our opinion, the excise tax reduction we are seeking would help to set the small brewery industry on the path to growth. Without these small breweries, we're concerned that we would gradually become marginalized.

I urge you to give this request due consideration. Thank you.

[English]

The Chair: Merci beaucoup, madame.

Maintenant we have the Writers' Union of Canada.

Mr. Grills, go ahead, sir.

Mr. Barry Grills (Past President, Writers' Union of Canada): Thank you, Madam Chair. As you said, it's nice to see you all again. It hardly seems like a year since we were last here.

My opening remarks are really quite piecemeal. I'll turn it over to Deborah in a moment to highlight some of the recommendations. Many of them are similar to last year's recommendations, perhaps with some additional recommendations added.

I wanted to talk instead about the Writers' Union and the context in which the brief is prepared. There's a larger context based on all of the activities that the Writers' Union is involved in. If it's okay with the committee, I'll proceed on that basis. Thank you.

As you know, the Writers' Union of Canada is more than 30 years old now. When I was chair last year, we celebrated our 30th birthday. Since then, the government too is celebrating it's BPIDPgrant 25th anniversary this coming year. We'll be working together with them on that celebration.

Among our achievements is a burgeoning membership. We're now up to 1,500 members, where we essentially started in a house with some now household names of book authors. Among our achievements are public lending right and access copyright.

Certainly, the excellence of Canadian writing internationally is now well known. I don't have to say much about that.

We've also been working together with the publishing industry and our governments to encourage new writing, new publishing, and to protect fundamental rights that relate to the creation of literature.

In more recent years, the Writers' Union has also been actively involved in initiatives to protect copyright and working with coalitions to develop a new international instrument for cultural diversity. I was in Paris last December working on that with meetings between the Canadian and French governments.

We also have launched, and chair, a new initiative called BIG, the Book Industry Group. It's a think-tank made up of professional associations and individuals representing writers, publishers, editors, the Book and Periodical Council—I'm also vice-chair of that organization—Booknet, and others, with the express purpose of developing a book industry strategy to address an ongoing and worsening fragility in the entire book industry. This strategy is anticipated by the Department of Canadian Heritage early next year.

My point here is to present the holistic approach in which we approach the economic and other factors that are difficult for writers in Canada at this particular period in our history. While the Writers' Union has been spearheading this holistic approach to the various financial economic and cultural stresses facing writers and the publishing industry, it remains important to see the brief that we have already presented to you within the same holistic context.

The various interrelated issues of tax fairness, copyright, an unhealthy publishing industry, international trade pressures on the world's cultural mosaic and national sovereignty, technological change, and an increased need for government policy cohesion with respect to all of these issues outline the urgency facing writers in Canada as much as they define our cohesive response as writers.

In summary, since we last appeared before you, matters have worsened for Canadian writers. The publishing industry grows steadily more fragile, and writers still live and work well below the poverty line.

In the past, this committee has seen fit to endorse some of our recommendations designed to correct taxation injustices. We hope, in view of a worsening economic situation generally for Canadian writers and the publishing industry, and in view of our demonstrated dedicated efforts on behalf of Canadians generally and cultural creators and industries in Canada, that this committee will consider in a positive way the recommendations in our brief, which I'll ask Deborah to review for you.

Thank you very much.

¸ (1405)

The Chair: Ms. Windsor, go ahead.

[Translation]

Mrs. Deborah Windsor (Executive Director, Writers' Union of Canada): Thank you for giving us this opportunity to make our position known.

[English]

The Writers' Union, as Barry has identified, is focused on improving the quality of life of writers and creators, the foundation of our cultural society. Unfortunately, they are some of the lowest-paid people with some of the greatest academic achievements. Some are world renowned and yet their incomes are exceedingly low.

Part of this problem is based on the fact that they have fluctuating incomes. As a result of that, we would ask that the committee seriously look into a limited backward averaging plan for professional incomes of creators to address the fluctuating income component.

We would ask that this committee look into copyright income deduction for creators, modelled on the copyright reduction used in Quebec.

Writers often, when lucky enough, receive what is called subsistence grants. We would ask that tax be removed from the subsistence grants.

We would ask that the committee constantly look at the good works that are being done by the Canada Council of the Arts and adequately fund it for today and the future.

We are strong proponents of the public lending right and the funding that goes to the writers and the creators as a result of their work in libraries. We would ask that the committee support the funding of the public lending right in accordance with its original agreement. They are under threat of having $630,000 removed from their budget. It is a $10-million budget, so that is an exceedingly large amount. If possible, we would ask that the public lending right be a separate line item in the budget, as opposed to money going through the Canada Council and then being filtered further down.

We ask that you assist us in seeking secured creditor status for writers in the situation of bankruptcy. We have already made a presentation to the Senate Standing Committee on Banking, Trade and Commerce as a result of this.

We would ask that you look into finding a method of providing unemployment insurance benefits to self-employed creators who take on other jobs to fill in the gaps in their incomes. When those gaps are lost, they are not able to claim unemployment on the earned income that they have achieved.

Thank you. Merci.

¸ (1410)

The Chair: Thank you, very much.

Our final presenters today are from the Canadian Jewellers Association.

It has been a couple of years since you have been here, so welcome back.

Mr. John Minister (President, Canadian Jewellers Association): Good afternoon, Madam Chair and members of the committee.

My name is John Minister, and I am here today in my capacity as president of the Canadian Jewellers Association. With me are Carmen Rivet from Montreal and Neil Foster from Lethbridge, Alberta, both of whom are representing the independent retailers component of our membership. Both Carmen and Neil are members of the CJA executive committee. As a Canadian jewellery manufacturer myself, I bring these concerns to the table.

We appreciate the opportunity to appear before the Standing Committee on Finance during its pre-budget consultations.

The jewellery industry in Canada comprises approximately 5,000 companies, the vast majority of which are small privately owned businesses. They are involved in all aspects of the jewellery industry, providing full-time employment to approximately 40,000 Canadians. The Canadian Jewellery Association is a national trade association representing this sector.

The jewellery excise tax is imposed on all jewellery over $3 and all watches over $50 in value. This so-called luxury tax was first levied in 1918 to fund Canada's efforts in World War I. It is the only remaining tax of its kind. This tax should have been replaced by the GST in 1991. Instead, we now have both.

The luxury label can hardly be applied to most jewellery and watches, as the annual household expenditure on jewellery in Canada is estimated at $130 per household, less than the cost of an annual newspaper subscription.

The CJA appreciates past recommendations by the Standing Committee on Finance for the repeal of the excise tax on jewellery. The 1999 budget committee stated: “The Committee therefore recommends that the Department of Finance eliminate the excise tax on jewellery.”

We would now like to address three specific rationales for the elimination of the tax.

First is other jurisdictions. It would be natural to ask what other comparable jurisdictions are doing. Canada is the only industrialized nation and the only diamond-producing nation that still levies a jewellery excise tax. The last countries to repeal their taxes on jewellery were the United States, Russia, and Australia. Australia moved to a GS-based tax system two years ago, and it now taxes jewellery equally with other items. Those countries have now seen growth in their local jewellery manufacturing sectors.

In 1997, the Canadian jewellery industry participated in an independent study by Ernst & Young. It concluded that the tax was discriminatory, hurt small business, was very difficult to enforce, and generated very small net revenues for the government. On page 17 of the study it said that “the collected weight of all the evidence and industry knowledge analyzed above make a strong case for eliminating the tax”. I would be happy to pass on a copy of the study for the benefit of the committee.

I would also ask you to consider a recent reality with Canada playing a leading role as a diamond-mining country. Due to the jewellery excise tax, Canadian-mined diamonds cost more in Canada than anywhere else in the world. Canadians can purchase a Canadian diamond for less in any border town in the United States or any vacation destination outside their country due to the added and hidden 10% excise tax.

Over $1.5 billion of rough diamonds are exported annually, making Canada the world's third-largest producer. From the four diamond mines--two currently in production--total government revenues are expected to surpass $500 million annually. This dwarfs the $70 million collected from the jewellery excise tax.

Our second point is on job creation. In our opinion, the number one reason for the elimination of the excise tax on jewellery is jobs. This tax kills jobs, due to the way the tax is enforced. How is it possible that an identical piece of jewellery manufactured offshore is taxed in Canada at a lower rate than if it were made in Canada? Should Canadian manufacturers be placed in this unfair tax position by their own government? This tax system may have worked in 1918 when there was no global economy, but it doesn't work today.

¸ (1415)

Evidence of its destructive powers is clearly shown by the fact that since our last appearance in November 1998, numerous jewellery manufacturers have closed, and several manufacturers have relocated offshore and now export their products back into Canada to pay less excise tax. This has resulted in the loss of thousands of manufacturing jobs in our industry.

For example, with respect to the Canadian diamond industry, should Canadian tax policies only encourage the export of our raw materials? Would it not be wiser to promote the value-added and job-creating industries of diamond cutting and jewellery manufacturing in Canada?

This tax also negatively impacts federal initiatives for developing employment opportunities for aboriginal peoples of Canada. In northern Canada, the removal of the tax would encourage investment in the diamond and jewellery manufacturing industries.

The elimination of this tax will increase employment in the jewellery industry by creating jobs for an estimated 9,000 workers in both the retail and manufacturing sectors. That works out to an average of 30 jobs per riding, depending on the size of the riding.

I will now turn it over to our incoming 2004 president, Carmen Rivet.

Mrs. Carmen Rivet (First Vice-President, Canadian Jewellers Association): I will do the presentation in French.

[Translation]

The third issue to consider is the support of federal parties.

The CJA is pleased to have the past support of the Standing Committee on Finance. However, we would also like to acknowledge that members of all political parties have indicated their support for the repeal of the excise tax, including opposition members such as Gilles Duceppe, Leader of the Bloc Québécois, Pierre Paquette, Bloc finance critic, Joe Clark and Scott Brison of the Progressive Conservative Party, Jason Kenney and Stockwell Day of the Canadian Alliance, Svend Robinson, Nelson Riis and Wendy Lill of the NDP, as well as several Liberal MPs, including Bill Graham, Sarmite Bulte and Eleni Bakopanos.

At a recent national diamond roundtable held to examine ways in which Canada can capitalize on its new position as one of the world's largest diamond producers, the Honourable Herb Dhaliwal, Minister of Natural Resources, indicated publicly that the repeal of the excise tax would be a necessary step to ensuring the long-term growth of the burgeoning diamond industry. The Honourable John Manley has consistently indicated support for the industry's efforts to repeal this tax. Moreover, Minister Manley has also stated that he believes the excise tax has no place in today's economy.

At the March 2003 Diamond Day on the Hill initiative undertaken by the mining industry, Canada's diamond mines, including BHP Billiton, Diavik and Aber, stated that the excise tax does not work in lockstep with growth and success. They expressed support for the CJA's efforts for a full repeal.

The Government of the Northwest Territories has publicly stated that the repeal of the excise tax across all jewellery categories will only enhance the Canadian diamond industry from mining to retail. It would encourage the development of jewellery manufacturing in northern centres to assist natives.

I will now turn the floor over to our President, Mr. John Minister.

[English]

Mr. John Minister: In conclusion, the CJA seeks a clear and unambiguous recommendation by this committee urging the government to eliminate this tax now in order to rectify more than 80 years of unjust and harmful discrimination against our industry.

The Canadian Jewellers Association has patiently persisted in its efforts to repeal the excise tax over many years. We have done everything that has been asked of us. We have completed an objective study of the jewellery industry to analyze the policy case. We have consulted repeatedly with government officials and members of Parliament. We have found no sustainable opposing arguments.

We have enlisted the support of every federal-provincial party. We have the total support of our industry and the emerging diamond mining industry. All that remains is for the Government of Canada to act. We strongly urge this committee to categorically recommend immediate repeal of the jewellery excise tax.

On behalf of the Canadian Jewellers Association, I once again thank you for the opportunity to present today.

¸ (1420)

The Chair: Thank you very much, and I also understand the rationalization of this elimination.

With that, we have eight members at the table, besides me, who will not question. Everybody else is going to get only five minutes, which includes your answers, ladies and gentlemen, so keep them to the point so they can get a few questions in for each person.

Mr. Jaffer, go ahead.

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance): Thank you, Madam Chair. I think I'll have time for only two questions.

I just wanted to ask Ms. Webb this. I think you mentioned in your brief that the net debt-to-GDP ratio we should aim for by 2010 is 30%. Am I right?

Ms. Mary Webb: Yes, or better than that.

Mr. Rahim Jaffer: Or better, that's right. And I think you said that could be reached with about $3 billion a year in payment, which is sort of what's been happening.

I just want to know if the Chamber of Commerce believes that should be almost legislated, if the obligation for governments to pay that debt is something you'd like to see happen without having a contingency or something where it could evaporate mysteriously from time to time, from year to year. Do you think it should be legislated pay-down?

Ms. Mary Webb: The concern with legislation is that it would limit flexibility when the economy downturns and when we have all the unforeseen events we've had this year. I think legislation is perhaps too strict. But keeping it on the front burner is essential, because paying more than $1 out of every $5 in revenue for interest charges as we go forward and the baby boom generation starts to retire is just too high.

Mr. Rahim Jaffer: Right, I appreciate that.

I wanted to focus on the excise tax issue for the smaller breweries. I understand the argument you've made to deal with and reduce it. I'm curious, though, when we heard from the Canadian Jewellers Association.... What sorts of comparable excise tax exist in jurisdictions like the United States and others? Have they been reducing overall taxes in those jurisdictions, especially when it comes to microbreweries, and how do we compare to them currently?

Mr. Howard Thompson: I guess the most direct comparison would be in the States, where they have a level for small brewers set at 2 million hectolitres, which is significantly larger than what we had put as a cap in our request. The reduction in the United States is 60%. To put it on a dollar-for-dollar basis, we pay $28 a hectolitre; they pay about $9 per hectolitre, if you equate the two currencies.

Across the nation, almost all of the significant beer-producing jurisdictions provincially have a graduated production tax regime for their provincial taxation for the breweries in their provinces. Most recently, in Ontario one of the production taxes was reduced on a graduated basis from just over $50 a hectolitre to just under $30, so there was about a $20 per hectolitre saving, depending on what size you're at.

Internationally, again, most of the beer-producing countries have some type of graduated or reduced excise tax regime for their smaller brewers.

Mr. Rahim Jaffer: So it's just this federal government that has been a bit slow to catch up with some of the other areas?

Mr. Howard Thompson: Right.

And that was one of the things that had been put back to us by the Department of Finance years ago, that the provincial governments have some work to do as well with regard to production taxes, and that has happened over the last five years. There's been significant reduction in the production-based taxes.

Mr. Rahim Jaffer: Mr. Minister, I think you've made a very strong case for eliminating that excise tax. I think it's clear that it's hindering the continued growth in that industry, that sector.

You mentioned you haven't found any arguments coming from the finance department or others for why that should be eliminated, but I don't understand why it hasn't been eliminated to this point. It's been in place for years. What has been the justification for it not being dealt with, in your opinion? I'm at a loss as to why that hasn't been dealt with.

¸ (1425)

Mr. John Minister: Well, when we began our most recent fight to have that tax removed, probably about 10 years ago--we've been knocking at the door trying to have this eliminated for 10 years now--there were huge deficits, and we were told that with the deficits in place, they couldn't eliminate the tax.

Moving forward, we were told it's very important to try to get all parties supporting our issues, so with our membership--we have over 5,000 jewellers across the country--we went to call on many different MPs. I have all kinds of letters of support here from many MPs, and I can just quote a few here. One, from Vancouver, said “After all, isn't it a Canadian industry that we want to support? Why would we tax a Canadian piece of jewellery more than we would if the identical piece of jewellery were made in China or in India? It's against our own interest and we lose the jobs.”

The Chair: Thank you.

I'll just note that we're in Ontario today, Mr. Jaffer, where you have legislation that says you can't run a deficit. So people said there was no deficit. If they hadn't, the politicians would have lost 20% of their pay. But there's a deficit here.

Monsieur Paquette.

[Translation]

Mr. Pierre Paquette (Joliette, BQ): Thank you for your presentations.

I'd like to say first of all to the Canadian Small Brewers Association that not only did you have the committee's support last year, it's a given that you have it again this year. We've questioned Minister Manley on several occasions and he hinted that he made some choices in the last budget and that your industry's turn would come.

Have you broached the subject with the future Prime Minister?

Mrs. Laura Urtrowski: We're working on this. We want to be positioned correctly. We plan to start working with members of Mr. Martin's team.

Mr. Pierre Paquette: It's all starting to sound rather familiar. Small Canadian breweries are operations that produce 300,000 hectolitres per year. How many hectolitres do small breweries in the US produce?

Mrs. Laura Urtrowski: We're talking about 2.3 million hectolitres.

Mr. Pierre Paquette: Therefore, what's considered a small brewery in the United States is, in essence with this tax break, a large brewery...

Mrs. Laura Urtrowski: Relatively large. Production is almost eight times higher in fact.

Mr. Pierre Paquette: I hope the issue is resolved this year.

Regarding the excise tax on jewellery, you explained how in 1991, you were expecting the tax to be repealed along with the introduction of the GST. That didn't happen. There may be a perception that jewellery is a luxury item for the wealthy.

Who is the average buyer and what kind of jewellery does he or she purchase?

Mrs. Carmen Rivet: We looked into the average amount spent on jewellery per Canadian household. Last year, the figure was $130 per household. That's not a huge amount of money. Only a segment of society can afford to spend more than that. Basically, we're looking at an average of $130 per year per household.

Mr. Pierre Paquette: At what point is the tax applied to jewellery purchases?

Mrs. Carmen Rivet: In the case of jewellery, on items priced at $3 or more, and in the case of watches, at $50 or more. A ten- or twelve-year-old girl buying a $15 jewellery item as a gift for a friend will pay excise tax on that purchase.

Mr. Pierre Paquette: Who collects the tax?

Mrs. Carmen Rivet: It's a complicated matter as fas as the industry is concerned because various levels are involved.

[English]

Maybe you can answer about who's taking the excise tax, who's striking it.

The Chair: What she's saying is that the levels of taxation are different.

Mr. John Minister: Where does it apply?

The tax is very complicated because it follows the old federal sales tax rules, which are in a book this thick. Everyone in our industry has great difficulty trying to interpret them, and so do our accounting firms.

For someone importing into Canada, the tax is levelled at the imported cost. If you're a Canadian manufacturer, you pay the tax on your cost plus your markup, plus your salesman's commission, plus your marketing costs, all your overheads, your rent, your Canada pension payments for your employees, health care payments--you have to eventually pay 10% more excise tax.

If you're a retail jeweller, the tax is applied at what you purchased from the manufacturer. Or--again, it's very complicated--if you make a custom piece of jewellery, the tax is even applied at the retail price. So there are many levels of distribution at which this tax is currently applied.

¸ (1430)

[Translation]

Mr. Pierre Paquette: I said it again this morning, Mr. Shapcott. I'm flabbergasted by this every time. You're putting considerable pressure on the provinces and territories, arguing that the federal government needs to set down some conditions and rules, failing which you will go directly to the municipalities. For starters, it's impossible to deal directly with the municipalities, because the provinces have a hand in their creation. There's even legislation on the books in Quebec prohibiting municipalities from using funds that flow directly from the federal government. Therefore, this is not an option.

One of the problems is that the federal government can withdraw at any time. It creates needs and when either the administration or priorities change, it pulls out. That happened in the social housing sector.

Wouldn't a better option be for the federal government to pass legislation guaranteeing funding of social housing before we consider doing an end run around the provinces? Of the $2 billion mentioned, if the federal government were required by law to invest in this sector, I would agree with you that we should be looking at forcing the provinces and territories to comply. However, that wasn't one of your recommendations.

[English]

The Chair: Please make it a short comment.

Mr. Michael Shapcott: First of all, we know through the Federation of Canadian Municipalities that municipalities are willing to be partners. We know that in some provinces there are different issues with the amount of room the provinces will give municipalities to actually take up these programs. And there's a fiscal capacity question; some municipalities are not able to put their own money in to match federal dollars.

Those are important issues, but we do think the principle, nevertheless, is that the federal government has committed some money, yet that money is sitting in Ottawa when there are people in the streets of this country who need that money for housing. We think that money should flow, and that's the reason for you to try to find some way, if the provinces are unwilling or unable, to go beyond them and to deal directly with willing partners.

The Chair: Thank you very much.

Mr. Wilfert, five minutes.

Mr. Bryon Wilfert (Oak Ridges, Lib.): Thank you, Madam Chair, and I thank everyone for coming.

This question is for the Canadian Jewellers Association and concerns the issue of international competitiveness and the issue of opening diamond mines in the north, particularly in the Northwest Territories. It may be news to some people in the federal government, but the Great War has been over since 1918, and I think it's time we took action on this.

Now, I would say that we may not be able to do it all at once; we may have to phase it in over a two- or three-year period. Can you just refresh my memory as to the amount of money we are looking at, roughly, in terms of tax?

Mr. John Minister: Our understanding is that it's currently approximately $70 million, but the diamond revenues will be approaching half a billion dollars.

Mr. Bryon Wilfert: I had $60 million to $70 million, so thank you very much. I certainly would support that recommendation and maybe this time finally put it over the line.

The National Housing and Homelessness Network, you talk about ramping it up to $2 billion. We have problems spending the money we have already put on the table, and Ontario was an excellent example of that. And Mr. Paquette, of course, emphasizes the problem we also have in provinces like Quebec.

I don't know what we do in terms of the accountability provisions. Sometimes we write these agreements and either we don't enforce them or they're very weak. For Nova Scotia, 15 units is ludicrous.

How do we do that? I'd like to make sure the money we've already committed is spent, and obviously it is the responsibility of your association and others to put the heat on these provincial governments as well to do that. But if there's anything you think we're not doing in terms of the mechanism, you can make recommendations; we'd certainly appreciate it.

Mr. Michael Shapcott: If I may say this, Mr. Wilfert, in June we met with Minister Mahoney and asked Minister Mahoney to invoke the accountability mechanism in the Affordable Housing Framework Agreement and the bilateral housing deals the federal government has with all the provinces and territories. These call for the provinces to issue performance reports listing the amount of money they've spent, the number of units created, the rent of the units or, if they're ownership units, the ownership prices of those units. It gives the federal government the power, if the provinces and territories haven't met the commitments they've made, either to stop any additional funding or indeed to ask for money to come back, money that's already been spent or already been committed to the provinces. So we actually think that's there.

Most recently, two or three weeks ago, we got a letter from Minister Mahoney saying they're still waiting for agreements from the provinces. We're now almost two years into an agreement, so we're quite frustrated.

Mr. Paquette mentioned the idea of some sort of legislated national program or other mechanisms. We're certainly willing to do that. We would point out, though, that there have been unilateral federal programs in the past, as well as cost-shared programs with the provinces and territories, that have worked effectively at delivering the housing. We think that this program, if the federal government were to invoke the accountability mechanism in a much more determined way, could get the money that's already been committed out there, and then we could look to the future for better mechanisms to avoid this kind of morass.

¸ (1435)

Mr. Bryon Wilfert: To the Ontario Chamber of Commerce, Ms. Webb, probably the way we can achieve much of what you said is to accelerate the systematic and ongoing examination of government spending. We have a budget of $180 billion. As you know, the minister this year went through the billion-dollar exercise, which was very useful, but we're going to have to do a lot more than that, given that the expected revenues are not necessarily going to be there.

I'd like to see us ramp up the capital tax elimination too, but unless we're Harry Houdini, we're not going to be able to do that unless suddenly there's more money on the horizon, and it doesn't look like it. And I agree with your comments on debt, although as you know, the incoming Prime Minister has suggested 25%, which I certainly support.

To the Writers' Union, you have seven excellent recommendations. You're not going to get all seven, as far as I'm concerned, so what are your priorities? Give me two.

Mr. Barry Grills: From the standpoint of speaking to this committee, I would say copyrighting income deduction and backward income averaging. Some of those other recommendations just ask for your support and wisdom.

Mr. Bryon Wilfert: Then we can look at getting some figures as to the cost on that.

On the small breweries, is it $12 million you're looking at?

Mr. Howard Thompson: It's $11 million or $12 million.

Mr. Bryon Wilfert: Thank you very much.

The Chair: Thank you very much.

Maintenant Mr. Pillitteri.

Mr. Gary Pillitteri (Niagara Falls, Lib.): Thank you very much, Madam Chair.

I suggest to the Jewellers Association that if you keep mentioning more names of opposition members who support the removal of the excise tax, maybe some of us might have second thoughts about recommending that. I just caution you on that.

Mrs. Carmen Rivet: Maybe I can mention that the list would have been too long if it had included those on your side.

Some hon. members: Oh, oh!

Mr. Gary Pillitteri: Well, I think you're better off not mentioning anyone.

But I have a couple of questions, and one is to Ms. Webb. Did I hear you recommend the elimination of the surtax for financial institutions?

Ms. Mary Webb: No, it was the capital tax.

Mr. Gary Pillitteri: Thank you. I thought I was hearing things, because that would have meant something close to $1 billion.

Going to the excise tax now, let's get one thing clear here. The excise tax is equal for the large breweries and the microbreweries, and as far as the excise tax is concerned, it's no different in my wine industry. It's equal to all for each hectolitre. It was because people of British descent thought it was a sin to smoke and drink that we got stuck with this excise tax, while a lot of the European countries and even the United States don't tax it as a sin. They have it as part of the food act, a totally different place compared to where we have it here in Canada. That's why we do this excise tax.

But I do support the microbreweries, in fact, and I'm sure we're going to get a presentation or some written submission from the small wineries. There is the job creation aspect of it and the hampering of the retail aspect. Then there's how Brewers Retail became a closed niche club in Ontario, so you don't have the open marketing process available. It's the same thing with the wineries. They had their own private stores and then they became grandfathered. This is very complex, what the 80 microbreweries and small wineries are facing in Canada, especially in the provinces of Ontario and Quebec. It's the fact that they don't have the venue for marketing, because the only way they can market is on their own premises.

I do in a sense support this, but when we're looking at parity with the United States, let's be clear. When products come from the United States into Canada, they are subject to the same excise tax as we pay, and when we export outside of Canada, there's no excise tax. A lot of times my colleagues over here have a tendency to mix one with the other, but we're treated equally on the tax issue.

I support it basically on the issue of creating jobs, given the impact local breweries have on small communities.

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Mr. Howard Thompson: Yes, and that's the point we want to make. We're not trying to demonstrate that we pay a different tax rate than the big breweries do, but you make a good point. We pay the exact same excise tax rate but are not afforded the opportunity to own the distribution system or consolidate worldwide to influence agencies like the LCBO.

With regard to the U.S. brewers, the significant difference is that a small brewery that may produce up to two million hectolitres in the United States pays $9 per hectolitre and can use those resources to come into our market. We don't have the same resource to go into their market. So in terms of supporting a potential export, the excise tax also gets in the way of that.

But you're right, on our home front and in exporting, there's no tax differential. In fact, that's what we're asking for, to have a graduated system that invests in the job creation and regional development that has been proven to come from this industry.

Mr. Gary Pillitteri: Also, for the record, Madam Chair, you know some people in the House of Commons have in the last couple of weeks been questioning how a large brewery gave special, preferential treatment to some ministers on holiday. The large breweries do support the lowering of the excise tax for the microbreweries, and so do the large wineries.

The Acting Chair (Hon. Maria Minna (Beaches—East York, Lib.)): Thank you, Mr. Pillitteri.

Mr. Brison, please.

Mr. Scott Brison (Kings—Hants, PC): Thank you.

I want to follow up on Mr. Pillitteri's comments. Mr. Pillitteri has been very successful in the wine business, so his comments on the brewing industry are a classic case of why you should not mix the grape and the grain.

Some hon. members: Oh, oh!

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Mr. Scott Brison: Furthermore, I resent what he said. My ancestors are from the British Isles and they drank and smoked a lot.

Some hon. members: Oh, oh!

Mr. Scott Brison: Personally, on the issue of the excise tax for smaller breweries, it's a question of tax competitiveness. We at this committee talk about a wide range of industries and trying to make Canada's tax system more competitive to create jobs, growth, and opportunity in Canada. I don't think there's a clearer example of a specific tax that impedes our productivity, and competitiveness in job growth in a sector, than the small breweries tax.

The $12-million figure, the initial cost of your proposal, would pale in comparison to the windfall from the resultant growth of jobs and economic activity as a result of this. Further, if you look at the locations of these breweries across Canada, a lot of them are in smaller communities, and I think we should be considering the impact from a tourism perspective and the tie-in from a tourism perspective. I think that's is another area of economic activity, and anything we can do to help will make a difference.

So we support any initiative that will result in more jobs and better beer and, ultimately, happier citizens.

On the jewellery tax issue, I think it's interesting to have both of you here today discussing specific taxes that don't make sense and that impede competitiveness in a specific sector. And these taxes were introduced for specific reasons that are not current.

There's a wide range of support here for.... Any proposal that can have support as broad as to include Stockwell Day and Svend Robinson obviously has a broad range of support in Canada, but the fact is that eliminating this luxury tax.... The notion that somebody can buy a $10,000 or $20,000 coat and not be subject to the same luxury tax as applies to a $100 or $200 ring just doesn't make any sense. I think that when you consider it from that perspective and from a competitiveness perspective, and the impact, as you mentioned, on Canada's aboriginal communities, these are two very compelling cases for specific tax reform that make sense.

I would assert, Madam Chair, that one of the things the committee ought to undertake in the future is a report focused on nothing but tax reform, not just dealing with these specific types of taxes, but a broad range of tax reform focusing on competitiveness and productivity and ultimately increasing the standard of living of Canadians.

On income averaging for artists, I would go a step further, and again, it's a tax reform issue. I met with someone in my riding a couple of years ago who was a labourer who had hurt his back several years ago, about ten years ago, doing labour and could not work. He fought Workers' Compensation for eight years to try to get some of the money that was due him. He eventually won his case with Workers' Compensation, and this labourer with a grade four education received in one year $100,000 from Workers' Compensation to make it up. He paid taxes based on the highest marginal tax rate. Even though he was somebody who was without income for that period of time, he paid taxes based on the highest marginal tax rate because of that.

So I think income averaging, beyond artists, for all Canadians is something we ought to consider at this committee. It is something I would be very supportive of.

The Chair: We have, actually, about 20 seconds if you wanted to continue. I think you missed one group. Fine.

Now, Mr. Murphy, five minutes.

Mr. Shawn Murphy (Hillsborough, Lib.): Thank you.

I want to pursue a couple of areas. One point I want to raise arises from the last point that Mr. Brison made, and it's regarding Workers' Compensation. It's my clear understanding that this individual will be able to file amended returns for the last ten years and get his refund.

Mr. Scott Brison: No, they were taxed at the highest marginal tax rate. It was a case we took up with Revenue Canada.

Mr. Shawn Murphy: I've seen it done before, but maybe we can't debate it here.

I want to follow up again with the brewers. Again, I support this recommendation 100% and I have two points.

You've answered the question before, but I didn't get a clear message. What is the reason Finance gave you for why it wasn't implemented last year? Perhaps you didn't get your answer from Finance, and that's why I didn't get a clear answer from you.

Mr. Howard Thompson: The sense has always been that it's been close, it's been a reasonable argument and there's motivation to do it. I think there is still some resistance within the department from not having a differential tax system, and the evidence we've tried to support it with is that in fact it does work; it works in other jurisdictions.

Mr. Shawn Murphy: But you still enjoy the support of the larger breweries.

Mr. Howard Thompson: But we still enjoy the support of the larger breweries, certainly, and we had unanimous support from this committee.

We did run into some extraordinary events in a few of the past budgets, one being an election call, one being 9/11, of course, and that changed some of the focus of the budget.

Mr. Shawn Murphy: You use in one of your arguments the international or U.S. comparisons. Are the small breweries, let's say, in upstate New York and Michigan coming across the border, and is that a big competitive issue? Usually a small brewery sticks with its...microbreweries do, anyway. But is it a big issue that they're coming across the border and selling into Canada? I know beer is an international business. We have a lot of American beer being sold here, but what about the small breweries?

Mr. Howard Thompson: What we've seen is an increase in all imports simply because there's a larger focus on premium brands, which is to a large extent the type of beer we make.

In the United States there's the opportunity to become quite a large small brewer. Sierra Nevada would be a good example; they're close to a million hectolitres in size, which would dwarf some of ours. They still get a very preferential tax treatment in their own jurisdiction, which I believe gives them some money to be able to market it and export it. And it's one of the big ones that we see coming into the big markets like Alberta, Quebec, and Ontario.

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Mr. Shawn Murphy: But as Mr. Pillitteri says, they would pay the tax when they get into Canada, except that it will give them more capital, more profits, and that.

Mr. Howard Thompson: Right.

Mr. Shawn Murphy: I want to take this one step further. Is it not true under GATT that if the tax were lowered in Canada for our microbreweries, small brewers, that the U.S. product coming in would enjoy the same relief?

Ms. Laura Urtrowski: That's not reciprocal with the United States. Now, if we want to export into the United States, we don't get their lower rate at this point. Neither would we going into Europe. The European Economic Community is negotiating to regularize the small brewers reduction throughout the European Community so that--

Mr. Shawn Murphy: So the small brewer, to import beer into Canada, is paying tax at the same rate as you do.

Ms. Laura Urtrowski: Right.

Mr. Shawn Murphy: Now, assume, as we all hope happens, that the rate comes down. Then the small brewery in, let's say, upstate New York importing into Canada would get the lower rate too.

Mr. Howard Thompson: That would be up to your government. Right now if we export to the United States, we do not get their lower rate for small brewers.

Ms. Laura Urtrowski: Which makes it more difficult for us to compete there.

The Chair: Now, Ms. Judy Wasylycia-Leis, five minutes. Please go ahead.

Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Thank you. I'm just going to focus on housing and homelessness and talk to Michael and Jennifer.

In the past, going back ten years, concerns that you have were dismissed and programs cut in the name of deficit reduction. Then when we eliminated the deficit, you were told to take a hit in order to ensure that there were tax cuts for generally the well-to-do and large corporations. Now as you listen around this table, you're being told to take a hit in the name of debt reduction. What are you going to do about that?

Mr. Michael Shapcott: I think, first of all, there is a recognition that the affordable housing crisis across Canada has in fact been fuelled by cuts at the federal, provincial, and territorial levels. That recognition is not just from community-based organizations, from housing groups, from advocates, and from the people who directly experience it--that is to say, the 250,000 Canadians who experience homelessness every year--but increasingly, it's also from business organizations here in Toronto. The Toronto Board of Trade has said that social infrastructure is crumbling and there needs to be a renewed government presence. The Toronto City Summit Alliance, another business organization in Toronto; the Toronto Dominion Bank, which I mentioned in my main presentation.... So the observation that in fact the deficit and cost-cutting exercises shouldn't be borne on the backs of some of the poorest and most vulnerable Canadians, I think, is a recognition that is no longer just among a limited group, but it's certainly widespread.

As I say, in the last year our organization has met and worked not only with the Toronto Dominion Bank, but also with the Scotiabank and other banks. We've taken senior officials from the Scotiabank to hostels and drop-in centres to show them what's happening. They're concerned about these issues. We know there is a widespread concern. We also know that opinion polls all say that Canadians want their governments to pay attention to this issue and they want the governments to reinvest, even if it means raising taxes.

So, in fact, the mood of Canadians is very clear. That mood is reflected right across the spectrum. Even organizations recently, like the C.D. Howe Institute, have issued reports encouraging a more active government presence in terms of housing-related initiatives.

Quite frankly, at this point it's the federal government and some provinces and territories that are lagging very far behind where the rest of Canada is on this issue.

Ms. Judy Wasylycia-Leis: I appreciate your response. Some of the groups you're talking about have been here advocating, though, for a continuation of the tax cut agenda and this debt reduction fetish. You've heard it this afternoon from the Ontario Chamber. These are people basically saying, if I can use the housing analogy, pay off your mortgage even though your roof is leaking.

You have to take that argument on or I think the housing agenda, the social policy agenda, is going to be put on the back burner again, especially if you listen to what Paul Martin is saying. If he's talking about getting our debt-to-GDP ratio down to 25%, that's valuable money that should be invested now in social programs that will actually grow the economy and bring down the debt-to-GDP ratio, as opposed to putting the money in now, which is hardly going to make a difference. And we're going to be paying for it for many more years to come.

I guess I'm pleading with you and others who care so deeply about these programs to take on this agenda.

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Mr. Michael Shapcott: Absolutely. Perhaps I may quote Don Drummond, chief economist and executive vice-president of TD Bank, who co-sponsored a housing forum with our network in June. In the published report of TD Economics, he actually takes on his fellow people in the business sector very clearly on the issue and says that after 10 years of economic expansion, there in fact is a greater housing crisis, more poverty, more Canadians affected by housing. Therefore the notion that a rising tide lifts all boats has been shown to be demonstrably false.

So yes, we do take on directly the notion that when Canada had an active and successful housing program, especially in the period from 1973, when former Prime Minister Trudeau introduced changes to the National Housing Act in a minority government with the support of the New Democratic Party.... From that period of 1973 to 1993, about 600,000 units of good-quality, cost-effective social housing built across Canada continued to be very good-quality, cost-effective places for people to live. But our problem has been, as you've mentioned, governments deciding that they'd cut and let the private market deal with old social issues. The private market has clearly responded. It's not capable, it's not willing, and it's not financially possible for them to provide housing for low-income Canadians, and the banks and others are reflecting that. So the argument is clear.

The Chair: I'll give you a very brief response, Ms. Webb, and then I'm going to Ms. Minna for the last five minutes.

Ms. Mary Webb: I'd like to respond to you. We're not asking for a huge debt reduction; we're asking for them to chip away at it. We're asking for them to do it on an average basis. We're asking that programs be reviewed so that priorities such as affordable housing can be given more emphasis and programs that are not as effective can be discontinued.

On the tax reduction, we have two excellent examples here of the tax reform that we're talking about, where it's counterproductive and limiting growth, and if we changed it we'd have more growth and more revenue for your programs down the way.

The final comment I want to make is this. In fact, Michael is absolutely right, there's a growing awareness. There certainly is in our bank, which was why our bank approached them and was willing to work with them.

The Chair: May I now go to Honourable Maria Minna.

Ms. Maria Minna: Thank you, Madam Chair.

I'll start off with the chamber, just to continue on the same theme.

I know you just said that you mean to chip away at the debt. I believe that, yes, we can pay down the debt of $3 billion from whatever we put aside every once in a while if we have it, but investing in housing, education, training, research, post-secondary education, infrastructure, and what have you is probably going to grow the economy much faster and be able to actually reduce the debt-to-GDP ratio. Right now, the bulk of the debt-to-GDP ratio has been reduced primarily as a result of economic growth, not really as a result of the amount that we've actually paid down. I'm not suggesting we shouldn't have done this, but that is not the main drive for the debt-to-GDP ratio going down. So growing the economy is actually much more efficient, or it would get us there a lot faster.

I'm not sure we need to go down as far as 25%, as Mr. Martin says.... Well, I disagree with that. My colleague and I disagree on that one.

I want to finish by asking you two questions. You mention major spending reallocation, and it's so easy to say that. I've heard this now for two years on this committee and I heard it before when I was on other committees, that reallocation is the way to do it. Well, you know what, we went through what we called program review in 1993-94, before the 1995 budget. Program review was really a word for program cuts. So we talk about reallocation, but what a lot of people really mean is cuts somewhere.

I guess I'd like to ask, where would you cut? We keep being asked this. We've looked at this; we've cut so much in the system, 45,000 employees, and every time we read the paper, there are problems with programs, things that are happening. Whether we like it or not, we have an immigration department that is so backlogged because we don't have enough staff to do the job. We have huge problems in some other departments. So there are difficulties. You have to deliver the programs. Now, I know that reallocation is the new thing, but I really would love to know where you would reallocate. Do you take it from health to education, from housing to...? Perhaps you could give me some ideas.

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Ms. Mary Webb: The bottom line is that I wouldn't presume to do so. There are certainly some areas that we would look to...potentially industrial development where it hasn't been successful, but it's more an internal department type of thing.

What we're saying is that we see things like affordable housing, reinvestment in cities, as such huge priorities, because right now the gridlock is choking them, that perhaps some other programs have to be slowed down. I fully concur that there's a problem of scarce resources here, so that you will never have enough to cover every interest group's interest, but what we're hearing in an area such as Toronto, for example, is that we're losing over $2 billion a year because of a transportation gridlock. And all of us who live here know that, so we would welcome some federal assistance to start working with it, because the municipality simply doesn't have the money.

So you're absolutely right, program spending is never easy to trim. We're not asking to trim it, and we're not going with a 3% solution, which is what the Canadian Chamber is saying. We're saying up to 5%, but we want a balance between debt and some of the tax reforms, and then some spending priorities. And you're absolutely right, you can never please everyone because of the scarce resource.

Ms. Maria Minna: Okay. As far as the homeless situation and the housing are concerned, I'm glad to see that Mr. Mahoney is in his job. I think it was high time that we had a minister responsible for housing to address the issue directly.

I'm hoping this will continue, and then in the future, probably a minister responsible for urban issues, more to the point.... Then they could address some of the other items that affect urban areas that have come forward before both of us.

And I agree with you, Mr. Shapcott. I don't think the private sector has ever in the past, or will in the future, address the issue of affordable housing. Why should they?They're in the business of making money. And if you're in the business of making money, which is fine, you're not going to build low-income housing and affordable units, even under the not-for-profit building. If I'm not mistaken, when we build not-for-profit apartments, the rental is something like $900 a month, and that's high for a lot of the people you and I would be talking about. Even under that, it's a high rent to pay.

So I support it 100%. I think that's something we have to continue to address, and we cannot back off again in the future because I think we do it at our own expense. Quite frankly, whenever we cut back on infrastructure spending and the fundamentals, we end up affecting the economy, whether we like it or not, because social and economic issues are not separate issues; they're intertwined, and they are one in the same in the long run. I don't see them as two separate things.

[Translation]

The Chair: On behalf of my colleagues, I want to thank you for taking part in these hearings.

[English]

When you spend your talents, your time, and your energy putting your presentations together, all the members of this committee, those present here today and those who are working in Ottawa or other parts of the country, appreciate it. We will make sure your briefs get to the Department of Finance. I can tell you they do read Hansard, and we read the papers as members. We're a little concerned about being prorogued before we get to write a final report, so I think a few of us are being a little more pointed in our comments. That's, hopefully, for your benefit.

Anyway, we are going to suspend for a few minutes to seat our second panel of the afternoon.

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The Chair: Pursuant to Standing Order 83.1, we will continue in Toronto on November 6 with our second panel of the afternoon. This is a continuation of pre-budget consultations.

This panel is comprised of representatives from the Canadian Restaurant and Foodservices Association. Joyce Reynolds is the senior vice-president of government affairs, and she is joined today by Nils Kravis, director, and president of Kelsey's International. Welcome to you both.

We have the Ontario Federation of Agriculture, the president, Ron Bonnett; Jason Bent, who is a policy analyst; and Ted Cowan, policy analyst with the farm policy research group. All three of you, welcome to our table.

From the Regional Municipality of Waterloo, we have Gerry Thompson, chief administrative officer, joined by the commissioner of planning, housing, and community services, Larry Kotseff. Welcome to you.

From the Canadian District Energy Association, the president, Don Marsales. You have with you Bruce Ander, president of Markham District Energy. Welcome to you both.

Before I let you go on your seven-minute rounds, I will just give the floor to Mr. Wilfert for two seconds.

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Mr. Bryon Wilfert: Thank you, Madam Chair.

Just for the record, because I am a director on the Canadian District Energy Association board of directors I will refrain from commenting, and for any recommendations with regard to them I'd like it noted in the report that I refrained.

The Chair: It's noted in the record. Thank you.

Now, we will go for seven minutes. The floor will be yours in the order of the agenda. That's your time to say what you will. If your written presentation is longer than the seven-minute oral presentation, please tell us your key messages. We will then go to a round table of questions and answers, which can go from any of the five parties of the House to any one of you. I will attempt to keep us on time. If you see my pen wiggle, you know you have a sentence or two to wrap up. If I say thank you, that will turn off your microphone.

We'll start with the Canadian Restaurant and Foodservices Association.Madame Reynolds, commencez s'il vous plaît.

Mr. Nils Kravis (President of Kelsey's International Inc., Canadian Restaurant and Food Services Association): Good afternoon, Madam Chair. I'll speak on behalf of Joyce.

My name is Nils Kravis. I am the president of Kelsey's International, the parent company of Kelsey's Restaurants, Montana's Restaurants, and franchisees of Outback Steak House International here in eastern Canada and across Canada.

My company is also part of Cara Operations Ltd., a publicly traded Canadian company that also includes Harvey's, Second Cup Coffee, Milestone's Restaurants, Swiss Chalet, Summit Distribution, Airline Catering, and our airport restaurant division. Together within Cara, we operate over 1,250 food service locations across every province and in every major city in Canada.

Collectively, we also employ over 38,000 Canadians in jobs that range from hostesses, cooks, waiters, and waitresses, to managers, franchisees, and corporate executives.

I'm also a member of the board of directors of the Canadian Restaurant and Foodservices Association, an organization made up of 16,500 members representing 48,000 individual businesses.

We're here on behalf of Canada's $42-billion food service industry. Our revenues comprise 4% of GDP, and we're one of the country's largest private sector employers.

You may be interested in knowing that late last year our industry celebrated a significant milestone with the hiring of our one millionth employee. We now provide more jobs than agriculture, forestry, pulp and paper, banking, and the automotive industry combined.

The jobs we provide and the people we employ are truly a defining characteristic of Canada. They're also the strength of our industry. As operators, we need a business climate that allows us to grow our businesses and create more jobs for more Canadians.

Many Canadians get their first jobs in food service, and for those of you who have ever worked in a restaurant, you'll appreciate that there's no better environment for young people to develop important life skills. Our employees learn technical skills such as cooking, serving, or bartending. They learn about team work, time management, and self-responsibility. They learn about cash management, accounting, inventories, and purchasing. But most importantly, they learn how to contribute to this country by creating a strong food service industry.

Of our employees, 42% are under the age of 25, and the flexible hours and work schedules of our industry make it very popular with students of all ages. We also provide the bridge for many people coming off social assistance, and provide the jobs of choice for many new immigrants coming to Canada.

The food service provides fast-paced, interesting, consumer-focused job opportunities. Wait staff may be the most visible employees in our industry, but outside of the public eye we also have chefs, managers, and at larger chains, senior executive positions.

The biggest constraint we have to hiring more Canadians continues to be high payroll taxes, which comprise 40% of the tax load for the average restaurant operator. Payroll taxes punish us every time we add someone to our payrolls, and they affect labour-intensive businesses such as ours disproportionately.

This committee has recognized the regressive nature of payroll taxes--how they prevent young Canadians from getting a foothold into the labour market--by recommending the implementation of a yearly basic exemption in the EI program. For this we are truly grateful, and we are here again to seek your support in getting this proposal implemented as quickly as possible.

We're also here to provide input into the consultation on a new EI rate-setting process. Now, the next several months provide an important opportunity for government to finally fix a system that has unfairly taken advantage of the employers and employees who exclusively fund the EI program. We're pleased that the consultation is under way, because it signals a willingness to end the government's reliance on EI premiums as an additional form of general tax revenue.

The CRFA supports the five principles the Minister of Finance has identified as essential components of a new EI rate-setting system: that premium rates must be set transparently; that premium rates should be set on the basis of independent expert advice, and we would add that input from stakeholder groups would be appreciated; that expected premium revenues should correspond to expected program costs; that the premium rate-setting should mitigate the impact of the business cycle; and that the premium rates should remain relatively stable over time.

However, it's important to note that these principles exist in intent within the current legislative framework but not in practice. The new legislative model must not only fully enshrine these principles but also ensure that they will truly be respected. There must be built-in protection for employers and employees that ensures that premium payments will not be used for purposes unrelated to employment insurance.

The government must also return the $45-billion surplus that has accumulated to the EI account to those who funded the huge cash surplus--Canada's employers and employees.

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In setting the framework for the new rate-setting process, the CRFA has proposed two possible alternatives. The preferred option is a truly stand-alone EI fund established and administered at arm's length from government. This is the only responsible way that EI premiums can be set on a counter-cyclical basis, and it is the only way, we believe, the program can be maintained on a sound financial footing without tempting government to home in on its tax-collecting powers.

The second possible avenue, although less preferred, is to establish by legislation a low long-term premium rate. This would be a 10-year stable rate enshrined specifically in legislation that would require an act of Parliament to change. This rate could be set at a level that would allow employees and employers to gradually draw down on the $45-billion surplus that has accumulated to date. Details on how each of these two alternatives could be accomplished are discussed in greater detail in the submission before you.

We know there will always be pressure on any government to increase spending on a multitude of programs and activities and to lower taxes in a host of areas. But to date, the EI program has been treated like a cash cow. New programs, tax cuts...and the EI program will continue to moo.

We have to set up a legislative framework that will eliminate the temptation to spend EI program revenues on other worthy but unintended initiatives. It has proven to be too great a temptation in the past and simply has to be removed as an option by either setting up a genuine arm's length program or by legislating the long-term rate.

As I mentioned earlier, 2003 began with a great deal of promise for our industry with the hiring of our one millionth employee. However, anyone familiar with the industry will know that it's been downhill from there. I don't have to tell you about the devastating impact of SARS and BSE on food service operators throughout the country. But even before SARS and BSE, severe winter weather and a wet, cold spring kept many customers at home. The war in Iraq and ongoing global tensions caused a drop in tourism and business travel. Then the Canadian dollar began its miraculous recovery, which further discouraged travel to Canada and lured Canadians to the U.S.

When SARS was added to the mix, followed a few weeks later by a single case of BSE in Alberta, we all knew it would be a long time until the food service industry would recover. Added to this have been West Nile mosquitoes, fires in our west coast forests and communities, drought in the Prairies, the blackout in Ontario, and a destructive hurricane in Nova Scotia and P.E.I.

We're not an association that typically comes to government for hand-outs, even in a devastating year like 2003. However, there are some in the industry who feel that we've been hit just as hard or harder than employers in other sectors that have received some form of government aid.

I want to close by saying that we are not here today to ask for financial assistance. More importantly, we're here to seek your help in restructuring, for the benefit of all Canadians, a system that has a disproportionate impact on our labour-intensive industry, and that is employment insurance.

The Chair: Thank you very much.

Now we will move to the Ontario Federation of Agriculture and the president, Mr. Ron Bonnet.

Mr. Ron Bonnett (President, Ontario Federation of Agriculture): Thank you, Madam Chair. Thank you for the opportunity to present.

For those of you who don't know, the Ontario Federation of Agriculture actually represents 40,000 farm families and 36 different commodity groups in the province of Ontario. We're the largest farm organization in Canada. A lot of our policies are developed through a process that brings resolutions from the concession level right through to the provincial level of the organization.

One of the things that I think we should be mentioning is the fact that in many rural communities, and actually even in some urban communities, these farms are vital to the nation's economic success. We produce about 8% of the GDP. We contribute $7.4 billion to the trade surplus. Our industry benefits all Canadians by providing safe, affordable food, employment, and a clean sustainable environment.

In Ontario, the Ontario Federation of Agriculture county federations have completed a number of economic impact studies—and I know some of your members would have seen them—that have demonstrated the impact that we have on the rural economy and the fact that we drive that rural economy.

While Canadian farmers have been a success in this evolving industry, they still face challenges. A farm income crisis, driven by increasing costs for inputs and environmental projects, low revenues, years of drought, and competition with subsidized U.S. and EU farmers, points to the need for ongoing public support.

Due to time constraints, our concerns on trade, the environment, and food safety are addressed within the written portion of our submission. I would like to concentrate on taxation, the BSE crisis, and the business risk management pillar of the agricultural policy framework.

From a taxation point of view, the Income Tax Act is the most potent economic tool available to government. Its intelligent use is the key to the future of agriculture. We have four main requests.

One is fairly simple. For the child care allowance tax credit, the way it stands now, we believe it should be extended to all families as a non-refundable tax credit. On many farms the taxes are filed as a single income, even though both spouses work on the farm. They don't have the option of taking advantage of that tax credit. The Income Tax Act could provide fairly for children and single-income families when both parents work on the farm or at small businesses and file only one return.

On credits for conservation, land and habitat conservation is everyone's concern, but farmers pay a high share of the cost because we own the land. The Ontario Federation of Agriculture says that owning and maintaining designated conservation lands should entitle landowners with farm income to a tax credit of $100 an acre. This would share the cost of conservation among all taxpayers who benefit from this conservation, and would help compensate farmers for the cost of lost production, extra fencing, and other conservation costs.

On capital cost allowance rates, we are asking that the capital cost allowance rates for farm equipment and buildings be reviewed, as these rates have not been adjusted in many years. Rates for new barns and equipment fixed in barns no longer reflect the economic life of new farm assets. This can lead to investment for tax reasons rather than for productivity reasons, which leads to second best outcomes for farmers and for Canada.

On restricted farm loss provisions, the Ontario Federation of Agriculture asks that the $8,750 restricted farm loss provision be increased to reflect the inflation that has occurred in the 20 years since it was last changed. Farm start-up costs are higher now, and the restricted farm loss provision is essential to help people starting up on new farms.

These farmers are essential to the changeover between Canada's many farmers over 65 years of age and those in their thirties who need a financial, but viable way of taking over from a retiring farmer. Adjusting for inflation, the restricted losses provision should be at a minimum of $12,800. This change would allow more effective capitalization of new farms and reduce the risk for start-up and expanding farms, while assisting older farmers with more adequate retirement.

On the economic impact of BSE, cattlemen and ruminant livestock producers have had a difficult time since that one cow was discovered in Alberta this May. The subsequent loss of markets caused marketplaces to decline significantly.

Many producers, who had to sell large parts of their herds at reduced prices, cannot purchase replacement animals. Without replacement animals, many will face high income tax. Foreseeing this burden, we ask that you extend the prescribed drought regions deferral program to livestock producers. Currently, this program allows farmers with at least a 15% reduction of their cattle breeding herd the option of deferring cattle revenue for a tax year in prescribed regions.

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The Ontario Federation, along with the Ontario Cattlemen's Association, request that the program be extended to allow all Canadian farmers with at least a 15% reduction in their total ruminant livestock numbers, including feeder stock, the option to defer part of their livestock revenue for one year. This will allow producers one year to replenish their livestock inventory and will avoid the hardship of forcing farmers to buy cattle now even though there is no market for them.

There is an immediate need as well for a culled cow program to aid cattle producers. This program must recognize that processing capacity as limited and must fund farmers, not provide discounts for processors.

The George Morris Centre, in its August 5 review of the agriculture policy framework's business risk management proposals, identified that Ag Canada's proposed program cannot handle extraordinary circumstances such as BSE. Alternatives outside of the BRM pillar need to be developed and funded by federal and provincial governments to address losses resulting from circumstances beyond a producer's control, such as from foreign subsidies, trade embargoes, or diseases such as BSE.

There has been a lot of discussion around the agricultural policy framework. At the outset, I'd like to say that we have examined this again with the George Morris Centre. There are changes that have to be made to make it effective.

Farm income programs must contribute to viable and sustainable farms. To attract new people and investment to the sector, there must be adequate returns on investment and labour.

You will have the written presentation. It will give some of the details of exactly what we're asking for in changes.

Seeing as our time is running to a close, I think it's fair to say that we believe the new program, with these changes, would adequately address some of the key issues that we've identified, not only with our own research but with the independent third-party research done by the George Morris Centre.

The other point I want to make is to keep in mind that agriculture programs are not gifts and they are not subsidies. They are investments designed to stabilize rural economies, which can be sabotaged by foreign trade, weather, or as clearly demonstrated this year, disease.

On behalf of the federation, thank you to the members of the House of Commons finance committee for the opportunity to contribute to this consultation. We could discuss any of the details further at a later time.

¹ (1525)

The Chair: Thank you very much.

Now we'll go to the Regional Municipality of Waterloo. Mr. Thompson, go ahead, sir. You have seven minutes.

Mr. Gerry Thompson (Chief Executive Officer, Regional Municipality of Waterloo): Madam Chair and members of the committee, thank you for the opportunity to provide the Region of Waterloo's input to the 2003 pre-budget consultations.

While the information to be presented reflects our specific realities, we feel that the general thrust of our presentation would be equally relevant to any of Canada's major urban areas. The majority of my comments today centre on our view that renewed federal government investment in municipal infrastructure is essential to support a high quality of life in Canadian cities and to maintain Canada's global economic competitiveness.

More specifically, I would like to explain how key areas of interest to the federal government align with budget priorities for the Region of Waterloo and to indicate the implications for potential federal financial involvement in 2004 and beyond.

Since its formation in 1973, the Waterloo region has consistently ranked as one of the fastest growing communities in Canada. With a current population of about 470,000, the region is the tenth largest urban area in Canada. With an annual gross domestic product in excess of $16 billion, the Waterloo region contributes a net $1 billion back into the Canadian economy annually. It is home to one of the youngest and most culturally diverse populations in the country, a population that drives the kind of advanced economy that ensures Canada's competitiveness in the global marketplace.

While this tremendous growth has created a number of exciting opportunities, particularly in the areas of education, cultural heritage, research and high-tech employment, it has also created several challenges, particularly financial ones.

The region has actively sought to meet these challenges through new investments that will benefit the national economy. For example, the region is spending $25 million over the next ten years to improve and expand Waterloo Regional Airport. This investment will increase the capacity of our facility to serve local investment-related growth and relieve existing congestion at Pearson International Airport—a benefit that extends far beyond the regional economy.

Similarly, the region, in partnership with the federal government, the Province of Ontario, the University of Waterloo, and private partners, is developing a $200-million research and technology park at the University of Waterloo. The intent is to capture and commercialize innovation in an effort to grow the economy for the good of all.

However, if the region is to remain economically prosperous and continue to support a high quality of life, a new funding framework is urgently required to address the needs of the community's significant built and social infrastructure, both in terms of enhancement and replacement costs, and to minimize the potential burden on the property tax system. It is neither appropriate nor feasible to continue to rely primarily on the property tax base as the main source to fund initiatives of such important national benefit.

The need for funding partners and a stable funding model respecting the provision of a number of services and programs has already caught the attention of the federal government. For example, the final report of the Prime Minister's Caucus Task Force on Urban Issues recommended the development of a national transportation strategy and a national affordable housing program. Likewise, the most recent federal budget allocated $900 million over five years to increase the number of child care and preschool spaces, to reduce the cost of service and improve the overall quality. However, for the more effective flow-through of these and other various funds, including housing allocations by the federal government to the municipal level, current federal-provincial-municipal arrangements need to be enhanced and streamlined.

I'd now like to turn to a number of recommendations regarding the federal funding commitments required to address service in a number of areas. At present, the most acute financial pressures affecting the region of Waterloo relate to the road and bridge network, transit infrastructure renewal and enhancement, transit operations, affordable housing and support services, and early childhood education and care. We recommend that these areas of regional responsibility also be key federal budget priorities for the year 2004 and beyond.

Beginning with the roads and bridges network, a new funding arrangement is needed to address both the growth-related pressures and infrastructure renewal requirements. Particular attention needs to be given to the significant infrastructure deficit—that is, the accumulation of unmet needs—which amounts to almost $200 million for the region alone. To eliminate this accumulated deficit over ten years, and to address the annual funding shortfall of approximately $12 million, a total financial commitment of $32 million is required. Assuming a one-third sharing of responsibility of this total cost, the federal government is requested to contribute $10.7 million per year.

Turning to transit infrastructure and enhancement, in order to enhance transit service, increase ridership, and better meet the needs of the community, the region requires significant new expenditures. These expenditures are required to maintain, expand, and replace the existing transit fleet; to further improve transit facilities; and to implement transit priority measures and new technologies, including those described in the region's urban transportation showcase program proposal to Transport Canada.

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Without additional financial assistance from the federal government, it will be difficult, if not impossible, for the region to fund its transit fleet replacement and system expansion needs. The estimated cost to replace the transit fleet, assuming an 18-year replacement cycle, is approximately $40 million over 10 years. To enhance the current system will entail a further financial commitment of $80 million over 10 years. All told, this breaks down to a cost of approximately $12 million per year to which the federal government is being asked to contribute $4 million annually.

In addition, consistent with the region's recently adopted growth management strategy, a proposal has been submitted to the federal government for the partial funding of a light rail transit system within the region's central transit corridor. However, for the light rail transit system to come to fruition, federal, provincial, and local governments will have to share in the projected first-phase $260 million development cost. The region is, therefore, seeking a one-time capital infusion from the federal government of approximately $87 million.

Achieving a significant modal split from automobile to transit is a key objective of the region. However, for this shift to occur, a sizeable investment in transit operations is required. To catch up to the population growth that occurred during the nineties and generate the ridership required to meet our auto reduction targets will require a minimum of $7 million per year.

The region is also requesting that the federal government share one-third, or about $1 million, of the total $3-million annual operating cost to further enhance the system. This leaves a federal share of $3.3 million overall.

In the areas of affordable housing and support services, there are needs as well that amount to approximately a $2-million requirement per year. Similarly, in the area of early childhood education and care, we recommend the formation of a direct funding relationship with the federal government not unlike that established under the supporting communities partnership initiative, SCPI. Such an arrangement would allow for a flow-through of resources to the consolidated municipal service managers, of which the region is one, and from it, direct funding to address municipal issues.

A number of studies have identified various revenue sharing and funding options available and currently in use throughout North America. Some of the more frequently cited options that we believe would substantially help toward addressing the current funding deficiencies include fuel and sales tax revenue sharing, GST exemptions, income tax amendments, and increased funding from general revenues.

You want me to wind it up, and I will. I'll present my summary somehow in the answers to the questions that will inevitably follow. Thank you very much.

The Chair: That's excellent. Thank you very much, and thank you very much for a complete brief too. It was very well done.

Now we'll go to our final presenter in this panel, the Canadian District Energy Association. Go ahead , sir. You have the floor.

Mr. Don Marsales (President, Canadian District Energy Association): Thank you. Good afternoon, my name is Don Marsales. I'm president of the Canadian District Energy Association. With me with Bruce Ander, our vice-president, who is also the president of Markham District Energy, one of the largest district energy systems in Canada.

Our association is a non-profit industry association representing owners, operators, builders, designers, and others who have a common interest in promoting district energy as the most reliable environmental and economic solution for Canadian energy consumers.

We're here today to ask you to amend the class 43.1 tax regulations for accelerated depreciation to include district energy equipment, which includes pipes, pumps, meters, heat exchangers, and other auxiliary equipment that is used to deliver thermal energy to consumers.

The generation component of our projects, which I'll talk about in a minute, is already covered by the class 43.1 regulations. However, the district energy distribution equipment can amount to up to 50% of the highly intensive capital costs of our projects, and even 100% in expansion situations. By amending the class 43.1 regulations, you'll remove a key barrier to financial viability for many of our marginal, yet highly beneficial projects across Canada.

Why are we here today again? Some of you may be aware that we have made previous submissions to the Department of Finance on this issue. Certainly the need to include district energy equipment in the regulations has not changed, but a number of external conditions have changed that we feel make our submission more important.

In particular, the Kyoto accord has been ratified. It means the reduction of greenhouse gas emissions is much more significant. Our equipment goes a long way to helping that goal.

The August 2003 blackout highlighted the need for more secure and reliable energy supplies in urban areas, which our equipment also provides.

And district energy equipment has recently been recognized by the Province of Ontario in their tax regulations to incent new efficient generation.

Let me take a minute to briefly educate you on what is district energy. It's a proven reliable technology that's been used for over 100 years throughout North America and in Europe. It varies in size from small communities in the north of Canada to large systems in Vancouver, Toronto, and Montreal. Many of these systems are owned by municipalities such as Charlottetown, the Town of Markham, Hamilton, Sudbury, Portage la Prairie.

District energy is a technology and it involves creating thermal energy, either heating or cooling, in a large central source and distributing it via an underground piping system to individual building owners, where it replaces the need for them to provide their own individual heating sources. It eliminates the need for boilers or air conditioners in those buildings. There are a couple of pictures in the notes, if you have them.

Our systems have two major components that are capital intensive. The first is the central energy plant that generates the thermal energy. The picture in our package shows one that was recently installed in downtown Hamilton. It's a natural gas-fired combined heat and power plant. And you can see that they're relatively small and quite compatible with urban areas. This one was built in nine months and began delivering energy in March of this year. And the centralized energy production through one or more plants means that district energy systems are large enough to provide for the flexible use of renewable and alternative fuel sources and achieve efficiencies through economies of scale.

The second major component is the distribution piping system that connects the thermal load to the end user. And there's a picture of the piping in the package. It's much like sewer and water piping installed in the ground at about a depth of a metre. Also, the building connections, which we call the energy transfer stations, convert the steam, hot water, or chilled water to usable energy for the consumer. And it's these last two items, the pipes and the transfer stations, that are the subject of our submission today.

Most new district energy systems are powered by high-efficiency natural gas-fired combined heat and power plants that produce heat and electricity, and they provide two simultaneous benefits. They generate a new source of highly efficient electrical supply, which displaces a need for power that is now produced in less efficient, environmentally damaging generating sources like our coal-fired plants in Ontario. They also produce thermal energy from the CHP process, and it is distributed through the district energy equipment, which displaces the need for additional electrical and natural gas energy to provide the heating and cooling requirements for the buildings it serves.

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A recent study by Natural Resources Canada indicated that there could be up to 10,000 megawatts in small combined heat and power plants built in Ontario by the year 2010. If this goal is met, greenhouse gas emission reductions will be reduced by 8.7 million tonnes of CO₂. District energy systems powered by combined heat and power plants will help meet this 10,000-megawatt target.

What's the importance of the district energy distribution equipment that I'm talking about? It's the vehicle that's essential to produce the energy efficiency levels required in the class 43.1 regulations. The district energy equipment distributes the thermal energy to produce an overall efficiency beyond 80%. Without this thermal load and the means to distribute it, efficiency levels won't be met, and quite frankly, the new combined heat and power plants won't be built either. District energy is not a by-product of generation, as has been previously suggested in response to some of our earlier submissions; it's an integral part of that efficient generation.

Last, let me just summarize why you should extend this benefit to the class 43.1 equipment.

It is already a newly recognized property class under the tax regulations in Ontario to incent new generation, but more importantly, district energy systems reduce greenhouse gas emissions and help us meet our Kyoto requirements. For every megawatt of district energy we install, 2,000 tonnes of greenhouse gases will be eliminated.

It also promotes secure and reliable energy sources in urban areas. Last August, during the blackout, our systems either continued to run or were back on line within minutes of the grid being restored. Compare that to the hours and days it takes the large nuclear and fossil fuel plants.

It also promotes urban intensification through compact design, and it provides the efficiency that's necessary to create efficient generation.

In summary, our recommendation is that you make district energy equipment a property class eligible for accelerated depreciation in class 43.1 by accepting the definition in our notes.

Thank you, Madam Chair.

¹ (1540)

The Chair: Thank you very much.

My colleagues, I know, want to ask questions. I'm going to give them six minutes per round.

We'll start with Mr. Jaffer.

[Translation]

Then, we'll hear from Mr. Paquette.

[English]

Mr. Rahim Jaffer: Thank you, Madam Chair.

Thanks to all the presenters for being here this afternoon. Given the limited time, I'll try to launch quickly into my questions. I'll start with Mr. Kravis, if I can.

Being a restauranteur myself, I know how difficult payroll taxes can be when you're trying to grow your business, so I always admire the work you guys do in trying to address that issue here and continuing to push it.

I wanted to focus specifically on the EI that you're proposing, the stand-alone fund administered at arm's length. I think it's an issue that needs to be discussed further. It's something that I appreciate in your submission, because clearly we have a problem in the EI fund when the surplus seems to disappear year after year. I think it's something that needs to be addressed, and we have to decide how we can make sure it's protected for the workers and the players who are contributing to it.

I wanted further clarification on that fund. Are you saying you want to have individual accounts, kind of like the proposal that was made--it was called the super RRSP plan--where instead of having the money go into general revenue, you would put separate accounts aside for money that is being taken off people's cheques; it would go into a separate account so that it would be there for them when they were ready to retire? Is that the kind of thing you're proposing with EI, or would it just be a separate fund where all EI premiums would go and be managed?

Mrs. Joyce Reynolds (Senior Vice President of Government Affairs, Canadian Restaurant and Food Services Association): Actually, we were referring to a dedicated trust fund. The example we used in our submission was like a provincial WCB. It would have to be at arm's length from government, controlled independently of government.

There would be an opportunity to establish rates on a counter-cyclical basis in a separate fund, but as long as it's part of consolidated revenue it's really pointless to have a counter-cyclical type of rate-setting process, because by accounting principles, you can't retain the surplus at the end of the year. It's gone, regardless. So you're leaving employers and employees vulnerable to a rate increase, even if there's a surplus, because it's a notional account.

There has to be a mechanism that would truly ensure that EI program costs and revenues are met and there isn't an opportunity to divert funds from the EI program. That's really the only way we can see that being the case.

¹ (1545)

Mr. Rahim Jaffer: I appreciate that. Again, congratulations on that millionth in job creation. That's quite a milestone.

I want to move on, if I can, to Mr. Bonnett.

In your submission, you talked briefly about the deferral program and that you would like to see it potentially extended for one year. I know this particular year has been a very difficult one for agriculture, especially for the cattle producers.

I'm just curious. With that extension, if we were able to allow that to go ahead, would it be sufficient to help the cattle producers this year, or will we have to look at extending it even further, in your opinion?

Mr. Ron Bonnett: It's just a handful of tools that I think are going to have to be used to assist the cattle producers. This would specifically apply to feedlot operators who have sold off their cattle in a very low market. The revenue that comes in is normally offset by buying in the next bunch of cattle. A number of them are running into cashflow problems, where they don't have enough cash on hand to buy. They're having problems negotiating with banks. We're hoping a year would give them enough time to work their way through the system. It's going to stabilize those operations so that they're still there as markets open up. We're hoping by early next year you'll see some more movement of livestock across the border.

As for saying it's the only thing that's needed, no, it's not the only thing that's needed. It specifically is targeted at those producers who need some time before they restock.

There are a number of other things I could talk about, for example, some of the changes we're proposing for the business risk management program, like covering extraordinary negative margins when there are losses like BSE, and allowing farmers to put up their share of the premiums by using a line of credit with the bank as opposed to having to find the cash. Those are the types of things that are behind some of the recommendations we made. Altogether, they would address a number of the concerns that have been faced, but individually they may target only one particular sector, sir.

Mr. Rahim Jaffer: Well, we understand it has been a difficult year for many of the producers in different parts of agriculture. So we appreciate those submissions.

Mr. Thompson, I know you didn't get a chance to finish up your concluding remarks. I noticed on the last page you have some of the revenue-sharing funding options. One of the suggestions was the GST exemption. I think I understand the others, given we were recently debating the fuel tax, sharing that particular revenue. And there are other amendments you're suggesting. I was wondering if you could expand on what you're talking about when it comes to GST exemption.

Mr. Gerry Thompson: I'll try to make it short.

Currently, municipalities in Ontario, or I guess municipalities across the country, have access to a GST rebate. So there's a 4% rebate on the GST that we pay, leaving us with a net 3% GST. That is quite a concession in itself. However, we still pay, for a municipality of our size with a budget of nearly $650 million, a sizeable amount of tax, both federally and provincially. Any help that can be flowed through to the municipalities in terms of GST relief is certainly part of the equation of relief we're looking for.

The Acting Chair (Mr. Gary Pillitteri): Thank you very much.

Mr. Paquette.

[Translation]

Mr. Pierre Paquette: Mr. Chairman, my first question is directed to the Canadian Restaurant and Foodservices Association. Your call for a separate employment insurance fund has widespread support in Quebec, in management as well as union ranks. I'm pleased to see a national association make this kind of suggestion, but Quebec is already on side on this issue.

The Bloc Québécois also endorses the idea of reimbursing the $45 billion. Of course, the money would be reimbursed over time, depending on the rate of growth of the economy, but this is money that is owing to employers and workers. Quebec unions have launched two separate suits calling on the courts to rule that the federal government has acted illegally. There is also a case pending on the issue of parental leave that has been launched by the Quebec government. It is arguing that parental leave should not be part of employment insurance, a program designed to provide economic security to persons who lose their job, not a program geared to parents with young children. Parental leave should fall under a different program. I think the Quebec government will win this case. Therefore, I'm pleased to see this proposal put forward.

However, I'm wondering if you've considered taking action against the federal government for fraud. According to the economic statement released by Mr. Manley on Monday, each year, $2 billion in surplus funds are earmarked for purposes other than the one originally intended.

¹ (1550)

[English]

Mrs. Joyce Reynolds: We've certainly followed the court cases carefully, and those people who've been on this committee a long time know we've been pursuing this issue for a long time. We believe, hopefully with your assistance, we can get the help that we need through the parliamentary system as opposed to through the court system.

[Translation]

Mr. Pierre Paquette: You are rather optimistic.

Yesterday, Mr. Bonnett, we were in Montreal where we heard from representatives of the Union des producteurs agricoles. They were highly critical of the Agricultural Policy Framework. Specifically, they felt that the initiative was underfunded, particularly as regards risk management.

Is the Ontario Federation of Agriculture of like mind, that is to say does it view the Agricultural Policy Framework as a step in the right direction, albeit an initiative that has not been adequately funded by the federal government?

Could you also explain the concept of negative margin coverage to us? As I understood it, in the case of mad cow, a problem has arisen over negative margin coverage for a number of cattle producers.

[English]

Mr. Ron Bonnett: You've touched on a couple of points. As to the point on whether or not there's enough money in the system to cover what the demands are, in our view right now that's a secondary issue. The idea of the agricultural policy framework was to design a system that would deal with the types of losses that farmers were dealing with, and we have been trying to make sure we get the programs designed right so they deliver as they do.

As we evolve to the five-year program, we're going to have to examine the funding requirements. My understanding is that at the present time they draw forward from future years' commitments if there's a year that has increased demands. I think it was an important step when the announcement was made that they would review the program annually. We're hoping that if there are problems with the amount of funding that is required to keep the thing going, that's where that issue would be addressed, in the annual review. We're more concerned right now about having the program work well.

As I mentioned in my presentation, the George Morris Centre did an independent evaluation of what was proposed, and they said there were a number of things that had to be changed to make it work well. We're not opposed to change, but we want to make sure we're moving to something that changes well.

You did mention negative margin coverage. We have been very forceful in Ontario in stating that there have to be some coverages for those years when exceptional negative margins take place. Otherwise, the way the system is designed right now, it would not pay out much money to the farmers who have had severe losses. So that is the type of thing that has to be fixed.

If you look at the overall framework, it could work. The thing is that there have to be changes made to make it work. It's like buying an insurance policy and realizing that you don't have the coverages you thought you did. You're better to get the coverages right at the start.

[Translation]

Mr. Pierre Paquette: Thank you. Do I still have some time remaining?

The Chair: Yes. You have one minute.

Mr. Pierre Paquette: I have a very brief question for the representatives of the Canadian District Energy Association. Regarding your request for class 43.1 amortization, do other energy producers have this status?

I'm not very familiar with the structure, but in Quebec, for example, it's clear that Hydro Québec is a public utility. Gaz Métropolitain, on the other hand, is privately operated. I imagine Gaz Métropolitain is entitled to the same type of amortization provisions as businesses in general. I'd like to know if other energy producers in Ontario benefit from the same kind of amortization provisions.

¹ (1555)

[English]

The Chair: Mr. Ander.

Mr. Bruce Ander (President, Markham District Energy, Canadian District Energy Association): It does vary, depending on the type of producer, but what we're really comparing this technology to is other combined heat and power plants that do not include the distribution equipment that goes off to capture the thermal load.

So in those cases where a private investor owns those systems, they have class 43.1 if they meet the efficiency threshold, but they don't have the same equipment that we would have to go off and get the loads as would other renewal energy projects in the country. They have the class as well, but they don't have the same equipment that we're talking about here today.

[Translation]

Mr. Pierre Paquette: Thank you.

The Chair: Thank you very much.

Go ahead, Mr. Wilfert.

[English]

Mr. Bryon Wilfert: I want to thank everyone for their presentations.

To CRFA, just for the record, as you know, the minister announced the consultation process with regard to EI. Did you present during those consultations?

Mrs. Joyce Reynolds: Yes.

Mr. Bryon Wilfert: I would agree with you that we should be looking at something with regard to the establishment of a yearly basic exemption with regard to EI. However, in terms of the issue of a stand-alone, as you know, in 1987, I believe it was, the Auditor General said we could not do that, and we rolled it into general revenue. So that's why it's not a stand-alone. As to whether that could be done in the future, I don't know, but the Auditor General makes it very clear that it was not acceptable.

If I read your brief correctly, are you suggesting that the government return $45 billion? If you are, we might as well close up these discussions today.

Mrs. Joyce Reynolds: Yes, over time.

It takes seven years to accumulate a $45-billion surplus. We don't expect to get it back in seven years, but let me have Nils give you an idea of the number of restaurants he could open, the number of stores he could open, and the number of people he could employ.

Mr. Bryon Wilfert: I want to follow up by asking, where will the money come from?

Secondly, as you know, when there were downturns, money went into EI from general revenue, and that, of course, is the principle that would continue. So I'd be curious, because I'm interested in the future of how we can get this right, but if you're asking us to go back with the $45 billion, that's going to be a non-starter.

Mr. Nils Kravis: The YBE definitely goes a long way towards making it more equitable for labour-intensive industries such as ours. I think the Auditor General also says it's violating the intent of the act to allow the surplus to continue ballooning and continue to be used in other resources, and the impact is significant on us.

We have 38,000 employees across Canada. Our employees contribute about $23 million a year to EI, and our corporate contributions are about $32 million. So that's $55 million that we, as one organization, contribute to EI. If 20% of that continues to be used as a surplus, those are funds that really aren't intended for and by EI. That's a cashflow grab that really doesn't allow us to reinvest in our businesses.

We've contributed to the surplus $10 million to $15 million, or $70 million dollars over the last seven years. That $70 million could have allowed us to open 140 new restaurants across Canada. It could have allowed us to employ close to 10,000 new employees, and those are businesses that have a domino effect through the supply chain, creating sales, tax revenue, and an employee base, strengthening Canada's economy, strengthening our industry, and strengthening the benefit of our youth across the country. So I think there are significant benefits to putting dollars back into the business community so that we can reinvest in our people and in our future.

Mr. Bryon Wilfert: I could argue--and I will--that moneys went into such things as health care because of that $45 million, which helped your employees. But I have no difficulty with the yearly exemption. What I would have difficulty with is, if we're going to spend time looking in the rear-view mirror, we're not going to get very far. If we look forward, we're going to say, all right, how can we improve your industry, which is extremely important in this country and creates a significant number of jobs. You mentioned a million employees.

But clearly the EI moneys have gone. Yes, they've gone to other purposes, but that includes health care, which obviously I think is important for your sector. But we're in a situation where we're not going to go back into a deficit. We're perilously close, given the announcement of the minister earlier in the week. So that concerns me.

To the OFA, in regard to providing substantial funding needed to the on-farm sector, can you explain to me your definition of substantial funding?

You have four recommendations in taxation. You're not going to get all four, obviously. In my view, you won't get all four, so what's your priority? What's most important to the OFA?

º (1600)

Mr. Ron Bonnett: Most important right now are the changes that we've requested on the agricultural policy framework, if you're talking about overall priorities. If you're talking specifically about taxation policy--

Mr. Bryon Wilfert: Yes, please.

Mr. Ron Bonnett: --it would be the capital cost rates. That would be the priority, re-evaluating those capital cost rates and how they've been used. It has been some time since they're been re-evaluated, and a lot of the equipment we're using in modern agricultural facilities depreciate at a different rate than some of the equipment that was used in the past.

Mr. Bryon Wilfert: Do you have any cost figure for that?

Mr. Ted Cowan (Policy Analyst, Farm Policy Research Group, Ontario Federation of Agriculture): In terms of changing the rate, sir, for example, in the case of equipment that's in a barn, that's currently discounted out at 4%. It has an economic life, typically, of six or seven years, either due to the moisture in the barn or obsolescence. So you'd be looking there at a rate of about 15%.

The capital cost total wouldn't change, but its rate would. So you'd be looking at an accelerated loss of revenue to the government from the agricultural sector, but the total loss would be the same.

Mr. Bryon Wilfert: Thank you.

To the Region of Waterloo, as a former of president of the FCM and as a member of the Prime Minister's task force on urban affairs, there isn't a lot that I disagree with, except for two areas.

One is on the issue of transit. You know that we called for a national transportation strategy. The Government of Canada, in my view, should not be involved in any way with operating costs of any transit system. Capital costs where there is appropriate massing would be reasonable, but operating costs would be, to me, a non-starter.

I think one of the things that your municipality and others need to press the new Government of Ontario on, as they need to do across the country, under a new Municipal Act—which I've heard about for eons—is the fact that they need to expand the taxation power base for municipalities. I'm not suggesting new taxes, although I am suggesting that if you need to raise more taxes you should have the authority to do so. Then you'd be accountable for it to your community. I'd love somebody to give us a cheque, so that I wouldn't have to account for the money and then I could get all the kudos for spending it, but it doesn't work that way at the federal level. We need to do that.

Clearly, you've complimented or made comments with regard to the infrastructure program, both strategic infrastructure and the municipal infrastructure, on the ten-year commitment and the billion-dollar down payment. It's very important, but I think we have to be very clear that we can't go back under deficits. We have to be strategic.

We talk about trying to flow money through to cities. I could be causing a national outrage here, but I'd be quite happy to eliminate the middleman, i.e., the provinces. I think, in terms of some of the effectiveness that we've had, we've had more problems with some of the provinces. Ontario is an example, in the last government, on affordable housing. In Nova Scotia, all they've put down are 15 units. It's unacceptable. But the fact is that there are certain constitutional niceties here that we have to respect. We have been more of a partner than any government in the history of this country in terms of urban issues.

I would caution you that if you're looking for things like operating costs, it certainly wouldn't be something that we could afford or that, I think, would even be practical.

The Chair: Thank you very much. Your time is now up.

We'll go to the Honourable Maria Minna.

Ms. Maria Minna: Thank you, Madam Chair.

I'd like to start off with the restaurant federation. One of the things you recommend is to “reinstitute the government contribution to EI funding to cover a portion of costs for benefits unrelated to the labour market”. Can you give me an idea of what you mean exactly? Under the EI now, what things would you eliminate? What would this new structure look like?

Mrs. Joyce Reynolds: Back when government was a contributor to EI, the contribution was to cover regional extended benefits and fishers benefits. Since the federal contribution was withdrawn, new benefits have been added for parental leave and compassionate leave. I think the percentage of pure EI benefits for employees who lose their jobs through no fault of their own is less than 60% of overall program costs now.

Our sense is that there has always been a discrepancy between employers paying 60% and employees paying 40%. We've argued before that there needs to be a change in the multiplier. Perhaps the way to go about it would be to have the government, which is adding new programs to the cost of EI, pay 20% and then the employer-employee contribution would be equal.

º (1605)

Ms. Maria Minna: The reason I asked that is that I don't see it quite that clearly. Some of the programs, like parental leave and compassionate leave, which is the latest, allow the government and the country to have a labour management renewal of a labour force situation and allows for a labour management situation to take place in the country.

It would seem to me that this would benefit both the employer and the employee. It would help your industry if you have someone who is about to go on parental leave and you are able to train someone else to do the position. I see that as part and parcel of stabilizing our labour force. The benefits that accrue come from both the employer and the employee. I don't see it as something that is pure EI. I have heard of this pure EI so many times, and yet I don't think we've had it for quite a long time in this country.

For instance, what will you do when you reimburse someone for having lost a job? What's your position on the intensity rule, for instance?

Mrs. Joyce Reynolds: The position we took on the intensity rule was, for employees and those who are seasonal workers, to make it easier and easier for them to access benefits. It has been harder and harder for them to actually find work in the off-season.

We think there should be programs to encourage employees and employers. Because they can rely on the EI program for a steady workforce for a portion of the year, it doesn't encourage them to change the way they manage their companies either. For both the employers and employees to improve the overall productivity in the country, and to encourage mobility and to encourage training, we don't think the intensity rule is a good idea.

Ms. Maria Minna: Again, that is where we differ, simply because there are seasonal industries. One of them, for instance, is construction. They used to have longer periods off, but they now have shorter periods, with all of the new technology in the industry and what have you. It's an industry, for instance, in Toronto, that has a huge shortage of skills. To train a good carpenter or to train a good bricklayer, proper training takes a long time. Quite often these men and women work from job to job to job. Sometimes they're off and then they're back on. If we start penalizing them every time they're off for a few weeks in the winter and then back on, the industry isn't going to keep very many trained people.

On the one hand, you're saying that you want $45 billion back, then you say you want a pure EI. What does a “pure EI” really mean?

I've talked with them. We discussed parental leave, compassionate leave, and other things that you don't want to see there. Now the intensity rule, again, is here. You would shrink it so much that I think the number of people who would benefit from this program would be very small, from your description of it, at this point.

The Chair: Do you need a response or is that a question?

Ms. Maria Minna: Am I right? Do you want to shrink it?

Mrs. Joyce Reynolds: We want to have a more productive economy.

Ms. Maria Minna: I'm sorry to interrupt, but why is it the assumption that somebody who may receive EI more than two or three times is not productive?

Mrs. Joyce Reynolds: Well, we have seasonal businesses in our industry as well, but there's no encouragement for those companies to diversify and do anything else.

Ms. Maria Minna: Okay, so you want the guy who is building houses.... I'm sorry I'm being difficult, but I've lived with the construction industry. My father was a construction worker. I started out as a farmer, so I have a bit of a bone to pick here.

How does a home builder diversify? He is building houses. There's a period of time of the year when his employees are going to be off, possibly for a month, in the middle of the winter. His bricklayer and carpenter are highly skilled. It has probably taken six or seven years to get them there. What is it that you want him to do with these guys exactly? How is he going to diversify?

I want you to get specific, because I understand that in your industry it may be easier, but not in others.

º (1610)

Mrs. Joyce Reynolds: You're using a specific example.

Ms. Maria Minna: Well, that's what we're about here.

Mrs. Joyce Reynolds: You can find a specific example where there are people who rely on the EI program to supplement their income throughout the year, year after year after year. For people, particularly some of the lower-wage employees in our industry, who pay into the program year round year after year, they don't feel they should be subsidizing those who make a higher income for the period when they are working and then are subsidized for the year.

The Chair: I now have to turn it over to somebody else. I have a feeling that discussion won't be resolved today.

We'll go to Mr. Murphy.

Mr. Shawn Murphy: Well, I'll continue it because--

Some hon. members: Oh, oh!

The Chair: Why not?

Mr. Shawn Murphy: I disagree with Maria on a lot of this--not totally, but I think there are a lot of distortions in our EI system that really take away from productivity right across Canada. We can all use specific examples, but I think the two biggest problems are that it keeps people in regions where there are no jobs and, perhaps more importantly, it restrains people from getting some further training and education.

Going back to the specific restaurant proposals--and I agreed last year with the YBE, and I hope this committee will see fit to put it back in this year--I certainly think that when you look at the whole perspective, the restaurant industry certainly has paid more than its share of taxes over the years.

But let's follow this at a macroeconomic level. You listen to the tax experts and you listen to the chambers of commerce that come in here, and they advocate that capital taxes should be taken right off the table--which we have done; we've recommended that and the Government of Canada has followed that--and the corporate income taxes should be lowered. We've recommended that before, the government has followed that, and you're getting the benefit of that, which in turn has led to, I believe, lower interest rates, which you're getting the benefit of. The so-called experts--and I'm not disagreeing with them--have advocated that to replace the revenues, you look to consumption, which would be the sales tax, the GST, and maybe employment taxes.

Now, you can be cynical and say the EI program really has, for the last eight years, been an employment tax in disguise. That's what it's been, and I think most people would agree with me. But right now, if you look at your graphs and see what's going on, you'll see it is to a certain extent correcting itself. It's not as bad as it was, although I believe there's still a $2.5 billion or $3 billion surplus in this fiscal year. Probably if employment goes up a bit and the rates come down again, it will disappear.

But at a macroeconomic level, if we followed the proposal to pull EI right out of the system and made it self-standing--whether you do it by making it a separate trust or by separate accounting, I don't think it makes a lot of difference--a revenue-neutral, transparent, accountable, self-funded organization similar to provincial workers' compensation boards, and you probably don't even want to talk about those organizations, there would be revenue lost. Do you have any thoughts on where the additional revenue would come from?

Mr. Nils Kravis: As I mentioned earlier, from our perspective I think the savings you would get in EI premiums would be reinvested in the business; they would be reinvested in growth. We would be opening restaurants. We have a lot of communities that don't have the restaurants we have to offer, so there's a capital outlay that would go in. Each new restaurant employs anywhere from 40 to 100 new employees, who get training, who get job-specific skills, and who contribute back to society. Each new restaurant averages between $600,000 and $2 million a year. The purchasing supply chain, the flow-through on that, is significant. All those positive outflows are going to create the revenue generation and compensate for what we're looking for from an EI deduction.

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Mr. Shawn Murphy: Now, the second issue is skills training. The restaurant industry needs a skilled workforce. Do you think government has a responsibility in that regard?

Mr. Nils Kravis: Personally--and Joyce can jump in--I think the best thing government can do is reduce the payroll tax burden on employers and allow us to train our employees. We have very sophisticated training programs, where we have job skills and other government subsidies. People take advantage of them; a lot don't. I think the best thing to do would be to allow us to create a stronger industry, to allow us to grow, and to allow us to compete on an competitive basis.

Mr. Shawn Murphy: I just have one last question for the Canadian District Energy Association. You're asking for certain assets to be included in class 43.1 for accelerated depreciation. I take it that has nothing to do with the economic life of the asset. The accelerated depreciation is there in a certain class to spur investment. Is that correct?

The Chair: Mr. Ander.

Mr. Bruce Ander: This is precisely the point; it's to spur on investment. We were trying to encourage a class of project that would lead to new investments, projects that wouldn't otherwise happen. Generally, we're trying to level the playing field against other forms of generation. The role the federal government has in the tax system is only one barrier we're trying to beat down, including emission trading rules and electricity market rules.

To give you a sense, Mr. Marsales referenced an NRCan study that said there is 5,000 to 10,000 megawatts of combined heat and power cogeneration potential, and Ontario is going to need a lot of it in the next 15 years. We don't know what percentage of those systems will be connected to district energy, systems that will include this class of asset we're asking be included, but if you assume 10% of them would be included in this sort of system or made up of this sort of system, we're looking at 500 to 1,000 megawatts of generation connected to our systems.

Mr. Shawn Murphy: This request is specifically to include it to spur additional investment on a rapid basis and has absolutely nothing to do with the economic life of the general line assets.

Mr. Bruce Ander: No. That's exactly right. We're trying to make sure that for this environmentally preferred generation, the playing field gets levelled. Then, as our industry goes through the reinvestment it'll be doing over the next 5 to 10 to 15 years, this will be one of the preferred sources of generation.

Mr. Shawn Murphy: I know I'm probably out of time, but give me one or two examples of assets that are presently within class 43.1.

Mr. Bruce Ander: It would be the combined heat and power portion of our project that is embedded in an industrial plant, for example, so it's recovering the heat to be used for industrial process. There is no piping in the structure; it is simply a 10-foot-long pipe taking out the waste heat and delivering it to the industrial process. We're moving it onto the heating systems, but we have to put the pipe in the ground to get the thermal load to create the efficiency.

The Chair: Thank you very much.

Now Mr. Pillitteri for six minutes.

Mr. Gary Pillitteri: Thank you very much.

The comment was made by Ms. Reynolds that some members have been here so long.... Let me put it this way, I took it somewhat personally because I've been here for 10 years. Maybe you'll remember the remarks I made some eight or nine years ago, when I told the minister that every form of tax was a redistribution of wealth or social programs. I mentioned income tax, corporate tax, and GST. I said, why not call EI a tax on jobs? What's the difference? It's a redistribution too.

Let me put it quite bluntly, because we cannot put it any other way. Before I started sitting around this table in this life, I worked in industry. I'm a farmer by trade, an entrepreneur, whatever you want to call me--developer, anything you can think of. I've paid into the EI fund and never collected a cent, but I never regretted paying it because there are those who need it.

We talk about stand-alone.... In those days I also made the remark that if we called it a tax we wouldn't have to talk about a surplus or a deficit, because years ago, how much of the general revenues went to support the EI fund? Only in the last few years, with the improved economic situation in Canada, have we had a surplus because more people have been working--even though we've lowered it almost $1 per $100 compared to ten years ago. We've done quite a bit.

Let me also say this to you. When you say “stand-alone”...the very heart of the restaurant and tourist industry in Canada is Niagara Falls. I've never had a restauranteur or hotel owner come up to me and say, “It's costing me so much money.” They say, “Educate me a chef.” We have a school in Niagara College that has culinary classes--a private school. This school trains people in the tourist industry.

In today's society we have a shortage of trades, and by gosh, people in the trades are no longer coming over from Europe as they did in droves in the 1950s, late 1940s, and 1960s. There's a shortage of skills that we have to address. When we take away the responsibility of no longer training those individuals--as little as we train them, because we should be doing a lot more--then we're really in trouble.

You talk about the tourist industry. Years ago there used to be mom and pop operations. They opened for six months, closed for six months, and were gone for holidays. They had the lowest-paying jobs, closed their doors after six months, and moved away. Today the industry is coming to us and saying they want to keep the people they trained for a long time. They want us to help them, and they're doing work sharing. It's going on right now. Last summer we had a downward trend in the economy, especially in the tourist sector. We have to start having job sharing.

Do you know what that means? For some it means the industry will keep certain individuals for two or three days and then lay them off for two or three days, so they keep the same number of workers. Companies want to keep the individuals they've trained. If you had a stand-alone, those companies would not have a responsibility. They couldn't care less who got laid off. They'd say, “Go and find yourself a job.” But with today's world shortages, we need those tradespeople.

Take a look at maternity leave. I'm a small business man, and when a woman employee goes on maternity leave I have problems training someone else. That is a cost to me as an employer, but I also know that when that person comes back to work after six months or a year, she'll be a happy person.

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We talk about those individuals who never want to work. I have a workforce of about 30 people, and I lay off the same four or five people every year. I never hear the other 26 people complain and say, “I pay and never collect, and those who are not paying the same amount always get laid off and go on holidays.”

You know, you cannot have EI as a stand-alone. It should not be in the hands of government. To heck with it. Let's give it to the private sector. The government is there, even starting with this redistribution of wealth within EI....

I don't care how you feel, Mr. Paquette. That's my feeling, and I just want it to be known. That is maybe one segment of the hotel industry, but other segments of the hotel industry and the restaurant industry are telling me, “Educate individuals. Train them for me, because that's what I need. I need skilled workers in order to have a continuous workforce.”

Mrs. Joyce Reynolds: Having a stand-alone account doesn't necessarily mean there will be changes to the benefit structure. That's not what we're talking about. We're talking about administration of the program so funds can't be diverted from EI for other purposes.

In terms of training and employee retention, we're 100% with you. Nils can talk to that better than I can--how important it is to retrain, develop, and make employees part of a very important company team and industry team.

Maybe you can talk to that a little bit more.

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The Chair: That will be the last comment of this panel.

Mr. Nils Kravis: People are the strength of our industry. We have people who enter our industry from the ages of 14 to 16. We have development opportunities and career opportunities. They go on to become managers and assistant managers, where they're making $50,000 to $100,000 a year. They go on to become corporate executives.

The industry has a huge commitment to train and develop people, and we use the resources available to us. Passion for people is what our industry is all about, and our loyalty to our people is reflected in the loyalty they have back to provide service for Canadians.

I don't agree 100% with the comments. We have seasonal restaurants. This past year has been a very difficult year for both the hotel and food services, where we needed to have some short-term job sharing. If this were a long-term epidemic or a long-term impact, we'd have to redeploy those people, because the industry could not afford to sustain that on an ongoing basis.

We hope that through our efforts, through marketing, and through the economic turnaround, the industry will get to full force. But with everything that has hit us this year, that's not going to happen in the short term, so we need whatever support we can get to make the industry stronger and return it to where it was in the past.

The Chair: Thanks to all of you for preparing your briefs and getting them to us early enough that we could translate and distribute them. I want to acknowledge that your presence in our discussion is very important to this committee--and not only to the members who can attend. We can't put everybody on the road. All of these briefs go to all 18 of the members of the committee, and also to the finance department. The record from these meetings is also read inside the finance department.

So whether or not we get to write this time--I hope we do, and the only way we won't is if the House prorogues at some point--your participation is important. Through today's session you have had the chance to put forward your words and your written materials. For those who didn't get all of the oral presentations, the written materials also have everything you need to put on the table.

So thank you very much.

We will suspend for about five minutes, and then have our final panel.

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º (1633)

The Chair: We are back in session in Toronto, on November 6, with our sixth panel of the day. As witnesses, we're very pleased to have with us Canada's Association for the Fifty-Plus, and their executive director and co-director of advocacy, Bill Gleberzon, is with us again. Welcome to you. And we welcome back Judy Cutler, director of communications and co-director of advocacy.

From the Arts Network for Children and Youth, we have Linda Albright, executive director, together with the treasurer, Rudy Ruttimann. Welcome to you both.

From the Canadian Cancer Society, Rebecca Finlay is the group director in public affairs. Welcome, madame.

From the Nature Conservancy of Canada, we have John Lounds, president. Welcome back, sir.

From the Direct Sellers Association of Canada, we have Paul Thériault, president. Bienvenue, monsieur.

From the Toronto Real Estate Board, we welcome Mauro Ritacca, manager of government relations.

So I think we'll go in the same order as we have on our agenda. You get up to seven minutes to put your presentation on the table. If you've submitted your briefs, they have been distributed not only to the members who fiscally we can bring with us, but also to those who are in Ottawa or in other parts of the country at the moment. We will, after the seven-minute rounds, go to questions from members present at that time.

So let us start.

Ms. Judy Cutler (Director of Communications and Co-Director of Advocacy, Canada's Association for the Fifty-Plus): Thank you very much for this opportunity. As our brief indicates, there are so many things to talk about. To whittle it down to seven minutes was not easy, but we'll give a brief overview.

To begin with, to remind people, in case you don't know, that CARP is Canada's Association for the Fifty-Plus, representing 400,000 members right across the country who are 50 and older, retired or still working. Our mission is to protect and promote the rights and quality of life for mature Canadians.

Canadian society is living in unprecedented times. We are on the cusp of a demographic revolution that will actually have as great an impact on society as did the Industrial Revolution. By 2030, one out of every four Canadians will be over 65 years of age. For the first time in global history, a large percentage of us will be living well into old age and even into very old age.

What this means for our society is that from about 2030 until 2065 or so, older Canadians will form a dominant segment of our population. We as a society must prepare for this demographic revolution right now to avoid crises later. Therefore, we'd like to offer some recommendations.

I'll turn it over to my colleague, Bill Gleberzon, to begin some of these recommendations.

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Mr. Bill Gleberzon (Executive Director, Co-Director of Advocacy, Canada's Association for the Fifty-Plus): Thank you very much.

We recommend, in regard to retirement income, that a committee of the House or Senate be established to review all components of the retirement income system. Until then, we'd like to make some of the following recommendations on elements.

Briefly, the formula for increases in old age security can realistically meet the financial needs of seniors with a more appropriate basket on which the CPI is based, the CPI for seniors. For example, it shouldn't include interest and mortgages. And it shouldn't be pegged only to this 3% inflation. The clawback in old age security must be replaced by the progressive income tax system.

Guaranteed income supplement payments should meet real financial needs. Also, couples receiving GIS should not be penalized by not receiving the equivalent of what is received by two individuals. The 50% clawback on GIS should be rescinded or reduced, awareness about eligibility must be improved, and retroactive payments should go back to the first day of eligibility.

New RRSP categories must be developed for both modest-income Canadians and high-income Canadians. Conversion to a RRIF should be restored to age 71, and the formula for annual withdrawals from RRIFs must meet the real financial needs of seniors. FPT legislation on LIFs should be harmonized for more flexibility than just purchasing annuities.

National legislation is required to regulate funding holidays in company pensions so that pensions are not underfunded.

Finally, the progressive income tax system should be applied to Canadian residents receiving U.S. social security.

I'd like to turn it back to Judy now, who will talk about health care.

Ms. Judy Cutler: Whether at home or in facilities, long-term care must be fully integrated into our health care system with national standards legislation and funding. Chronic long-term care must be included in the national home care program as part of the health accord. Or, at the very least, any money saved by the provinces and territories as a result of new federal funding for home care must be reinvested in chronic home care, and we'd like to see an agreement to that effect.

We have a study by Dr. Marcus Hollander showing the cost-effectiveness of chronic care in home care, and we have copies for people. EI should be made available for all family caregivers who leave work rather than just for six weeks of palliative long-term care. And similarly, CPP should extend its stop-out provision that exists for new parents to family caregivers who have to reduce hours of work or even leave jobs to provide care.

We'd like to see federal funding made available for nursing homes to ease the financial burden on provinces and territories as well as, of course, on residents and their families.

A very important determinant of health, affordable housing, is something that we would like to see happening. We're not sure that it is happening. The FPT governments need to do a report card on the actual number of new units built under the agreement for affordable housing to the public, and the program should be extended beyond its current timeline.

In conclusion, Canada can lead the way globally in becoming senior friendly in this new emerging world, this new demographic shift, and why not begin with the next budget and the throne speech?

Thank you.

º (1640)

The Chair: Thank you very much.

Now we'll move to the Arts Network for Children and Youth.

Who would like to start? Go ahead.

Ms. Rudy Ruttimann (Treasurer, Arts Network for Children and Youth): Thank you for allowing us to present to you today.

The Arts Network for Children and Youth is an arts service organization that was formed by arts practitioners and delivers programs to children and youth in Canada both in schools and in communities. We came together by an identified need that there was no organization in any of the provinces or in Canada that represented arts programming specific to children and youth.

Over the past few years there has been research in Canada and from other countries substantiating the benefits of arts in education: improved social interaction and community involvement, a reduction in high school dropout rates, and a decrease in crime and drug use.

In the next 10 years, the Arts Network envisions communities where children have opportunities for multiple arts experiences both in schools and in the community. These will range from the traditional art, music, theatre, and dance classes to the new emerging programs that we are beginning to see, such as after-school drop-in art programs, arts leadership and mentorship programs, multidisciplinary and single-disciplinary programs in high-risk neighbourhoods, preschool art programs, art programs that work with street youth, and outreach programs in rural and first nation communities.

Many of these new programs are beyond the art classes. They offer life skills, mentorships, and training. They facilitate community involvement and allow youth to develop teamwork, communication, and social skills in a more holistic way. The arts are becoming a powerful tool to reach all youth, but especially those at risk.

Through our travels and contact with Canadian organizations, we are also hearing the amazing anecdotal stories about the work that organizations are doing with children and youth.

Blue Feather Youth Centre's Youth of Today Society in Whitehorse engages high-risk youth in arts and entrepreneurial activities. Many have been involved in the justice system, with high levels of drug and alcohol abuse. Judges are recognizing that this is the first program that is having a positive effect on youth.

The De-Ba-Jeh-Mu-Jig theatre troupe takes a team of young artists into remote and first nation communities and engages children and youth through theatre and community arts. When asked how they evaluate the work they do, they respond that no youth tries to commit suicide while they are there.

My organization, Sketch, is a working arts studio that works with street youth between the ages of 15 to 29, who have access to a framework of programming. Our research shows that it takes a minimum of two and a half years for an individual to go from living on the streets to a healthy lifestyle. In 2002, Sketch reached 250 youth; in 2003, we will reach 700. Recently we worked with a homeless youth who came to us with no housing and a heroin addiction and is now a full-time student, two and a half years later, at the Ontario College of Art and Design.

What makes programs such as this work? It's simple. They engage youth in a proactive manner. They focus on their positive creative skills. They offer safe, healthy environments and experiences. They build in a sense of community. In some cultures, such as those of our first nations, their culture is defined through the arts--music, dance, art, and stories--and it then makes sense that it is through creative activities that youth are most successful.

Unfortunately, these organizations and others like them do not have ongoing core funding. Stable program funding in communities for arts and youth in Canada does not presently fall under the responsibility of any government ministry, federal, provincial or municipal. Even though research shows the reduction in community costs, it does not share any of the sustained funding and resources that are available to other sectors such as recreation, health, social services, justice, or education.

It has been estimated that $1 spent on asset-based programs such as the arts equates to a savings of $5 to $7 in other intervention sectors such as social services, health, and justice. The question of being able to afford this type of program must be replaced with the question, can we afford not to invest in these programs?

As we are envisioning a broader range of creative activities and arts opportunities for children and youth, we have identified three key gaps in needs of communities for programming to be sustained and developed. These include long-term sustainable funding; cultural infrastructure that is designed for children and youth, and having the equipment and studios necessary to deliver programs, much like recreation; and trained creative artist-facilitators to work in programs with children.

When we have achieved addressing these gaps, we will see the creation and development of the arts sector for children and youth in Canada. We are coming to the federal government asking you to take the lead role to assist with the development of this sector. Once the sector as a whole is developed and expanded, we feel confident that the provincial, territorial, and municipal governments and the private sector will become involved.

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This comes at a time when Canada is developing the national children's agenda and national plan of action for children.

The creation of the arts sector for children and youth will result in an economic ripple effect that accompanies sectoral expansion. This is an investment that will not be a drain on public funds but will return the investment dollars back to the government in a multitude of ways. With this investment, there will be a substantial return through cost savings to other sectors, the improved health of our children and communities, dollars spent in communities to deliver programs, and job creation for artists and program staff.

Facilities are being built for children and youth. However, these facilities are often correctional institutions, mental health facilities, and sports facilities. What is lacking is the creation of community creative spaces for children and youth. We see the need to have a mix of facilities, including new buildings, retrofitted studios, storefronts, and studios in neighbourhoods.

With the need for youth training and concerns about the environment, here is an opportunity to develop a building process that will have multiple innovative successes in the creation of these facilities. Wherever possible, we would like to see the building of facilities include opportunities for youth to take part in the construction, which will develop job skills, and integrate into the facilities sustainable green and natural building components.

The Arts Network for Children and Youth have two recommendations for funding to be placed in the 2004 national budget.

In our first recommendation, we urge the Canadian government to establish, through Industry Canada, a creative spaces children's infrastructure fund. This would be an ongoing yearly fund, beginning in 2004, with a minimum of $10 million for the first year. In the first three years there would be an establishment of 10 pilot sites per year, which would be spread across Canada in rural and urban communities, with a focus on high-needs communities.

In our second recommendation, we urge the Canadian government to establish a children and youth arts engagement fund to support existing arts organizations with ongoing core funding to ensure their longevity and sustainability. We're requesting that $5 million be set aside in 2004.

As new arts programs are developed in communities, we would like to see this fund increase over time as the successes prove themselves. The Arts Network for Children and Youth is in the position to act as a conduit between local communities and government. We have been able to gather a national network of practitioners with a combined expert knowledge. We have also spent an enormous amount of time meeting with all levels of government staff to speak to these issues. We look forward to working with the federal government in partnership with ministries such as Industry Canada and the Department of Canadian Heritage to ensure that a template is created to work to establish the first pilot communities, which will then become models in the creation of expanded programs and facilities in Canada.

We look forward to working with the federal government and other government agencies, public and private funders, community people, artists, and the youth themselves in realizing this vision.

Thank you.

The Chair: Thank you very much.

Now we'll go to the Canadian Cancer Society. Ms. Finlay.

Mrs. Rebecca Finlay (Group Director, Public Affairs, Canadian Cancer Society): Thank you.

I'd like to begin by bringing you up to date on the Canadian strategy for cancer control. As you know, cancer continues to be a great threat to the health of Canadians. Over 68,000 Canadians will die of cancer in 2003, and since 1974 the deaths from cancer each year has more than doubled. Without effective intervention, this trend will not change.

In 1995 the World Health Organization stated that the most effective way to stem the growing impact of cancer is through a systemic nationally based program. As we explained to this committee last year, since 1999 hundreds of organizations and individuals with minimal government funding have been working to develop a comprehensive cancer control strategy for Canada.

Today we know many of the answers to managing this challenge and have many of the tools required, but the effort is sorely underfunded.

Our real objective must be more than just delivering better health care. An important challenge, for example, is the timely translation of health research results into practical applications across the cancer control spectrum, all the way from prevention to palliation.

The Canadian strategy for cancer control has identified six priorities that address equity and service excellence through development, dissemination, and application of standards in all aspects of clinical care, prevention, and population health, and by refocusing our efforts to ensure attention across the whole health and disease spectrum. These vital interventions are best delivered through joint action at the national level.

By investing in these activities, Canada will avoid some of the increasing health care costs that will inevitably accrue as a result of the increasing number of cancer cases due to our aging and growing population.

We therefore recommend that the federal government take leadership and provide meaningful funding to the Canadian strategy for cancer control to contain those long-term health care costs.

I'll now turn to tobacco taxation.

Higher tobacco taxes are an important means of not only reducing smoking but also raising revenue for the government. Past increases in tobacco taxes have advanced both of these objectives very well. In order to make further progress, we recommend that federal tobacco taxes be increased by $5 per carton of 200 cigarettes.

We also recommend that steps be taken to eliminate the loopholes that currently allow roll-your-own tobacco and tobacco sticks to be taxed at a lower rate than cigarettes. In order to close the loophole, we recommend that the tax on 0.5 grams of roll-your-own tobacco be taxed at the same rate as one cigarette, resulting in an increase of $15.45 per 100 grams of roll-your-own.

For tobacco sticks we recommend an increase of $9.25 for 200 sticks. Health research is also an important area of federal investment. By continuing to invest in health research, the federal government can improve the health of Canadians, provide the evidence necessary to contain health care costs, and contribute to the creation of knowledge-based jobs and economic growth.

By ensuring the long-term viability of Canada's health research enterprise, the government will help ensure Canada's competitiveness within the world economy and make Canada a better place to live.

There can be no doubt that health research is very important to Canadians of all walks of life. The fact that collectively health charities such as ours annually raise hundreds of millions of dollars, much of it spent on health research that is important to our donors, indicates that average Canadians fully expect health research to improve the quality of their lives.

We commend the government for its foresight in establishing and aggressively promoting such programs as the Canada Foundation for Innovation, the Canada research chairs program, and programs such as Genome Canada. However, the support of the Canadian Institutes of Health Research must remain the most central element of the government's plan, since this is the source of the operating funds that lie at the heart of the research enterprise. By simple analogy, it makes little sense to build a state-of-the-art suite of automobiles, attract the world's best drivers, and then have no gasoline available to power the fleet. Those operating grants through CIHR are exactly that gasoline.

The staged growth of CIHR towards at least $1 billion a year as a stable funding base is therefore central to any success of the government's health research effort. Any uncertainty with CIHR's budget beyond 2004 would put untenable pressures on health charities such as ours.

º (1650)

We recommend that in order to help make Canada one of the top research-intensive nations, you support an increase in CIHR's annual operating budget to the $1 billion level by the end of 2007.

I'd like now to address the prevention of chronic disease.

As I mentioned earlier, an important part of the Canadian strategy for cancer control is related to the prevention of killer diseases such as cancer. A plan for this, the pan-Canada healthy living strategy, is being developed by the federal, territorial, and provincial ministers of health. Over 50% of cancers could be prevented, primarily through reductions in tobacco use, improved healthy eating, and increased physical activity.

Investment in the components of a comprehensive action plan--it's critical that it be comprehensive--for chronic disease prevention will eventually provide big dividends. Key components are the development of new policies, including school, nutrition, and food policies; increasing the quality of surveillance systems; establishing a network of researchers to identify best practices; and increasing public awareness programs.

We believe that the Chronic Disease Prevention Alliance of Canada, which has already made a presentation to this committee, should be that intersectoral committee to guide the implementation of a comprehensive prevention strategy.

Also, it would be critically important that reforms to our public health system, which are pending, include and address chronic disease as well as other infectious diseases.

We therefore recommend that the committee endorse the pan-Canadian healthy living strategy and its key components--surveillance, research, policies, and programs--and that you recommend that the federal budget contain an investment of $125 million to fund a national strategy for chronic disease prevention.

Leadership by this committee will help ensure that the Government of Canada achieves its potential in meeting the pressing health challenges of Canadians.

Thank you.

º (1655)

The Chair: Thank you very much.

Now we go to the Nature Conservancy of Canada. Go ahead, Mr. Lounds.

Mr. John Lounds (President, Nature Conservancy of Canada (The)): Thank you very much.

The Nature Conservancy of Canada is pleased to once again talk to the committee about our proposals to increase the effectiveness of government expenditures on conservation priorities.

A Statistics Canada report released in 2000 called The Importance of Nature to Canadians: The Economic Significance of Nature-relatedActivities indicated that 20 million Canadians participate annually in nature-related activities, and that our natural capital is also a key factor in drawing tourists. Spending on nature-related activities contributed over $12.1 billion to Canada's GDP in 1996 and helped to create over 215,000 jobs in that year, and it has increased since that time.

At the same time, our list of species at risk in this country continues to grow. In 2002, the list stood at 402 species, up from 380 the year before.

Our proposals revolve around two items. One is investing in conservation in the most efficient and cost-effective way. The other is improving the ecological gifts program, which works with private owners of land to donate conservation easements and properties in the name of conservation.

With regard to the first one, investing in conservation, the National Round Table on the Environment and the Economy, in its 2003 publication, Securing Canada's Natural Capital, recommends the creation of a national conservation fund with an initial investment of $250 million. This would, with matching funds from conservation organizations, support priority conservation activities and result in more than $1 billion of conservation activity completed across the country. The Nature Conservancy of Canada has a strong record of delivering such programs, and as one potential partner, we are prepared to raise funds from the private sector to match up to $20 million per year for at least five years to invest in land conservation across Canada. This investment would be levered further still in terms of actual value of land conserved on the ground through donations and donations of conservation easements.

Other organizations such as Ducks Unlimited Canada, the World Wildlife Fund Canada, and the Canadian Nature Federation are prepared to engage in similar programs.

With respect to land conservation, these matching arrangements would allow sites essential to maintaining the ecological integrity of Canada's landscape, those sites that have been identified by Parks Canada and by Environment Canada, to be conserved at half the cost, or less, to the Government of Canada. We think it's very important that we work together as partners to invest in our conservation across the country.

Our second area of proposals is around improving the ecological gifts program. Ten percent of Canada is privately held, and 90% of it is crown land. On that 10% of Canada that is privately held, over 50% of Canada's species at risk are found. These are the lands that we also use to build our homes and live on. These lands are under development pressure and are being converted to other uses at an alarming rate.

The government has taken important positive steps to encourage private landowners to conserve their ecologically significant lands through the ecological gifts program. There's a reduction by half in the capital gains that are included in the donation, and now you can actually entertain part-sale/part-donation as a tax-receiptable gift.

However, there are three additional things we can do to really make this program truly effective and fair to all Canadians.

One, we can ensure that the ecological gifts program is renewed and enhanced when its initial five-year period ends in March 2004. To date, Canadians have donated 325 eco-gifts covering 24,000 hectares, worth approximately $67 million, which they've given up for conservation purposes. This rate of gifting is increasing, and we need a program that can ensure that these valuable donations continue and that people get the right advice and help they need from the Government of Canada to meet the increasing demand.

Second, we would like to see the remaining capital gains tax from gifts of ecologically sensitive lands or conservation easements reduced to zero. The final report of the Task Force on Economic Instruments and Disincentives to Sound EnvironmentalPractices, a report that came out in 1994, recommended that the government should amend the Income Tax Act to exempt from capital gains all donations of ecologically sensitive land made in perpetuity to all levels of government and charitable institutions. This recommendation has been repeated in the round table report of 2003 that I referred to before.

Finally, with regard to the eco-gift programs, we'd like to see the inclusion of the donation of ecologically sensitive lands that are held as inventory by development companies in the ecological gifts program. In areas such as the Oak Ridges Moraine near Toronto and in other landscapes adjacent to urban areas, development companies often own ecologically significant lands, but the ecological gifts program is not available to them to achieve conservation in a cost-effective way.

» (1700)

Finally, we'd like to also see ecologically sensitive lands that are sold to qualified organizations be exempted from GST. Commercial properties that are purchased by charities such as the Nature Conservancy are still subject to GST. With these two proposal areas, investing in partnerships and improving the ecological gifts program, we believe Canada can lead the world in cost-effective and efficient conservation practices.

Thank you.

The Chair: Thank you very much for your comments.

We get a lot of requests from charities for removing the GST, but I know there's a huge resistance to it.

Mr. John Lounds: I would say that for all charities. We still have to pay for half of the rate, but it's sold. Charitable dollars spent on that--

The Chair: I'll give you an explanation for that. I was a PS on Revenue Canada when we did some of that work.

Mr. John Lounds: I'd be happy to talk to you later about that.

The Chair: Yes. It's not me you'd have to convince.

Anyway, let's go to the Direct Sellers Association of Canada.

Mr. Paul Thériault (President, Direct Sellers Association of Canada): Honourable chair, members of the committee, on behalf of the board of directors of the Direct Sellers Association of Canada and its members, we appreciate having the privilege of appearing before you this afternoon.

The Direct Sellers Association of Canada, which was founded in 1954, is the national association of direct selling companies and their independent sales contractors, the mission of which is to further enhance trust, confidence, and growth in the Canadian direct selling industry through self-regulation and ethical conduct.

[Translation]

The DSA and its 40 direct selling member companies are committed to operating in accordance with the comprehensive industry standards set out in the DSA's Codes of Ethics and Business Practices. The codes govern the direct sale practices and procedures used by DSA member companies in marketing their products and services to the public and emphasize the great responsibility member companies have toward consumers and the general public.

[English]

In Canada ISCs sold more than $1.6 billion in retail goods and services during the last year. The direct selling companies and their ISCs market and distribute a wide variety of products and services such as cosmetics and personal care items, home appliances, houseware specialties, household cleaning products, candles, natural health food products, toys, educational products, and telecommunications services, just to mention a few.

Close to one million independent sales contractors use this business opportunity to promote and sell the products and services offered by our member companies. Of these, 75% are women and 50% are employed part-time or full-time in addition to their involvement in direct selling. So direct selling is a breeding ground for entrepreneurs, and it provides not only for the business opportunity but also for the training and education needed to fully understand and grow within the business model.

Before summarizing our recommendations, the DSA applauds the Canadian government for its commitment to lowering taxes, specifically the five-year tax reduction plan that was introduced in 2000 and the further tax reduction introduced in the 2003 budget that will serve to promote economic growth and job creation, including increasing the amount of income eligible for the low small business tax rate.

It is in the interest of all Canadians to promote businesses in order to create personal wealth and common wealth. The role of the government would thus be to help create a climate conducive to the growth of entrepreneurship and businesses. Staying the course for the tax reduction plan is definitely a positive and constructive action.

So this is our first recommendation.: We recommend that the government stay the course with respect to its announcements on tax reductions that will contribute to Canada's economic growth and job creation.

As for the second recommendation, with the globalization of the Canadian economy and the diversification of the Canadian population, more and more Canadians are using dietary supplements and natural health products as a regular part of their daily diet and health routine. Whether it is to manage a specific dietary concern or to spread an overall wellness-centred approach to health and diet, dietary supplements and natural health products play an integral role in many Canadians' purchasing and consumption decisions. These products are consumed by Canadians in many forms, including liquid, powder, tablet, capsule, and solid form, and they include protein bars, shakes, herbal teas, powdered drinks, mixes, and natural fruit juices.

Nutritional products help to keep people healthy, and at the very least, it is a preventive measure. Healthy habits of Canadians help to reduce the tax burdens to support the health system, and as such, the GST zero-rating of these products would be sending a clear message to the Canadian population in this regard. So we are joining probably with other recommendations in this area of zero-rating.

The DSA recommends that the food and beverage zero-rating provisions of the Excise Tax Act be amended to zero-rate dietary supplements and natural health products to ensure the goal of investing in and caring for Canadians.

In doing so, we encourage more Canadians to assume the ultimate responsibility for their health and well-being; we encourage more Canadians to be cognizant of their diet and nutrition needs, thereby significantly lowering the risk Canadians face in developing chronic diseases; we reduce the costs associated with properly feeding and nourishing Canadian families; and we provide Canadians with a natural and more cost-effective means of promoting and maintaining their health.

In the area of job creation and transitioning into independence, the DSA believes it is important for the government to understand that the direct selling industry is a vital part of the small business sector in Canada. We have a tremendous capacity to create jobs and economic growth and, in the process, reduce dependence on social assistance programs by providing accessible earning opportunities with little or no investment to a broad spectrum of Canadians. The accessibility of these earning opportunities is highlighted by the fact that close to one-third of independent sales contractors have a high school education or less.

One of the cornerstones for success in a direct selling industry has been equality and the availability of training for independent sales contractors who learn how to properly present products, guarantees, and business opportunities of companies that they represent as well as how to enhance their entrepreneurship skills.

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We believe the small and medium-sized business sector will continue to be the engine for Canadian economic growth in this area and will continue to create jobs when the economy is at a standstill. The direct selling industry has an unlimited capacity to transform individuals who are dependent on social programs such as unemployment insurance into successful small business operators.

The present rules for unemployment insurance and social assistance, however, create a barrier to entering the direct selling industry for those who are receiving such benefits.

First of all, under the current legislation, a self-employed person is generally considered to have worked a full working week and is, therefore, not considered unemployed and is not entitled to benefits. Accordingly, when a person receiving unemployment insurance begins operating a business as an ISC, they are no longer entitled to benefits unless the activity is of such a minor extent that they would not normally rely on it as a principal means of livelihood.

Second, to the extent that the involvement is of a minor nature, the person is entitled to receive benefits. Once the person receives a certain level of income, the benefits are reduced.

The DSA recommends that existing social programs be amended to allow all individuals, including those starting their own businesses, the transitional relief needed to move from a position of dependence on social assistance to a position of independence in operating their own small businesses. Additionally, once a taxpayer's earnings have surpassed the allowable level of transitional relief, which is currently set at 25% of EI earnings...the DSA recommends that social programs be amended by providing additional pro rata relief through deducting only 50% of additional earnings from IE eligibility.

Fourth, we recommend that legislative action be taken to extend the direct selling mechanism so that it will be available not only to direct sellers and those ISCs who operate on a buy-and-resell basis, but also to direct sellers and their independent sales contractors who operate on a sales agent basis.

The benefits of extending the direct selling mechanism to this sector of the direct selling industry would be significant. The GST rules would apply on the same basis throughout the industry, with minimal, if any, impact on government revenues. The companies and their sales agents would have a significantly reduced administrative and compliance burden. The CCRA's administrative costs would be reduced, as the sales agents would no longer be required to be registered for GST. Additionally, consequent treatment regarding the availability and application of the direct selling mechanism would reduce the uncertainty and confusion that has resulted within the industry.

The Direct Sellers Association appreciates the opportunity to appear before the committee and believes that its recommendations will be consistent with the committee's objectives to prepare a pre-budget report focusing on the three areas that were initially proposed.

Thank you.

» (1710)

The Chair: Thanks very much.

Now to our last panellist. You've given us the CREA pre-budget documentation. The committee is very familiar with this and we've heard from different real estate agents and associations across the country. I'd like to invite you to put forward the Toronto or the regional focus for us.

Mr. Mauro Ritacca (Manager, Government Relations, Toronto Real Estate Board): Thank you very much. I'm glad to hear you've heard from a lot of realtors across the country.

As you've already indicated, realtors across Canada speak with one voice, and that's why I'm here today--to reiterate the positions and proposals that were previously presented to you in Ottawa by the Canadian Real Estate Association, or CREA, for short. Many of you are familiar with CREA and its work on behalf of realtors as well as homeowners. Membership currently stands at approximately 59,000, with almost 20,000 of those members from the Toronto area.

All of you know realtors in your constituencies. They see you in Ottawa every spring when they attend CREA's annual political action meetings and they see many of you in your constituencies in the fall.

I'll speak very briefly about just three of the issues contained in that submission that are important to the Toronto Real Estate Board. They are affordable housing, municipal finances, and brownfield redevelopment.

Realtors can be part of the solution to the affordable housing issues around the country. They are working both to expand access to existing housing stock and, in special circumstances, to expand the supply of new affordable housing.

I'd like to underline one recommendation in CREA's submission, and that is the proposal to amend the Income Tax Act to allow capital gains and capital cost allowance rollovers when the proceeds from the sale of an income property are reinvested in another income property. We're also proposing a cap to ensure that the benefit is targeted to small-scale investment.

A tax rollover of this kind enjoys broad support. CREA's submission notes 12 organizations that support this proposal, but it's obviously not limited to just those 12.

In addition, the Liberal caucus task force on urban issues and federal-provincial-territorial housing ministers support the study of tax deferral in reinvestment situations.

Our particular proposal was very well received by members of Parliament who met with realtors last March. The majority of members of all parties expressed support for the rollover. Some expressed surprise that the operation of rental units can't be treated as a small business for income tax purposes, and yes, some said more information is required on the costs and benefits of such a proposal.

In response, CREA has commissioned a cost-benefit study and will be sharing the results with you once it is complete.

CREA's submission also outlines three other priorities that realtors see as the foundation of a balanced housing policy. These are to continue the residential rehabilitation assistance program, to encourage innovative ways to allow more Canadians to enjoy the benefits of home ownership, and finally, to provide public support to help those in greatest need of all--those who are homeless and require shelter.

I'd like to turn briefly to the financial crisis that many Canadian cities, including and especially Toronto, are experiencing. I can tell you that Toronto's realtors and their clients are very concerned about the deterioration of infrastructure and upward pressure on property taxes and municipal levies. These are the inevitable results of downloading of responsibilities onto municipalities without the revenues to pay for them.

There really is only one taxpayer in Canada, and when our communities deteriorate, when they become less desirable places in which to live, and when social problems increase, we all lose. We recognize that the federal government acknowledges the problem; however, we think the government should and must take the leadership role.

We urge you to encourage the government to support the recommendations of the Liberal task force on urban issues that CREA has outlined in its submission.

Speaking of the quality of life in our urban communities, the revitalization of brownfield sites has the potential to strengthen a city's tax base and contribute to the community's well-being in many ways.

Former Minister of Finance, Mr. Martin, asked the National Round Table on the Environment and the Economy to come up with a strategy for brownfield redevelopment. As you know, the strategy group has completed its work. There's a clear consensus that tax changes are required to kick-start redevelopment. We urge you to continue to support the remediation of brownfields.

On that note, Madam Chair, I'd like to thank you and the committee for this opportunity to present the views of Toronto's realtors.

Thank you.

» (1715)

The Vice-Chair (Mr. Monte Solberg (Medicine Hat, Canadian Alliance)): Thank you very much, all of you, for your presentations.

We'll start with Mr. Jaffer, for a six-minute round, please.

Mr. Rahim Jaffer: Thanks.

I'm inclined to say “Thanks, Madam Chair”, but maybe I won't say that now seeing that there has been a switch. I'm sure you'll be much more liberal with the time, seeing that you're sitting in the chair.

In any case, I wouldn't mind asking a few questions. I know we have limited time.

If I could start with Ms. Cutler, could I get your feedback and Bill's?

I've found that in my riding, especially in recent years, I've had an increased number of seniors coming to see me. Some of them were not capable, in essence, to do it because they're were on disability. It's very difficult for them to come to see me, but they're taking the time to come to see me because of the fact that they're finding it harder and harder to live on the incomes that they have.

For many of them, especially those who have fixed incomes, their income stream changes for some reason or their pensions get changed. Then there are clawbacks in certain areas and the fact that pensions aren't indexed when it comes to the cost of inflation, in many cases.

I've had an increased number of seniors coming in to see me. I've found that it's disturbing. It's something we should be concerned about. I think it's something that needs to be addressed. We need to have a more comprehensive strategy. I'm glad you're out there raising those issues, because it seems like I'm dealing with an increasing number of problems for seniors on a regular basis.

You may want to comment on that, but I only wanted to share that as a comment. It's something that I have found somewhat disturbing.

One of the things that I want you to maybe enlighten us on or focus in on is a challenge that we're having. I know that in your brief you addressed the issue of long-term care facilities. Even for facilities and lodging arrangements for seniors, it seems to me that there's a huge challenge there. There's a limited supply when it comes to the number of people who are going to be looking for those kinds of facilities. Could you shed light on that, if that is in fact the case? What are the challenges we're looking at here in Canada on that basis?

Ms. Judy Cutler: The problem in both cases, your original comment and then the last one, is that what's lacking is the holistic approach to ensuring quality of life for seniors. There's a lack of affordable housing, inadequate pensions, user fees, and co-payments for drugs. Everything is in silos, so governments deal with one issue, and then say that they just did that and now you're coming with something else, but the truth is that it's interconnected.

In terms of long-term care facilities, what we need is an integrated health care system. If people need chronic care.... If they're in a hospital, for example, they're getting acute care, and that's much more expensive than chronic care. It's not cost-effective. We need a better home care system. We need an integrated system so that if somebody can be at home and get proper care, quality of life is there and it's costing less to government. If nursing homes are needed, they should be there. If hospitals are needed, they should be there. But the three should not be competing with each other for funding and status. That's really what's happening at the moment.

Mr. Bill Gleberzon: I have some other points.

About 40% of seniors are dependent on public pensions and don't really receive much CPP; it's mostly older women who did not work outside the home. Their annual income is around $13,000 a year. The increases they receive quarterly are paid to the rate of inflation, up to 3%. There's a formula that cuts in. Often they'll phone us with bitter tears to say that the increase in the cost of postage is more than the increase they're getting, or that they're literally getting pennies. That's why we recommended the review of the whole retirement income system.

On the home care facilities, the problem is that there is no national strategy, which is why we talked about funding on a national level. Each province has its own strategy regarding long-term care facilities. In New Brunswick, for example, assets are included. Now, that means if there is a couple with one spouse still outside the nursing home, he or she uses up the money to support the person in the nursing home. Then when his or her time comes, of course, what's going to be left for them? You have situations such as in Alberta, where there was a 40% increase to the cost of nursing homes literally with a week's notice. There's no configured policy. Each province does its own thing. Supply is based on whatever the province decides.

Really, in a sense to follow what Judy said, what we feel is permeating throughout all of this is a kind of complacency that the government has done all it has to do, or can do, for seniors in terms of poverty and have solved the poverty issue. Well, they haven't.

Secondly, in regard to nursing homes, there's a kind of ageism attitude. People have saved up all this money; it's their responsibility to pay their own way. Well, they can't do it. They just can't do it.

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Mr. Rahim Jaffer: I appreciate that.

I only have one last question, Mr. Chairman. I wanted to address the brief from the Canadian Cancer Society.

I appreciate all of the great work you guys do in raising awareness for cancer and pushing for strategies to reduce the amount of cancer. I'm all for programs that try to reduce smoking, especially for younger people. But one of the fears that I have—and I guess that's where I need to be convinced—is the recommendation that you make to raise taxes on cartons of tobacco.

I've noticed from some of the studies I've seen--and I might be wrong here--that the fear is that every time the tax levels become too high, there is a growth in the black market. We had this problem before. Unfortunately, then there was an even tougher challenge to try to control young people from getting access to products that could be substandard or getting access in different ways to the black market. The higher the tax goes, one of the concerns I have is that the black market may grow larger. I need to be convinced that overall it does reduce the levels of smoking and that there isn't an unfortunate result where people may be obtaining cigarettes illegally.

Also with the amount of taxes, it seems to me that if you're going to have a strategy that works to increase taxes, it shouldn't be to try to cut down on smoking. It should use some of the revenue that comes in for education programs, especially targeting youth in high schools or wherever. It seems to me we already collect such a significant amount of taxes from that industry, yet none of it tends to go back into, from what I've seen, any sort of forum. Maybe I'm mistaken again, but I don't see many programs being spearheaded federally or in other areas with that money to be able to effectively help cut down smoking where it would make the most difference, where young people are forming habits.

Maybe you'd like to comment on that, because it's a concern I have.

The Chair: It will be a brief answer, because we seem to have a very liberal six minutes here.

Mr. Rahim Jaffer: I thought the new chair was going to be here.

Mrs. Rebecca Finlay: With regard to the question of smuggling and access to black market cigarettes, we believe we're in a different place today from where we were when it occurred previously after tobacco taxes were increased. We think there's much more government and law enforcement attention specifically on that issue that would help to address it should it arise. We've also seen governments take legal action around some of those issues in the past. Third, we have picture-based warnings on our Canadian-based and -produced cigarettes. We think they will help to clearly differentiate what is produced in Canada and what might be smuggled. So we don't see it as a major issue with tobacco tax increases.

With regard to raising taxes to promote greater educational programs and for other purposes, we would fully support the initiative. As you know, there's a $480 million commitment through the federal tobacco control strategy, which we believe is very important. What it promotes is a comprehensive approach that we believe is absolutely the right way to go, from the legislative policies—no-smoking bylaws, for example—all the way through to educational programs and mass media programs. That is directly where we would want those funds targeted.

» (1725)

The Chair: Thank you.

Mr. Pillitteri, please, for six minutes.

Mr. Gary Pillitteri: Thank you very much, Madam Chair.

I think we need to have a reality check in this room. Let me start with a GST reality check. One cent of GST is $4 billion a year. What the federal government collects in GST is almost $28 billion clear. Any time we talk about removing one cent here or one cent there...it's incredible how it would impact our ability to function as a government.

I want to go directly to Ms. Cutler. I liked your presentation when you said that seniors should have a better life to live. I truly agree with you; I'm a senior too. When we take a look at gender and the shifting of taxes from one generation to another generation, we have to be very careful.

Let's put it this way. We have an unfunded liability of $500 billion: we have a debt of $506 billion. This is what really has accumulated from a lot of unfunded programs, especially one: CPP, the Canada Pension Plan. It was inadequately funded and actually was expected to go bankrupt. For every $1 you and I put in it, we as seniors are going to get $6 to $7 back. For every $1 a 30-year-old individual who starts in the workforce today puts in to CPP, he or she is only going to get $3 back. Here is a generation that has already started to come into the workforce that is paying some of the unfunded liabilities we created, and we're going to be enjoying and receiving CPP.

I don't feel sorry for the clawback. For anybody who earns $72,000 or more, if their pension's clawed back, I don't feel sorry. I will be clawed back myself personally, but I'm thinking of everyone else too. We have to make sure that people who can less afford it have the money.

I have a question on this subject, and it is this. You said anyone receiving old age security from outside, specifically in the United States, does not qualify for the guaranteed income supplement. Is it not the case right now that anyone outside Canada receiving old age security, specifically in the United States, would only have to report 85% of it as income, and under the Income Tax Act they qualify for the guaranteed income supplement if it comes in below a certain amount? That was in your presentation. It was one of your recommendations.

Ms. Judy Cutler: I don't think we equated or linked GIS and the U.S. pension. What we're saying about the GIS is that there are clawbacks in GIS that we're against. I agree, if somebody's making a lot of money, a clawback is one thing. If somebody is living just under or above the poverty line and there's a clawback, that's another thing.

Mr. Gary Pillitteri: I thought you meant the clawback was in the pensions. What did you mean by the recommendation, Mr. Gleberzon? You said the recommendation—

Mr. Bill Gleberzon: What we said was we believed the progressive income tax system should be applied to U.S. pensions received by Canadians. It had nothing to do with GIS. Part of the problem is that a lot of the people aren't receiving all that much money, and 85% is a lot of the total amount of pension they receive. That's 85% to be taxed, so that they end up paying a disproportionate amount in tax because they don't receive a great deal of money from the U.S. pensions.

We were talking strictly about changing the basis on which U.S. social security pensions are taxed in Canada when received by Canadians.

» (1730)

Mr. Gary Pillitteri: They are reporting only 85% of it.

Mr. Bill Gleberzon: Right. I know they are.

Mr. Gary Pillitteri: They don't report the 100%, so there's a benefit of 15% of income.

Mr. Bill Gleberzon: That's because they've already paid tax in the States on it.

Mr. Gary Pillitteri: But if they have paid taxes on the States side, they have a tax credit in Canada.

Mr. Bill Gleberzon: Well, it's our understanding—

Mr. Gary Pillitteri: Under our Canada-United States treaty, there is no dual taxation. You could choose to pay taxes in the United States or you could choose to pay them in Canada. There is no dual taxation, sir.

Mr. Bill Gleberzon: No, but our understanding is that the reason the 15% is permitted is to take into account that tax was paid in the United States, so that a lot of the people who are receiving social security in Canada are only being taxed on 85% of it.

The other thing is that it used to be 50% till 1996. It was 50%, then it went up to 100%, and then it went back down to 85%.

Mr. Gary Pillitteri: I worked on that file, sir. That's why I specifically know what happened. When we made the tax agreement, the Americans taxed the whole thing.

Mr. Bill Gleberzon: Yes, that's right.

Mr. Gary Pillitteri: Then we had to reverse it, and—

Mr. Bill Gleberzon: All I'm saying is we get quite a large number of calls from Canadians who have worked in the States and are getting U.S. social security, saying the amount of tax they're paying is more than they would pay in the States, because there they have a different kind of threshold.

Mr. Gary Pillitteri: In actuality, what they're doing is paying for the old age security in the United States. That's why they say they've paid into this, because they've paid on old age security. On the other hand, in Canada we have not paid on old age security since 1971; there is no payment for that.

Mr. Bill Gleberzon: Yes. That's right.

Mr. Gary Pillitteri: Okay. Thank you.

The Chair: Madam Minna.

Ms. Maria Minna: Thank you, Madam Chair.

I'll start with CARP as well.

First, I want to say that I agree with you 100% on the need for a review of all of the pension systems and all of the pieces. In fact, if I recall correctly, there was a recommendation to that effect in the last report and the Prime Minister established a task force--it's called the Prime Minister's Caucus Task Force on Seniors--which is chaired by Yolande Thibeault. This is from the Liberal caucus; it's not a House of Commons committee.

In fact, tomorrow I'm chairing a Greater Toronto Area Liberal caucus consultation on that task force in Toronto from 10 o'clock to 12 o'clock and from 2 o'clock to 4 o'clock in the afternoon. The group is reporting back to the Prime Minister on December 10. They were given a short timeframe.

This will probably be the first cut, but certainly I've had a great deal of interest in this and I am involved with it at the moment.

I should also tell you that our women's committee of caucus about a year ago made a recommendation to increase the GIS and to review the GIS specifically. In this case, it was to address in the short term, while the review was going on, the issue of unattached seniors who are receiving the GIS and who are falling below the poverty line, and it's primarily women who are most affected. There are about 647,000 seniors, in fact, most of them women. I don't have to tell you that poverty for women has gone up to 48% in the last couple of years.

So there was a recommendation to that effect in the last report as well, and I wouldn't mind seeing it again. Both of those recommendations I support and I know there's a need to address them.

In Toronto, and I'm sure in other parts across the country, it's a major challenge for seniors who are having to pay exorbitant amounts for housing and then trying to pay rent and trying to buy medicines and cover all of the other needs that seniors have. It's next to impossible. This is one of the reasons they're falling below the poverty line.

So I support your recommendation for affordable housing. It's extremely important, as is long-term care.

I don't particularly have a question, except to say that it has been a long time coming for this area to be properly reviewed in terms of long-term care and affordable housing as well as in terms of our income systems. The RRSPs, for instance, do not really meet the needs of average Canadians. They tend to only meet the needs of those who have lots of money. If you're an average Canadian, it's not really worth your while to put money away in an RRSP. You're better to cash it in before you reach 65 years, otherwise you're penalized afterwards when you do cash in what little you've saved, with $40,000 or $50,000.

We were talking to another group earlier today about how we need to look at a different mechanism for savings for low- to moderate-income Canadians as part of the savings and pension structures. I want to let you know that tomorrow, I think it's at the Comfort Suites all day, we'll be dealing with just the pension issue.

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Ms. Judy Cutler: Actually, I think we're part of that tomorrow, but I didn't know it was only about pensions.

Ms. Maria Minna: Are you? It's a major part of it. You're right, it's not just on pensions, but seniors issues are a major part of it.

Ms. Judy Cutler: We'll be there.

I want to add to what you were saying, which of course we agree with. There is so much ageism out there. People forget that seniors pay taxes and they spend money, so it goes back into the economy. So we have to stop having the attitude of helping people in trouble, because they're giving back. It's not charity. I know you didn't think that, but I want to say that for the record.

Ms. Maria Minna: It's not charity. I agree with you 100%.

I just want to ask the Arts Network a question, if I have time. Your recommendations and what you have here are good, but I have two questions.

To what extent is the problem a national one in terms of funding? There have been cutbacks of huge amounts of money to schools in Ontario, for instance, so their after-school programs, classroom arts programs, and music programs have been eliminated. I'm not sure whether a national project is going to resolve that problem.

The other is on crime prevention. I think you talked about keeping the cost of building jails and so on.... You're quite right there. Are you aware of, and to what extent is your organization involved in accessing, the crime prevention program that also exists? From what you've described here, it kind of fits in pretty neatly under that program.

So those are two major things. One is really a provincial problem in Ontario. I think the other is a program.

Ms. Linda Albright (Executive Director, Arts Network for Children and Youth): We believe strongly in our school system, but equally and enormously for us is art in the community--looking at that recreational model where there's a variety of programs, both formal and informal, and different structures.

There is a problem in the Ontario government with art in education, but that will continue to fluctuate. Perhaps with the new government we'll see some changes there as well.

It is very much a problem across Canada, in that there is no funding mechanism at the federal level or any of the provincial or territorial levels, other than for things like national crime prevention. Many of us use that. It is a great program, and we met nationally with them last week. We believe in it strongly

The problem is that it only operates for one year. You can go back and access it for two or three years, but there is no continuing funding on a municipal, provincial, or federal basis. Many of us use HRDC funding. Crime prevention is a large one. There is definitely some foundation. Here in Ontario there's a small ministry of recreation. But all of them require going back--I don't want to say to the table, but you almost have to recreate yourself yearly. The problem is that the youth themselves desperately suffer because of that, because you cannot maintain staffing.

Rudy and I and those other organizations don't know from month to month if staff is going to continue--unlike what we do see again with recreation. If we were to compare it to funding of the CAPC program, which is now having its 10th anniversary, at least there'd be some sort of core base of ongoing funding. We're continually seeing staff leave...can you pay the heat tomorrow? No one is picking up on this. In many cases, for recreation, municipalities pick up on it and there's no doubt.

We see that happening eventually, but there needs to be a leader at some point.

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The Chair: Thank you very much. Your time is up.

I'm just really concerned that Industry Canada isn't the envelope that will fund you. I think you'll spend a lot of energy getting a no. Maybe I'm wrong, but I think your crime prevention money is your--

Ms. Linda Albright: Can we just make a suggestion?

This was also mirrored by a recommendation made by the Federation of Canadian Municipalities in last year's budget for both the infrastructure and the operating funds. So we've been working with the Federation of Canadian Municipalities around that as well.

The Chair: It would surprise me if this were a priority item for Industry Canada, when I know they have all the R and D envelopes and everything else.

I'll go to Mr. Solberg.

Mr. Monte Solberg: Thank you, Madam Chair. That's very generous, given how I broke the rules on--

The Chair: You're here and you get to speak.

Mr. Monte Solberg: Thank you very much.

First of all, just to make a couple of comments, Mr. Ritacca, I want to urge you to keep pounding the drum on TPSPs. I think they're a great idea. They would benefit millions of Canadians. I urge you to keep up the good work on that.

Mr. Thériault, I really have no comment except to say that your industry does provide millions of Canadians with an opportunity to make extra income. I urge my colleagues on this committee to do whatever we can to help knock down the barriers that prevent people from doing well by going out, in many cases on a part-time basis, to make some extra income and to claw their way out of a desperate situation, in some cases. I think what you do has an enormous social impact, apart from the fact that it's also a way for many people to make very good incomes and do it full-time.

Anyway, I'll just leave it at that.

Mr. Lounds, I have a direct question for you. With respect to the pickup on the ecological gifts program, you had some numbers in there, but can you give me some sense of what more can be done to enhance it so that we end up with a greater pickup on it?

I'll leave my question at that. Obviously I think this is a good thing.

Mr. John Lounds: In terms of the recommendations we put forward, as I've mentioned, the report from 1994 said to take capital gains inclusion to zero.

Mr. Monte Solberg: Right. That's what I thought you would say, but do you have a sense of what that would mean overall in terms of gifting?

Mr. John Lounds: With the reduction that has happened recently--I don't have the exact numbers--this program is accelerating. It really has been taking off now that more and more people look at.... When you have half the rate of inclusion, people start to look at it and say this is starting to make some sense.

Still, when somebody chooses to say, gee, I have a property that I'd like to donate, they need to pay for appraisal costs, for whatever surveys need to be done. People have to make a whole series of actual payments in order to gift their land away. Those kinds of things, as well as delays in having approval through the eco-gift panel, sometimes weigh almost more heavily on people than the actual process of donating.

So smoothing out how quickly this can happen and reducing those other kinds of barriers to becoming part of this will actually accelerate it down the road.

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Mr. Monte Solberg: Time's so fleeting.

The Chair: I won't even turn on the clock. You're the last questioner.

Mr. Monte Solberg: Well, let me just go down. If I have another question I'll come back.

I just wanted to say, Ms. Finlay, obviously we support the work you do. You've made some very serious recommendations. They're worthy. It's always a question of money.

The one concern I had--and in a way you've already addressed this--is the impact of raising the taxes on a carton of cigarettes. It's the issue of smuggling, and I guess it's just a cautionary note. If it doesn't work out the way you hope, then we're going to be in a situation where we'll have to reduce them again, or possibly reduce them, if we end up with a big smuggling problem.

That was my only concern, but my colleague asked it.

Go ahead, if you want to respond.

Mrs. Rebecca Finlay: I just have two comments in that regard. First of all, we've seen tobacco tax increases over the last few years, and we haven't seen a resulting increase in smuggling.

Second, even by moving forward with our proposals around tobacco tax increases, we're still not where many other jurisdictions are around the world. There are many jurisdictions within the United States that are moving forward with higher tobacco tax proposals than we're proposing here, and in the EU as well.

So in terms of the comparison of jurisdictions, we're only moving forward knowing that other jurisdictions are moving forward more quickly.

Mr. Monte Solberg: Well, that's a good answer. Thank you.

I have a question for the representatives of the Arts Network.

I was looking at your submission. On the third page, in the very first full paragraph, you have a bold section that says that $1 spent on asset-based programs such as the arts equates to a reduction of $5 to $7 in savings in other areas, and then it goes on. There's no source given for that. You don't really footnote it.

Ms. Linda Albright: There are several sources. We've seen studies out of the States on that, and a source was definitely the late Dr. Paul Steinhauer, who spoke aggressively around the need for programming. Just lately one of the studies that came out of McMaster University, which was called When the Bough Breaks, came very close, again, to those sources as well. We'd be glad to submit those, for sure; we can.

Mr. Monte Solberg: It would be helpful if you could put that in, just for future reference.

Madam Chair, I think I'll just leave it at that.

The Chair: I do have something for the real estate people. Brownfield development certainly interests this committee, and we made a very aggressive recommendation on brownfields. I wanted to know if you are aware whether brownfield redevelopment is currently going on in Toronto or whether everything is stalled as they wait for some policy.

Mr. Mauro Ritacca: I wish I could give you a yes-or-no answer, but I don't think it's that simple. I have heard some encouraging reports from some of our members who have been trying to work with some developers who are interested in it, but they're definitely in the minority. If I had to give you a definitive answer, I'd say no, there's not a lot that's happening right now in Toronto.

One interesting anecdote is that when the National Round Table released its report recently, I believe a few months ago or last year, a number of our member realtors asked for copies to see what the recommendations were, because they have a lot of clients who are interested in getting into this and who see some opportunity there. There was quite a bit of media attention paid to that in the Toronto area when that happened, and they were calling me up, asking for some background on that. There's a lot of interest there, but I'm not sure there's a lot of action.

The Chair: Could you tell me how closely you work with either your homelessness coalition in town or your affordable housing task force?

Mr. Mauro Ritacca: We work very closely with them. We're involved with all levels of government, and we get very involved with the City of Toronto. As a matter of fact, from our own organization's standpoint, we try to do quite a bit of fundraising, and we actually just recently hosted a very successful fundraiser in September that raised over $100,000, which went towards our provincial association fund that goes directly towards homelessness initiatives.

From a policy standpoint, we get very involved. I'm involved with the second suites committee, which is partly funded, I believe, through SCPI funding, the supporting communities partnership initiative.

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The Chair: That's what I was going for, the expertise you're hopefully making available to people.

Mr. Mauro Ritacca: Yes, we're working very closely with them. We sit on their steering committee, which looks primarily at second suites and the details of that issue. That's something we're very supportive of.

The Chair: Thank you very much.

We tried to help out the Nature Conservancy with some of our recommendations last year. I do want to encourage the type of work you're doing. I don't like steering people in wrong directions, and that's my concern for you.

I know you have to hit the traffic outside, so I'm not going to keep you any longer. We've been going since 8 o'clock this morning.

It's hard to be the first panel and it's hard to be the last panel, but we appreciate all of our panels. We appreciate your efforts in doing excellent briefs for us for our consideration and also your taking the time to come and answer our questions and participate.

I hope we're going to be writing a report, but if we don't, your testimony is on the record and your briefs have gone to all the people who should have them. I want to encourage you to participate again in this very important process as we travel across the country. Sometimes we hear the same theme in the course of our travels, but at other times following this track gives us new ideas in different locations. We need all of this help.

Thank you very much.

We are adjourned until 8:30 tomorrow morning. You get to have an extra half hour tomorrow.