FINA Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Tuesday, September 16, 2003

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1535

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

Mr. Pierre Paquette (Joliette, BQ)

The Chair

Mr. Pierre Paquette

The Chair

Mr. Pierre Paquette

The Chair

Mr. Pierre Paquette

The Chair

Mr. Pierre Paquette

The Chair

Mr. Pierre Paquette

The Chair

Mr. Barry Lacombe (President, Canadian Steel Producers' Association)

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1540

¹

1545

The Chair

Ms. Jann Bailey (President, Canadian Museums Association)

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1550

The Chair

Mrs. Megan Williams (National Director, Canadian Conference of the Arts)

¹

1555

º

1600

The Chair

Ms. Susan Annis (Executive Director, Cultural Human Resource Council, Canadian Conference of the Arts)

The Chair

Ms. Susan Annis

The Chair

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

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1605

Mr. Barry Lacombe

Mr. Rahim Jaffer

Mr. Barry Lacombe

Mr. Rahim Jaffer

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1610

Mrs. Megan Williams

The Chair

Mr. Pierre Paquette

Mrs. Megan Williams

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1615

Mr. John McAvity (Executive Director, Canadian Museums Association)

Mr. Pierre Paquette

Mr. John McAvity

º

1620

The Chair

Mr. Bryon Wilfert (Oak Ridges, Lib.)

Mr. John McAvity

Mr. Bryon Wilfert

º

1625

Mr. John McAvity

Mr. Bryon Wilfert

Mr. John McAvity

Mr. Bryon Wilfert

Mrs. Megan Williams

Mr. Bryon Wilfert

Mr. Barry Lacombe

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1630

Mr. Bryon Wilfert

The Chair

Mr. Roy Cullen (Etobicoke North, Lib.)

Mr. Barry Lacombe

Mr. Roy Cullen

Mr. Barry Lacombe

The Chair

Mr. Roy Cullen

Mr. Barry Lacombe

Mr. Roy Cullen

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1635

Mr. Barry Lacombe

Mr. Roy Cullen

Mr. John McAvity

Mr. Roy Cullen

Mr. Richard Darroch (Head of Government Relations and Administration, Canadian Museums Association)

The Chair

Mr. Scott Brison (Kings—Hants, PC)

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1640

Mr. Barry Lacombe

Mr. Scott Brison

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1645

Mrs. Megan Williams

Mr. John McAvity

Mr. Scott Brison

Mr. John McAvity

The Chair

Mr. Scott Brison

The Chair

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

Mrs. Megan Williams

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1650

Ms. Judy Wasylycia-Leis

Ms. Jann Bailey

Mrs. Megan Williams

Ms. Susan Annis

Ms. Judy Wasylycia-Leis

The Chair

Ms. Judy Wasylycia-Leis

Mr. Barry Lacombe

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1655

The Chair

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)

Mrs. Megan Williams

Mr. Nick Discepola

Mrs. Megan Williams

Mr. Nick Discepola

Mrs. Megan Williams

Mr. Nick Discepola

Mrs. Megan Williams

The Chair

Hon. Jim Peterson (Willowdale, Lib.)

Mr. Barry Lacombe

Hon. Jim Peterson

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1700

The Chair

Mr. Pierre Paquette

The Chair

Mr. Pierre Paquette

The Chair

The Chair

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CANADA

Standing Committee on Finance

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NUMBER 066

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Tuesday, September 16, 2003

[Recorded by Electronic Apparatus]

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[English]

    The Chair (Mrs. Sue Barnes (London West, Lib.)): I call the meeting to order. The order of the day, pursuant to Standing Order 83.(1), is pre-budget discussion.

    We will first of all welcome our witnesses. From the Canadian Steel Producers Association, we have Barry Lacombe, president. From the Canadian Museums Association, we have John McAvity, executive director, and Jann Bailey, president. From the Canadian Conference of the Arts, we have Megan Davis Williams, national director. And we have Susan Annis, executive director of the Cultural Human Resources Council. Thank you.

    We have one amendment to the agenda today. The Child Care Advocacy Association of Canada have just contacted us. They had an emergency. They will come at another time, so they're off today's panel.

    We will commence. And when we start hearings we will commence with the Canadian Steel Producers Association. Mr. Lacombe, you'll be going first.

    You'll each have around seven minutes. We'll hear from all of you and then we'll go to our panels. So we'll go in order of the agenda as amended.

    Mr. Paquette.

[Translation]

    Mr. Pierre Paquette (Joliette, BQ): Madam Chair, I see here in the modified agenda that you have deferred consideration of the motion I spoke to you about this morning and that it will be discussed in camera under future business. I merely want to let you know that after we have heard from the witnesses, I will be protesting the decision to hear my motion in camera. I think it needs to be debated publicly. I simply wanted you to know what my intentions are.

[English]

    The Chair: Well, it was your request to have this, and I will deal with this right now, because I put out the notice to deal with this motion on 48 hours' notice. It's dealing with a witness before committee. That's always been future business, and that's going to be my ruling.

    We will go right now to—

[Translation]

    Mr. Pierre Paquette: Once the committee has heard from witnesses, so as not to delay...

[English]

    The Chair: There is other business we will deal with from Ms. Judy Wasylycia-Leis, also, and there is other business of the committee, so we're going to do that with future business.

[Translation]

    Mr. Pierre Paquette: But Madam Chair, this isn't other business. I gave notice of my motion within the prescribed timeframe, that is last Friday before 9:30. I believe everyone is familiar with the thrust of my motion and that it should be debated publicly. I'm not asking that it be debated right this very minute. I'm only advising you that I will be asking that we debate it after the witnesses have testified.

[English]

    The Chair: Well, I've allotted time from 5 o'clock to 5:20 after we've finished. I'm not going to take away time from our scheduled witnesses. When the notices were put out, I was not aware of this. I did not become aware of it until late on Sunday night. I arrived here yesterday and I have accommodated it when you passed the motion today to deal with it within the 48 hours. And we will deal with future business as we have always dealt with future business. So we will move forward--

[Translation]

    Mr. Pierre Paquette: Madam Chair, I'm not...

[English]

    The Chair: Order, order.

[Translation]

    Mr. Pierre Paquette: I challenge your ruling, Madam Chair. We don't even have a quorum to vote on your decision. Once we do, I'll request a vote.

[English]

    The Chair: Yes. Okay, it's on the floor right now. We will deal with that. I'm making a ruling that we're going to deal with the motion in camera at future business, having given 48 hours' notice. Because the motion deals with witnesses before committee and we've always dealt with them in camera, I'm going to be consistent on dealing with future business in a future business meeting.

    Proper notice was given. It's an allowable motion. I've made my ruling.

    All those who wish to... Is my decision sustained? All of those in favour of sustaining my...

    What we can do is just wait until the end. I hate to take time from witnesses. We will take this at 5 o'clock before we go.

    Mr. Pierre Paquette: Thank you.

    The Chair: Thank you. I want to get on with the witnesses. It's not fair to them.

    I will start with Barry Lacombe. Go ahead.

    Mr. Barry Lacombe (President, Canadian Steel Producers' Association): Thank you very much, Madam Chair. We very much appreciate this opportunity to meet with the committee and apprise you of our thoughts in the lead-up to the next budget.

    Before I do that, I'd like to take a few moments to tell you about the Canadian Steel Producers Association. We represent Canada's primary steel producers. The industry is responsible for about 150,000 direct and indirect jobs. It has sales of $11.5 billion a year, and an annual buy from suppliers of $9 billion a year. It exports $4 billion a year and it invests $600 million to $700 million a year in new plants, machinery, and equipment. Productivity has been growing at 14% a year, and many communities across the country depend on the industry. The industry is also committed to sustainability.

    Turning to matters relevant to the next budget, we're very much aware that the economic context has changed significantly since the February 2003 budget. Most economic forecasters are now forecasting growth for this year in the order of 2%, and somewhere between 2.5% and 2.8% next year. Clearly there is very little fiscal room. Fiscal projections are very sensitive to changes in economic assumptions, and that means there has to be prudence and risk in framing the next budget.

    This view was reinforced by the recent OECD report, which reported that any surplus is gone, with no room for increased spending, debt reduction, or tax reductions. So prudence will be essential.

    Our view is that the government needs to stay the course on its standard of living and prosperity agenda, and that means focusing on productivity, investment, innovation, job creation, skills, and competitiveness. Governments have made significant progress in restoring fiscal health and improving the environment for a competitive, innovative private sector, and we would not like to see that compromised in either the short or longer term.

    That said, we believe there are a number of things the government can do that will move forward the economic prosperity and standard of living agenda. Our general recommendations are to ensure that the hard-won gains are not lost. That means no return to deficit, and no retrenchment on announced tax reductions, as people are planning on the basis of those reductions. Hold spending under tight control, and re-emphasize reallocation. Speed up regulatory review. Speed up elimination of the capital tax and elimination of the federal corporate surtax. A recent finance department study demonstrated the economic benefits that accrue from those tax changes. That study, released early last week, I believe, demonstrates that the economic gains outweigh the economic costs. As well, follow through on EI premiums based on break-even premiums.

    But there are other things that need to be done to ensure strong economic fundamentals and to move that agenda forward. In terms of fiscal policy, as I've said, there should be entrenchment of an ongoing process of program review, with an emphasis on reallocation of resources from lower to higher priority areas, and an identification of spending that undermines economic performance. We recognize that health care remains a priority. We also believe it's absolutely essential the contingency reserves be put in place. The risks are just too great.

    In terms of tax policy, we believe the federal government should establish the goal of reducing the federal corporate tax rate to 17% so that we could have a combined federal-provincial tax rate of no more than 30%, needed to attract capital and to encourage investment in Canada. We think there's an opportunity—and this will not cost any money—to review the current approach to capital cost allowances. We believe these can be used more strategically to promote investments in new machinery and equipment, an area that has been identified as one of the causes of the growing productivity gap between Canada and the U.S., and for environmental technologies and energy-related projects.

    We believe there are opportunities for innovation skills and learning, working with the private sector, particularly in the domain of lifelong earning, which was an important element in the innovation agenda.

    In terms of regulatory policy, complete the systematic review of Canada's regulatory regime as quickly as possible, with the purpose of reducing costs of doing business, promoting capital investment, and eliminating unnecessary impediments to innovation.

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    We believe that competitiveness, trade, and investment issues need to be properly addressed in a regulatory review and need to be taken into account in determining costs and benefits of regulations. From our perspective, this very rarely happens.

    We need to ensure that the cumulative impact and relationships among all regulations affecting a sector are assessed. This very rarely happens. Each regulation is looked at one by one.

    We need to establish a process of periodic review of regulations to ensure that they remain needed. Regulatory affairs are one of those things that are under the surface. They don't get much visibility, and they need to be visible because the costs and benefits to the economy need to be properly understood and assessed.

    Therefore, we would also argue that the rationale, and the expected costs and benefits, of regulatory authority be properly presented at the time that legislation providing that authority is considered. All too often, regulations follow, and the costs associated with them far exceed what people had anticipated.

    We also think there is room for the federal government to take a lead with the provincial and territorial governments to make sure there is no overlap and duplication and to reduce reporting burdens, all of which impose significant costs on industry.

    Finally, we'd like to draw the committee's attention to the need to focus on the manufacturing sector. Manufacturing accounts for 21% of Canada's economic activity, and when spinoffs are included, 55%. It employees 2.2 million people directly and another 2.5 million indirectly. It exports nearly 70% of its output, the bulk of which is to the U.S., and performs 75% of private sector R and D. A strong manufacturing base is essential for Canada's economic success, and we need to focus on policies that ensure a strong manufacturing sector. Given the high degree of manufacturing integration with the U.S., this is especially important.

    We think that a strong manufacturing sector requires reducing the steadily rising cost of regulation, and a tax system that is at least internationally competitive—which, I want to point out, we do not have. Even if you read that by 2008 we're going to have taxes lower than the U.S., those deal with tax rates, not with the effective tax burden. They don't take into account the impact of capital cost allowances or the differences in other deductions between countries. So it's important to distinguish between rates and the effective tax burden. Professor Mintz has written considerably on this.

    We need tax measures that encourage capital formation and investment, as I've said. We need reliable, reasonably priced energy, and a balanced, comprehensive energy policy to address potential demand and supply imbalances and price volatility. This is not something that's going to cost money, but it is something we have to start thinking about. Industry cannot sustain the volatility that appears, for example, in natural gas prices, which has a devastating impact—or the blackout in Ontario more recently.

    We need to focus on improving our access to the U.S. market by continuing with the border accord, but by moving beyond that to enhance the trading relationship. Too little attention has been focused on the Canada-U.S. trading relationship and the importance of it to the Canadian economy, and we believe that imbalance needs to be addressed.

    We can make common cause with our NAFTA partners to support North American manufacturing. In that regard, we were especially pleased by Minister Manley's recent statement supporting the position of Secretary Snow, the U.S. treasury secretary, on Asian currency movements and the way in which Asian currency levels are determined.

    Finally, we believe there's a role for the federal government in framing an overall economic prosperity standard of living agenda by working more closely and effectively with provinces and territories, because whatever is done on the tax, regulatory, or energy fronts involves the provinces. We believe there's a shared common concern for the economic well-being and improved standard of living of Canadians.

    Thank you very much.

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    The Chair: Thank you very much.

    We will now move to the Canadian Museums Association. Ms. Bailey.

    Ms. Jann Bailey (President, Canadian Museums Association): Thank you very much, Madam Chairman.

    I am delighted to be here. My name is Jann Bailey, and I'm the president of the Canadian Museums Association. Outside of Ottawa, my other duty is director of the Kamloops Art Gallery. As Mr. Wilfert kindly said, I've come from one smoke to the “big smoke”.

    We greatly appreciate this opportunity to address the committee. We are especially pleased at the committee's focus this year on making communities desirable places in which to live and work, because there are some 2,300 museums throughout Canada—history museums, historical societies, art galleries, science centres, parks, zoos and aquariums—that exist to inspire and enrich the lives of their communities.

    Indeed, museums are creations of their communities, reflections of community spirit and the desire of all Canadians to preserve and to tell their stories, so that future generations may draw upon their achievements and struggles as inspiration for their own lives. In this sense, they are a bellwether of community life.

    Museums today owe their very existence to the energy and initiative of tens of thousands of volunteers driven by pride, passion, and the spirit of self-sacrifice, for no other reward than a job well done. In this sense, museums are a focal point of community spirit. So we ask the committee to look upon museums as a key national resource to achieve the goal of building strong, vital communities. But to do so, we need your help.

    Allow me to point out a few facts. Museums and other cultural institutions contribute substantially to the quality of life in their communities. They protect and preserve the record of the community's history and accomplishments. They stimulate scientific research and artistic expression. They educate and inspire our youth. They deliver community programs focused on key social issues, such as literacy and diversity. They also contribute to Canada's economic strength, with a collective impact on the GDP of over $1.4 billion annually. This includes 40,000 jobs, and $650 million in labour income. Given total government spending on heritage at all levels of about $800 million each year, by any standard this is a solid return on public investment.

    Canadians cherish their museums. Of those recently polled, 96% said that museums were an important aspect of the quality of their lives. At 55 million visits each year, they boast a higher attendance than all professional sporting events combined. In short, museums are an important part of the social and economic networks that make communities desirable places in which to live and work.

    When we compare the contributions made by our heritage institutions with public spending on heritage, the discrepancies are staggering. After considering inflation, public funding remains below the level of a decade ago. Since 97% of federal spending on heritage is consumed by program and capital expenditures focused on the government's own needs, that leaves just three cents of each dollar to be distributed to institutions beyond the federal portfolio.

    Funding is a complex maze of federal, provincial, municipal, and to some degree regional programs, with compelling objectives and priorities. Inadequate funding, combined with ever-increasing regulations, strangles initiative and morale within our institutions.

    Last year the committee strongly endorsed the importance of museums and recommended additional funding, yet little came of this. This year new obstacles were encountered, and you know them all—SARS, mad cow disease, wildfires in British Columbia and Alberta—and the decrease in tourism has made the financial situation for many museums even more critical.

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    In response to this situation, the recommendations we bring forward to the committee in our brief revolve around four principal strategies: innovative ideas for increased funding to support the institutions in greatest need and the communities they serve; recommendations to streamline and simplify the current funding regime for heritage, allowing a reallocation of precious funding dollars to those institutions; taxation measures to increase the flow of donations to museums, thus building long-term stability and reducing dependence on public dollars; and recommended changes at the policy level to provide the government with a more effective opportunity to support cultural institutions.

    Together, these measures will greatly increase the capacity of museums to do what they do best: support and enrich their communities; connect Canadians of all regions; celebrate our achievements; and preserve our national heritage for future generations.

    We understand the challenge this committee faces in balancing a broad array of compelling demands. Yet considering the failing strength of communities large and small—the cornerstone of a vigorous, healthy, and united country—the measures we propose represent a modest investment that will reap important rewards for Canada and Canadians in communities all across this country.

    The committee recognizes the importance of museums to the country. You told us so in your report of 2002. We greatly appreciate your support. However, at this critical time we urge you to once again speak loudly and clearly on this issue, not merely on behalf of museums, but more profoundly on behalf of our communities they serve.

    Thank you so much.

    The Chair: Now, from the Canadian Conference of the Arts, Ms. Williams.

    Mrs. Megan Williams (National Director, Canadian Conference of the Arts): Thank you, Madam Chair.

    I'm very pleased to be here representing the Canadian Conference of the Arts. I'm the national director.

    The CCA is a national forum for the arts and cultural community in Canada. Our community also includes museums, and I very much support the remarks of the president of the Canadian Museums Association that we just heard. We advocate on behalf of artists in Canada. We're an authority, providing research, analysis, and consultation on public policy in the arts, and we are a catalyst, fostering informed debate and collective action.

    As your committee travels across the country, you'll have the opportunity to hear from several CCA members, from the Association of Cultural Industries in Newfoundland to the Writers' Union, the Union des artistes, and the Saskatchewan Arts Alliance. I venture to say that you'll notice a certain similarity in recommendations coming from the arts sector this year.

    The finance committee's main themes this year were particularly welcome, given that they focus on taxation and spending, topics that remain at the top of our agenda.

    I'll focus my remarks this afternoon on spending issues and advocacy for charities, and my colleague Susan Annis, the executive director of the Cultural Human Resources Council, will speak about taxation and compensation.

    The need for stable, sustainable government funding for arts organizations is absolutely critical. In May 2001, at a gala event in the CBC broadcasting centre in Toronto, the Prime Minister, accompanied by the Minister of Canadian Heritage, announced a funding package for culture amounting to something like $560 million over a period of three years. The arts community celebrated this announcement, recognizing that the funds would help the sector catch up following many years of government cutbacks. However, at the end of the current fiscal year most of the funding and some of the programs are due to expire.

    Although some evaluation of the impact of these funds is underway, many of the programs were slow getting started, and it's too soon to assess more than their functioning. However, indications are that the infusion of funds is having the desired effect of promoting sustainability and long-range planning; reaching into diverse parts of the arts community, which previously had minimal support, to expand festivals and arts events; engaging youth; and providing capital to maintain and build the arts infrastructure. The CBC, the Canada Council, and Canadian museums and heritage groups were also significant beneficiaries of this new funding. It's ironic that the arts sector is facing instability again so soon, given that the new programs emphasize stabilization, sustainability, and capacity building in the sector.

    The renewal of the funding package is the primary goal of many organizations in this sector in this budget process. The CCA is convening a group of arts organizations, which are planning a larger advocacy effort aimed at raising arts funding as an issue in the upcoming election process. However, the renewal of Tomorrow Starts Today is far from a sure thing, and so far any approaches Canadian Heritage has made to cabinet have been rebuffed.

    The imminent Liberal leadership convention and its probable aftermath, a cabinet shuffle and an election, has resulted in a creeping paralysis spreading throughout all departments and an inability to move forward on program development and funding. For arts groups such as Festival 500, the Newfoundland international choral festival, to take on the careful and intricate planning for their biennial event is almost impossible in this environment, let alone for arts groups with construction projects in hand.

    The CCA entitled this year's submission “Feeding the Canadian Spirit”, a reference to the Prime Minster's speech at the unveiling of the Tomorrow Starts Today funding. Foreign Affairs Minister Bill Graham has stated that “Culture is the face of Canada abroad”. Canadian Alliance MP Jim Abbott asserts that “Canadian culture. By definition it should be the reflection of our lives through the lens of our country's creative energy and expression. Throughout our history, distinguished artists and creators have interpreted Canadians to themselves and to the world.”

    I could probably find 301 quotes from the 301 eminent MPs who constitute our Parliament. Suffice it to say that although most MPs acknowledge that Canadian cultural policy includes adequate support for the arts at the federal level, the current funding regime does not reflect this conviction.

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    My colleague, Susan Annis, will address issues dealing with artists' and cultural workers' income and access to benefits, but I will set the stage by mentioning that an evaluation of the federal Status of the Artist Act, as required by the legislation, was commissioned by the Department of Canadian Heritage and completed last spring. As part of this report, consultants asked respondents to rank existing and potential measures in order of importance. Among the measures viewed by artists as the most beneficial were income averaging, a tax exemption on copyright income--

[Translation]

    an idea that Bloc Québécois MPs should be quite familiar with, since this measure has been in place in Quebec for many years now

[English]

    --and access to employment insurance and other social programs. We look forward to receiving the government's response to this legislative review in November, and we hope it will include recommendations corresponding to the measures I've just mentioned.

    I would like to finish with a further plea for charitable organizations to be granted a wider scope in terms of the advocacy and public policy work they can undertake. Last year when the CCA make its presentation to this committee, it was in the company of several like-minded organizations, and all voiced their support for readjusting the regulations governing charities in Canada with regard to the amount of advocacy work they can do. At that time we urged the government to narrow its definition of political activity to partisan political activity, to prescribe that, then to encourage charities to engage in as much advocacy as they deem appropriate as long as it relates directly to their charitable purpose.

    This message met with a sympathetic hearing here at the finance committee, and recommendation 36 in the final report reflected this. However, despite a valiant effort to find an administrative solution on the part of CCRA, the Department of Finance has remained obdurate in its refusal to support this effort.

    We reiterate the need for changes in the Income Tax Act to create a climate conducive to the advocacy and public policy work carried on by charities and we encourage this committee to include such recommendations in its final report.

    I will now defer to Susan Annis.

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    The Chair: You have had seven minutes. How many minutes do you need?

    Ms. Susan Annis (Executive Director, Cultural Human Resource Council, Canadian Conference of the Arts): I'm brief. I'm not like that.

    The Chair: Okay, go ahead. Thank you.

    Ms. Susan Annis: Thank you, Madam Chair.

    The Cultural Human Resources Council is one of 35 sector councils supported by Human Resources Development Canada. We very much appreciate this opportunity to add our voice to those of our colleagues at the CCA, particularly on concerns that are related to human resources issues among artists and cultural workers. Three of the eight recommendations in the CCA's brief before you fall into this category, and we'd like to briefly touch on them today.

    The third recommendation is that the Department of Finance take the lead in directing a full and comprehensive study into self-employment. We understand that leadership on this issue of access to employment insurance for self-employed workers rests with HRDC. However, as you are contemplating the broad picture of funding in the cultural sector, we urge you to recommend consideration of this issue by your colleagues on the Standing Committee on Human Resources Development.

    Self-employed artists and cultural workers, like all self-employed Canadians, should be able to contribute and access employment insurance. We at CHRC are prepared to work with government officials to help devise an employment insurance scheme for the self-employed that is fair and equitable and directly addresses concerns that such a scheme could be abused.

    Megan has already referred to recommendation four, that the government institute, without delay, a system of income back-averaging on a five-year basis. We strongly support this. It is the only way many self-employed artists will achieve stability in their own financial management and the only way in which their overall income may be fairly assessed for income tax purposes. This falls squarely in the purview of this committee, and we strongly urge you to recommend yet again that the Department of Finance seriously and immediately address this issue.

    Finally, recommendation five is that the government amend the Status of the Artist legislation to guarantee access to social benefits. Again, there is no social safety net for self-employed individuals. This is an increasingly important issue for the broad labour force as well as the cultural sector, as the number of self-employed Canadians is growing. I draw to your attention a recent fact that of the 49,000 new jobs created in June, a full three-quarters were for self-employment.

    We urge you to recommend to your colleagues on the Standing Committee on Human Resources Development to address this issue with urgency. Whether the solution comes through the status of the artist legislation, as suggested in the CCA's brief, through increased finance into arts organizations so that they themselves can help artists to access such benefits, or through amendments to EI legislation, the issue of access to social benefits for self-employed artists and cultural workers must be resolved.

    Thank you very much.

    The Chair: Thank you very much.

    We'll start with Mr. Jaffer, for seven minutes.

    Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance): Thank you, Madam Chair.

    Thanks to all the presenters today. I really found all the presentations interesting. They helped to guide our committee as we make suggestions, even though we have no idea when the next budget will be presented.

    Nonetheless, I would like to first ask Mr. Lacombe if he could give me a little more information. I appreciated the comment you made when you compared the issue of rates versus the effective tax burden, that there is a problem in this country. I want to specifically focus on that relationship with the U.S., our biggest competitors. I know you've done a tremendous amount of work in your industry to put us in an international stead, despite some of the lack of support that you've had from this current government.

    I want to focus specifically on the capital cost allowance and how that affects our productivity in this country. Secondly, what is the level compared to that of the U.S.? Could you enlighten us as to what challenges you have on that particular tax? I think that many of your manufacturing colleagues, and even some of the resource-based industries, have asked this committee to address that issue.

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    Mr. Barry Lacombe: Certainly the capital cost allowance is exceedingly important for capital investments. As you know, it's capital investments that end up helping to enhance productivity.

    In fact, one of the areas where Canada lags relative to the U.S. is on investments in new machinery and equipment. It has been identified as one of the reasons for the productivity gap between Canada and the U.S. It can be traced back to a difference in capital cost allowances. It used to be that in Canada there was a 50% straight-line write-off for capital investments. That was changed, and now it's 30% declining balance. The 30% declining balance is one of the things that puts us at a disadvantage relative to the U.S.

    If you go through and take a look at the tax burden for our industry, even with the proposed tax changes, we estimate about a five percentage point gap or disadvantage relative to the U.S. It's simply because of the impact of capital cost allowances and other deductions that are available in the U.S. and aren't available here.

    Our message is very much one of not only look at the rates, look at the effective tax rates. We still have one of the highest effective tax rates on capital in Canada, and, because of payroll taxes, one of the highest effective tax rates on labour in Canada.

    That's basically what we're saying.

    Mr. Rahim Jaffer: I have one last question for you, Mr. Lacombe. I'd like to get to a couple of other people as well.

    You mentioned the issue of our trade relationship and border management. I was hoping you could briefly address that issue from what you've seen, obviously, in some of the challenges we've had over the last couple of years and what challenges your industry specifically is facing.

    With the efforts we've tried to push forward of dealing with security as well as our trading relationship, in saying that they're both hand in hand, do you see the requirements being met? In particular, are they being met with regard to the challenges you're facing?

    Mr. Barry Lacombe: I'll respond in two ways to that, Mr. Jaffer, through the chair.

    First of all, in terms of the border accord, I think that a great deal has been accomplished on the border accord. With the wait times now and the flow times now, they're looking fairly good. There will still be bumps in the road, but we think that considerable progress is being made.

    At the same time, there are certain things that do cause us concern. There were some proposed rules about advanced pre-notification for the U.S. that would cause some problems. One has to be consistently vigilant on that.

    In terms of the relationship between border accord and security, clearly, the two are interrelated. We think that the two need to be examined as an interrelation, and we've said this in the past. But we do think that the border accord was a major step forward.

    The second dimension of the relationship moves us beyond the border to the whole trading relationship we have with the U.S. For example, in the case of steel, the Canadian and U.S. markets are integrated, but that doesn't seem to get reflected anywhere. We still have, if I can call them such, particular trade irritants that develop with the U.S.

    Right now, we're engaged in trying to deal with a couple of those trade irritants that could have significant influence. We think there needs to be far more attention paid to the Canada-U.S. trading relationship than has been paid to date. That is 87% of our exports and 40% of our gross domestic product. We think it merits that kind of attention.

    In the case of steel, we believe there needs to be a process to overcome these impediments. We're pleased to say that there will be a North American steel trade committee that will start to deal with them. It's the kind of thing we also have to focus on.

    Mr. Rahim Jaffer: Sure.

    Ms. Williams, I appreciated your presentation. I know in the past, I think it was earlier in the spring, when we had the chance to discuss some issues, there was an issue I was interested in, the idea you mentioned today on a tax break for artists on copyright. I was hoping that maybe you could expand on that a little bit to see how it would benefit artists, but also if you've done any calculations on maybe the costs there would be for the federal government, because I think there was some concern in our committee about that proposal.

º  (1610)  

    Mrs. Megan Williams: Thank you. I'll start with the last part of your question.

    We haven't actually been able to quantify the amount of income tax that would not accrue if this income tax break were implemented, but we know from the models in other countries that it's not a huge amount and that it stimulates the ability of artists to produce their work. This type of tax incentive for artists has been in place in Quebec since 1995. What it originally meant was that the first $30,000 of income that artists gain from either selling their work or selling copyrighted materials was not taxable. Quebec has recently raised that ceiling to $60,000, the first $60,000, because it has realized that this is a helpful measure for artists.

    What it does is recognize the fact that artists have to invest in their own research and development, like small-business people do. We know artists are well-educated people, so normally they've invested a lot in their education and sometimes it takes them years to reap the benefits of the work they make.

    I think I mentioned that this model is in place in Ireland. It resulted in part of the energy that fuelled the Celtic tiger. So we look to that model and we would hope that this kind of tax measure would be one the Department of Finance would be in agreement with.

[Translation]

    The Chair: Thank you very much.

    Go ahead, Mr. Paquette.

    Mr. Pierre Paquette: Thank you, Madam Chair.

    I want to thank the three groups for their presentations. I'll start with the Canadian Conference of the Arts and the Canadian Museums Association. I have to say that I'm not thrilled with the title of the brief submitted by the Canadian Conference of the Arts. Let's just say that “Feeding the Canadian Spirit” doesn't do a great deal for me, but the choice was yours to make.

    Both reports mention the relationship between the cultural sector and the essential role of volunteers. There's no question that the cultural sector couldn't survive without the thousands of volunteers who toil at all levels, whether in libraries or in museums.

    It is also a fact that in recent years, the number of volunteers in Canada has declined. And while those who do volunteer are doing more, on balance, the overall number of people volunteering has declined. In its submission, the Canadian Conference of the Arts encourages active dialogue between the relevant departments and the voluntary sector.

    The Canadian Museums Association specifically recommends the introduction of a kind of tax credit. They recommend that persons be allowed to deduct up to the equivalent of $1,000 in income for services rendered. The question I have—and I'm putting it quite broadly because I'm well aware that finding people to volunteer can be a problem—is whether this kind of initiative is really part of the solution or whether basic funding is really the big real problem here. Many volunteers working on behalf of foundations or for museums or libraries spend much of their time as volunteers raising funds to operate these facilities. Over time, they become very frustrated and the task becomes even more difficult in light of chronic underfunding problems.

    Wouldn't efforts in the voluntary sector be further consolidated if basic funding were increased and secured, as you recommend? Wouldn't this approach be preferable to one that essentially benefits individuals who are already well aware of the need for volunteers? I would have liked to see you delve into this matter further because it's extremely relevant. I've been asking myself such questions for some time now.

    Mrs. Megan Williams: I'll start by giving you a more general answer and then I'll turn the floor over to the CMA representatives. It's unfortunate that you do not see Quebec's artists and cultural workers reflected in the title of our submission. Obviously, our organization also represents Quebec workers and we speak for them as well.

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[English]

    I just want to say that in our submission we're not talking so much about volunteers, so I'll let the CMA answer that part. We're talking about the framework within which charitable organizations operate and we're suggesting some measures that would make it easier for charitable organizations to comply with the legislation that exists, because right now charitable organizations can spend only 10% of their resources on advocacy and public policy work, and we find that to be a very restrictive regime.

    We know that in Quebec contributing to public policy is recognized as a legitimate activity of charities. They've already made the appropriate amendments in Quebec to permit this kind of activity. We think Quebec, as usual, is ahead on this kind of enlightened social legislation and we're urging the federal government to follow that.

    Mr. John McAvity (Executive Director, Canadian Museums Association): First of all, I think your question was, given our druthers, would we prefer to have more funds for operations of our charitable organizations versus a credit towards volunteers' deductions? Absolutely. Of course we would. There's no question about that. Virtually all the institutions we represent are very poor, starving organizations. They depend on volunteers, and volunteers are extremely important.

    We have recommended in our brief that there be a $1,000 per year credit for volunteers. Frankly, that's a very minor amount, really to recognize the out-of-pocket expenses that most volunteers incur when they give their time. They're incurring gas money, parking, out-of-pocket expenses, and often child care as well. So this is really meant as, I think, a very reasonable recommendation to help encourage and sustain volunteerism.

    Monsieur Paquette, you also asked whether volunteerism has been declining. Yes, it has. At museums it has, but we've noticed that it's actually fairly stable. It started declining, but it's holding its own, if not picking up.

    In the year 2001 we studied and issued a major report on volunteerism in the institutions, and that is the picture of the country as a whole. There are isolated communities, particularly in rural areas, where communities and towns are shrinking, getting smaller, and in some cases disappearing. We're very concerned about museums, libraries, and related institutions that exist in those types of communities.

    We are interested in strengthening volunteerism, we're interested in receiving more volunteerism, and we're certainly interested in recognizing more volunteerism.

[Translation]

    Mr. Pierre Paquette: Thank you. This is an issue that will need to be debated. Obviously, if we extend this initiative to the cultural sector, as you're suggesting we do, we will have to extend it to the community sector as a whole. I don't see how we could restrict this measure because what you're saying applies just as much to a person who helps children with their homework or volunteers in some other capacity. Many volunteers work in hospitals, for example.

    Your fifth recommendation—and it still bothers me somewhat—calls for “...a substantial infusion of resources to municipalities for the purpose of revitalizing economic and other critical infrastructure...” Why single out municipalities? Why not recommend that funds be transferred to institutions or better still to provincial governments that have a cultural policy in place, such as the Quebec government? These are sticking points for us. Why single out municipalities?

    I'm from Joliette. The Musée d'art de Joliette is an independent facility. Obviously, the municipality contributes in various ways, but why wouldn't our art museum, the largest of any in Quebec outside of the major urban centres, receive some direct assistance from the federal government?

[English]

    Mr. John McAvity: Municipalities are very key to all of our institutions. They play a significant role in terms of funding and in terms of operational support. We're very concerned about the type of funding we are getting at the municipal level. Municipalities have been under a great deal of pressure in terms of concerns and other issues.

    What we're suggesting here in terms of the transfer of funding that does already go to municipalities for infrastructure and so on.... There are project dollars, billions of dollars, that go. Very little, if any, of that money right now goes to museums or art galleries. It's going to sewers, it's going to roads and bridges, all very important activities.

    All we're saying is let's earmark in that transfer a portion of funding that's specifically marked for culture, cultural activities, heritage preservation. We think it's very important. We support the role of municipalities. We work very closely with the Federation of Canadian Municipalities. The Canadian Conference of the Arts has been doing that as well. We see them as a very important other level.

    In terms of funding going directly from the federal government, we believe strongly that the federal government does have a role. I'm glad you recognize that as well, and support that, that the federal government should be funding these kinds of activities across Canada. We very much welcome the recommendation the committee made last year in support of that. Unfortunately, the budget did not contain any more money.

    Right now all of the museums in Canada, outside of these lovely ones we have here in Ottawa just a few yards away from us, receive less than $1 per Canadian per year, less than a cup of coffee.

º  (1620)  

    The Chair: Thank you very much.

[Translation]

    Next up is Mr. Wilfert.

[English]

    Mr. Bryon Wilfert (Oak Ridges, Lib.): Thank you, Madam Chairman, and I thank everyone for their presentations.

    With regard to the museums, I certainly think the information that was provided in your brief at the beginning regarding the importance to Canadians, the polling that was done, certainly speaks volumes. Obviously I had spoken in favour of this last year, and I continue to do so.

    However, I have a question with regard to recommendation two. You talk about increasing the amount of funding available to museums outside the federal portfolio. There is a responsibility, both for the provinces and for municipalities, particularly in terms of small museums. It would not be the purview of the federal government, in my view, to start funding every small museum no matter how worthy.

    There are special opportunities that the federal government has done. I know in my own riding moneys have been allocated for special collection preservation, etc. But I'm wondering where the collective responsibility is here in terms of... When you say outside that portfolio, what are you really suggesting? Given the fact that you talk about an increase in the order of $2 to $5 per capita, what's the bottom line?

    Mr. John McAvity: As I mentioned before, at the present time less than $1 per Canadian, per capita, is spent on museum activities outside of the national capital.

    If I may give you another fact before I address the rest of the question, the level of funding primarily comes out of what is called the museum assistance program. That program is $9 million a year. It's been at that level, not even adjusted for inflation, since 1972. So the funding is very much of a limited nature. Clearly there's a role for other levels of government. Clearly there is a role for the Canadian donors, for the corporate sector, as well to play.

    We've increased significantly the earned revenue at museums by admission charges, by gift shops, by tours, and so on. The fact of the matter is the core funding has not increased, and we feel it should increase. That museum assistance program that's at $9 million should be at least at $30 million, just if you added cost of living to the 1972 figures.

    What's the limit? There has to be a limit. There is no question about that. We feel at the present time the government should bring in an increase to the museum assistance program that takes it up to a much more significant figure, as well as, or alternatively, bring in a national heritage policy that looks at the sector as a whole. We've suggested a $200-million figure, in that case, over a three-year period.

    Mr. Bryon Wilfert: I would note that you have before us eight recommendations. I know that they're all very worthy, but what's the priority recommendation for your association? Then if nothing else when we're done we'd have one, because unfortunately we're going to have about another 400 people before us and they all, of course, have excellent ideas but we don't have unlimited dollars. What is it that would be the biggest self-starter for your sector of these recommendations, if you were to say this is the number one issue?

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    Mr. John McAvity: I really have to say it is funding. You may not want to hear that, but you may not also want to hear about the heritage we're losing in this country, the heritage that is being lost—

    Mr. Bryon Wilfert: That I do want to hear about, absolutely, and you need the tools to do that.

    Mr. John McAvity: —and, I suppose, really what the role of our institutions are. Our institutions, whether they're museums or art galleries, are helping to build better communities. They are in the health business, in a way. They are building a quality of life, they are giving a sense of pride and place to the whole thing. I think we're very modest in investment—very modest—and it's funding, I'm afraid to say.

    Mr. Bryon Wilfert: I'm afraid from my municipal days it reminds me of recreation versus sewers. Nobody argued about sewers. When I was president of the Canadian Parks and Recreation Association they'd talk about how this is a soft service, and it's not really that, but is important. The reality is a community is more than just roads and bridges and sewers. So I've always been very sympathetic in that regard.

    As far as dealing with the arts is concerned, and again it's very important, in terms of your submission, I liked the Canadian Conference of the Arts saying, “feeding the Canadian spirit”. I think that's pretty catchy, and I think it does indicate that there are a lot of things we need to be doing. We need to be able to promote very strongly the cultural sector.

    The question is, looking at the recommendations—and you put forth eight recommendations—and given that we're not going back into a deficit, what would be the key recommendation here that would really be the most important in terms of most benefiting your sector?

    Mrs. Megan Williams: Thank you for that.

    The top priority is the renewal of the funding package that was announced for a three-year period and has now expired. I think we really need to go on with that. It's not hugely expensive, and I think we have substantial evidence that it is generating a lot of economic activity.

    I want to say that I really support what the Canadian Museums Association was saying about the connection between museums and their communities. There's the same kind of connection between arts organizations and fostering inclusivity and attracting new Canadians to participate in community life and to “feed their spirit”. So I think we just have to make sure that all these community-level arts activities can continue, and this is the kind of thing that's happening thanks to this funding program.

    Mr. Bryon Wilfert: As far as the Canadian Steel Producers Association is concerned, there's not much in your presentation I disagree with. The difficulty is if we did all of what you wanted, we wouldn't be doing anything for these poor folks over here. So the question then becomes the pace of being able to do some of the things.

    You mentioned tax rates. We could debate some of those points, but I think in general you have given us credit, which I like to see, on improving the Canadian economic fundamentals. Because we have improved the Canadian economic fundamentals, we're able to do some of the things that your association would like to see, and certainly these individuals and their associations would like to see.

    You talk about the manufacturing sector, which is a bit of an unsung hero. A lot of people thought it's all gone offshore, we've forgotten it, and it's very important in this society, particularly in the R and D sector. Again, realizing I have little time, a question to you is, in terms of your priorities, what is your number one priority that would be most beneficial to stimulate the industry?

    Mr. Barry Lacombe: Clearly, our priority would be international trade considerations and trade laws. As many members know, steel trade between Canada and the U.S. is balanced. Unfortunately, their proportion of the Canadian market then turns out to be much higher than our proportion of the U.S. market. And let me also say that in steel, as you know, there's an oversupply of steel in the world, and a lot of that oversupply is caused by government subsidies of one type or another, which still goes on, which is why the OECD is addressing that particular issue. We're jammed, we're caught, because if we bring trade cases, then you have an implication for the U.S. And, as you know, we're an integrated market. We don't want to take actions against the U.S.

    Moreover, if you take a look at the U.S.-Canada trade relationship, the pricing in the U.S. is exactly the same as pricing in Canada. When U.S. imports come in, they're priced at the same price as the domestic market, but because of their size in the Canadian market they're seen to have contributed to injuring the Canadian industry. We think that has to be fixed.

    So our big thing is fix the Canada-U.S. trade relationship, go the next step on NAFTA and also make it possible for the CITT to better take into account the integrated Canadian-U.S. market when it's reaching its judgments. This is something that's absolutely crucial for the Canadian industry; otherwise we will not be able to effectively deal with the low-priced, unfairly traded imports coming in because of world oversupply of steel.

º  (1630)  

    Mr. Bryon Wilfert: I appreciate that. And as you know, some of my colleagues have been seized in the subcommittee on our side with regard to that. Now they are working very effectively with your organization.

    Thank you.

    The Chair: We will go to Mr. Cullen, followed by Mr. Brison.

    Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Madam Chair. Thank you to all the presenters.

    Mr. Lacombe, I certainly agree that we need to do something about our relationship with the United States, but on the tax burden issue I'm a little puzzled. I don't know if you have done a tax burden study recently in the steel industry, because what you're saying sort of runs counter to my understanding of where we were going and where we're at with corporate taxes. With the tax reductions announced in budget 2000, corporate capital tax—in fact, the capital gains regime—is more advantageous here in Canada than in the United States. In fact, I thought our rates were going to be about four to five percentage points lower than some of our major trading states, which would be the ones many of the members of your industry would be dealing with.

    Could you enlighten me a bit in terms of this tax burden study and the conclusions it has led you to promote here today?

    Mr. Barry Lacombe: Sure.

    What we have done—and we've made this presentation in the past to the committee—has been basically taking a look at the capital-labour ratio in the steel sector and then applying the marginal effective tax rate on capital and the marginal effective tax rate on labour to the proportions in the steel industry. And it turns out that the U.S. is in an advantageous position.

    I might also direct you, Mr. Cullen... in fact, I can get this to you, but you've probably already seen it--a piece of work by Jack Mintz, who has written a lot on taxation, as you know. It's called “Tax Policy as a Contribution to Canada’s Economic Advantage.” It was a paper that Professor Mintz presented at the TD economic conference.

    Mr. Roy Cullen: What was the date of that?

    Mr. Barry Lacombe: It would probably have been in the fall of 2002. In it Professor Mintz talks about tax rates in Canada, the U.S., and so on.

    I'll get you a copy of this. I'll definitely do that.

    The Chair: If you could get that to us, we'll circulate it.

    Mr. Roy Cullen: I'd be interested, because it seems to me that we need to focus still on personal income tax rates. Corporate tax rates wouldn't be something I would rush to myself, if I were to be asked.

    Mr. Barry Lacombe: But I think the capital tax is one that really is a tax that has powerful disincentives; and as the OECD demonstrated, the economic drag from that tax is absolutely incredible. So on that, we are pleased the government is acting. We would simply like to see it act a little more quickly in terms of getting it accelerated.

    Mr. Roy Cullen: But all those measures—the corporate tax reductions, the elimination of the capital tax—once they are fully in place as they have been announced, aren't we very competitive with the U.S.?

º  (1635)  

    Mr. Barry Lacombe: We believe we will still be at a slight disadvantage. Nevertheless, we say let's keep going, for sure. But I will send you Professor Mintz's study and you can take a look at it.

    Mr. Roy Cullen: I would be interested. I've had a lot of interaction with him and certainly respect his views as well.

    I'd like to come now to museums. Museums are something we tend to take for granted. During the war in Iraq, we all saw and heard about that and saw those images of the museum in Baghdad. I've never visited the museum in Baghdad—I might never—but in addition to all the human pain and suffering, most of us felt a sickness that the museum was being gutted. You could have this sort of death by a thousand cuts that can result in a similar, maybe with not quite as dramatic, kind of change. I think it's time we invested in museums.

    I have a question for you in terms of the process. We live in a free and democratic society, and if a group of stakeholders want to start a museum, I suppose they can, but the more museums we have, the more the resources are spread more thinly. There was an issue with respect to the portrait gallery. I don't necessarily want to go there. I know it's a little touchy. But is there a process where, say, if the federal government or a province or a major stakeholder wants to start a new museum that will take resources away from existing museums in helping with their operating costs... It seems to me there is a finite amount of resources. Is there a process or a consultation or a way in which you can convey your views on these very important matters that affect your stakeholders?

    Mr. John McAvity: I guess we live in a free and open society. You're right, anyone can literally start a museum of their own. However, I would distinguish between private museums and non-profit public ones, and they are the ones we're addressing ourselves. Even with that, there has been a growth in museums.

    Thanks to the Centennial in 1967 and the World's Fair in Montreal, there was a huge growth in these institutions called museums. Canadians were discovering their roots and taking pride in them and in the level of exhibitry that happened at Expo 67. We've gone from about 300 museums in Canada in 1967 to about 2,500 non-profit, publicly operated museums now in the country. How many do we need? I don't know. We at times have been very concerned ourselves about that growth.

    What we really wish to see as a priority is the operating assistance that is provided to those museums increased and much better addressed. They shouldn't be dependent totally on government. We would like to see institutions that are as self-sufficient as possible. That requires a strategy involving endowment funding, incentives for endowments, incentives for more volunteers, incentives for community growth and participation. It is through building friends and serving your community that the museums will survive.

    Mr. Roy Cullen: Thank you.

    Mr. Richard Darroch (Head of Government Relations and Administration, Canadian Museums Association): Madam Chair, might I add a couple of comments?

    I would like to add that on the specific question of process, I think in the brief you will note that one of our recommendations has to do precisely with the rather, I would say, incoherent approach that we appear to have here, in that there doesn't appear to be the kind of consultation in terms of allocating priorities and what not that we believe there should be between the various levels of government and the institutions concerned. It is precisely one of those things that we would like to see introduced in the context of the heritage policy framework.

    We think there are resources there. The problem is we're spinning in different circles, and we believe that around questions such as how much is too much, how high is up and that sort of thing, there has to be greater participation between the various orders of government, greater coordination in allocating very finite resources.

    The Chair: Thank you.

    Mr. Brison, please, seven minutes.

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

    First I want to congratulate Mr. Lacombe for pointing out the difference between effective and statutory tax rates. The government speaks about our corporate tax burden in Canada as if we were more competitive than the U.S. It is fundamentally false to make that assertion, as you identified. Few actually note the difference between statutory and effective rates, and you are right on that.

    There are several proposals out today for a new deal with the United States, a Canada-U.S. security and economic partnership that goes beyond simply addressing the issues of perimeter security: one focusing away from 49th-parallel security and more on point-of-entry security; one that actually goes towards, as a second point, harmonizing our regulatory burden between the two countries, such that if a product were approved by a Canadian regulatory agency there would be a mutual recognition, so that it would be recognized and approved by the parallel agency in the U.S. and agencies would work together to standardize approaches and agree to common approaches and methodologies of approval; third, a resource security pact that would address the ambiguities around resource pricing and subsidies and replace those ambiguities with some level of clarity to avoid some of the perennial issues, including softwood lumber. I would appreciate your view on that kind of approach.

    Second, I'd like your view on the idea that has been presented from time to time of a regulatory budget, such that any new regulation introduced in Parliament, instead of being introduced by stealth, would have to, once a year, be part of a regulatory budget that would be presented parallel to the fiscal budget in the House of Commons. It would list all costs of regulation, including the cost of compliance, which is the one that is left out now—not simply the cost of enforcement from the government perspective, but the cost of compliance—and would also have a cost-benefit analysis and risk analysis. The actual benefit would be quantified, as opposed to being more qualitative.

    Lastly, I'd ask for your views on the idea being promoted now by Roger Martin, dean of the Rotman School of Business at the University of Toronto, that instead of a CCA capital cost allowance system such as we have now, we provide a competitive advantage over the U.S. for Canadian businesses by allowing Canadian businesses to write off the entire cost of purchase of new equipment in the year of purchase, as opposed to the Byzantine CCA analysis that exists now.

    I have one last question for the Conference of the Arts and the Canadian Museums Association as well. I'm interested in your views on the elimination of capital gains tax on gifts of listed securities, whereby we would stop as a country taxing those who actually give, and would free up a lot of capital for Canadian museums and for the arts community. I would appreciate your views on that.

º  (1640)  

    Mr. Barry Lacombe: Thank you very much, Mr. Brison.

    We would very much appreciate anything that improves the regulatory process, and if that would include the kind of thing you're talking about between Canada and the U.S. we think it would probably be beneficial. We recognize, however, that there would have to be recognition on both parts, and one would have to see the details of how it might work before saying more on that. Certainly we believe also that anything that can be done... You use the word “subsidy”; there is a Buy America program. On those kinds of things, anything that can be done to make sure they aren't operating and that we're on a level playing field would, we believe, be very beneficial.

    There are a number of these irritants, if I can use that term, that really affect the steel sector. Of course, we do not support the kinds of subsidies that might be available. For example, we do not support the Byrd amendment where customs duties and so on are given back to those who lodged the complaint, so to speak. We would like to see that definitely cleared up. We'd like to see a strong Canada-U.S. NAFTA approach to these things; we would fully endorse that.

    In terms of a regulatory budget once a year, yes, again I think that would be very helpful. We're very concerned, however, about the cumulative impact of regulations on the sector. If you take a look at what the Office of Management and Budget does in the U.S., where they are putting out this kind of budget, they don't really take a comprehensive look at the cumulative impact on a sector. We would think that's very important, because it gets lost.

    In our case, you have a regulation A, B, C, and D. Each one is looked at independently; each one has a regulatory impact assessment statement independently, but the relationship and the cumulative impact are lost. I personally would be in favour of that regulatory budget, because I think our regulations just don't get the kind of scrutiny and screening they need.

    In terms of CCA and Professor Martin's view, machinery and equipment capital investment is one of the areas where we're lagging. The 100% write-off obviously would be much quicker than is possible now under the current CCA rules. We think the payoff from that would be high, and it would also help improve productivity, create jobs, and improve investment. We just cannot continue with that gap between Canadian and U.S. productivity. We thought we had that one crunched, with some improvement in that relationship. Recently we have seen that is not the case.

    On balance, we think those three are worthwhile ideas.

    Mr. Scott Brison: Thank you.

    Would it benefit the Canadian steel industry if Canadian shipping companies registered their ships in Canada as opposed to Liberia?

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    Mrs. Megan Williams: I'll make an oblique answer to your question.

    Of course we support regulations that improve the chances of charities benefiting from more donations.

    I just want to add at this point that as the government ban on tobacco sponsorship comes into effect, a lot of arts organizations have moved to replace that funding with other types of corporate sponsorship. We think there could be more measures the government could take to encourage companies to donate to charities, by making a variety of tax incentives available to them.

    Mr. John McAvity: I thank you for the question as well.

    We too, in our brief, bring out the question and make the recommendation that the inclusion rate for donations that are securities should be made completely tax-exempt. For a while it has been up to about a 50% tax rate reduction. We're saying go the whole way: clean this up and be clear about it. I think this is a recommendation you're going to hear from a number of other groups.

    What we're primarily interested in is seeing that tools are put in place so that museums and galleries can build up endowments for their long-term support, so they can be better in terms of their own self-sufficiency, and frankly, less dependent on other sources. This is a step in the right direction.

    Mr. Scott Brison: Would you extend that? For instance, in some cases museums would benefit from gifts of property that would not be publicly listed as securities but could be pieces of art or antiquities or real estate property or an old property. Would you support the notion of the elimination of capital gains tax on those sorts of gifts as well, subject to some sort of appraisal or assessment process?

    Mr. John McAvity: Frankly, yes, we would. At the present time certain classes of donated works of art are eligible, but they have to be certified and go through a very sophisticated and very good process. There is a process in place right now.

    My only concern, frankly, Scott, would be that if we did open up that door, the museums are not going to have the facilities to take all these wonderful donations that might be coming our way. We need warehouses and we need facilities to put them on display. We don't want them just sitting in warehouses; we want to put them out on display. So it would become a very big pressure on us.

    What we primarily need is the money to operate the existing buildings that are at risk.

    The Chair: Thank you, Mr. Brison.

    Mr. Scott Brison: Thank you.

    The Chair: Now, Judy Wasylycia-Leis.

    Ms. Judy Wasylycia-Leis (Winnipeg North Centre, NDP): Thank you, Madam Chairperson.

    I would like to thank all the presenters for this afternoon's presentations. It has been very informative and, as happened this morning, an interesting juxtaposition of views, which I think has helped us sort through some of the difficult issues.

    I'm going to come back to that in a minute, but I would like to begin by asking Megan or Susan, from the Conference of the Arts, about a situation you described in your brief that sounds rather difficult for planning purposes--that is, the three-year agreement that you are in the middle of, for $560 million a year, I think you said, which runs out at the end of this fiscal year.

    As you point out, with all the uncertainty in terms of the next prime minister and the budget process, and the delay in the budget, that puts you in a really difficult position in terms of knowing what the future holds. Maybe it's more important for us to ask the government members what their plans are to deal with the situation, but let me ask you, Megan, what would be a way to handle this difficulty right now?

    Mrs. Megan Williams: Thank you for that. I'll just clarify that the $560 million covered a three-year span.

    I want to emphasize that small arts organizations that are trying to increase their capacity have a great deal of accountability. There are many, many accountability measures in place for this funding in the government now in the wake of the problems that plagued HRDC in the way they handed out their money. There has been a lot of scrutiny and a lot of accountability applied to this funding.

    Given all the obstacles that are in the way for this particular budget and over the coming months within government, I think the best-case scenario would be for the funding to be approved for a one-year period until we're over this hump, and then a more in-depth look taken at it and have it renewed in a long-term way.

º  (1650)  

    Ms. Judy Wasylycia-Leis: Thank you for that.

    I hope members of the government are hearing the suggestion and are taking it back to the Minister of Canadian Heritage, because this sounds to me like a very unnecessary dilemma for the Canadian Conference of the Arts to be in. So we'll look forward to their response.

    To both the Conference of the Arts folks and the museums representatives, I was really glad to see your reference to the importance of museums, libraries, cultural institutions, and artists as part of community, creating community and attracting people to that community. Mostly what we hear is that people are leaving because our taxes are too high and they can get a better deal in the United States, that we're not competitive enough. I think you bring an important aspect to this whole debate that has to be heard. I'm sure Barry Lacombe is hearing it, and I hope other members of the business community are.

    Is there a way we can drive this point home more effectively, to get through to government? Is there a way to set out empirically the economic benefits of culture in the arts and museums in our society? Is there a way to talk about the contribution to the GDP? Is there a way we can show that without vibrant museums and artistic organizations, we're going to be contributing to a downturn in the Canadian economy?

    Maybe I'll start with Jann and John, and then see what time we have left. If there is time, I would like to ask Mr. Lacombe a question.

    Ms. Jann Bailey: Thanks very much, Judy, for the question.

    It's absolutely true, and I think for any of the business leaders I've dealt with in western Canada, whether it be Weyerhaeuser or MacMillan Bloedel, when they come and look at having employees move to our region, the second question in addition to the actual job itself is, what is the quality of life going to be like for me and my family? What are the cultural amenities? What are the health care benefits? What are the parks and recreation, and so on and so forth?

    There have been a number of sporadic economic impact studies done at various levels with the Canadian Museums Association, as well as individuals. I think if we did in fact put that together we would see the staggering results of the impact economically of the cultural industry on its various communities.

    But I think the biggest issue and the one on which we need to continue to hit home, over and over again, is the whole issue of quality of life and that one needs to be proud of one's history in the place in which one was born. I don't want to come to Ottawa always to see my Canadian history; I want to look at it in my local museum. I want to discover things that are happening in my western Canadian environment, in the museums I go to in those communities. So I think we also need to create that pride and energy within those communities around all the cultural organizations and study that impact, because it's there.

    Mrs. Megan Williams: I'll just recount very briefly a story that Jann Bailey told me at lunch about how her museum took in artworks from artists living in their community when it was threatened by fire a few weeks ago. That's the kind of community-based activity that is extremely important.

    Ms. Susan Annis: If I could just leave you with a couple of statistics, in terms of empiricizing, the culture sector contributes $22 billion per year to the GDP and includes a million people in the workforce. So it's significant.

    Ms. Judy Wasylycia-Leis: Could I ask Mr. Lacombe one quick question?

    The Chair: Be very quick, because there are two people who have questions.

    Ms. Judy Wasylycia-Leis: Given the fact that there were significant tax benefits in the last budget for businesses and corporations, such as the steel producers, and that there was really nothing for museums and artists, and given the fact that we're trying to balance things and make trade-offs, what would you be willing to give up to ensure that we can actually fund some of the tax measures being advocated here today that do sustain community?

    Mr. Barry Lacombe: I think that both from an economic and a social point of view, in the short run the best move is to accelerate the elimination of a capital tax. That's going to open up room. That's going to create investment, increase GDP, and provide extra money to do exactly the kinds of things you want to see undertaken. But there's one thing we've learned from the last ten years, and that is you can't reach a situation where your economic fundamentals aren't strong, because if they aren't strong and you're not continuously on guard, then a lot of the social and other things we'd like to do just can't be done.

º  (1655)  

    The Chair: Thank you.

    Next is Mr. Discepola.

    Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): I have an observation I would like to share with the Canadian Conference of the Arts. In your recommendations 6 and 7 you say that we should not only exempt $60,000 of annual copyright income, but you go so far as to say we should exempt $60,000 per annum of all artistic income. You quoted the example in Quebec. I wonder, first of all, if your organization has a rationale for why a government should exempt a particular individual's income, and I'd like to know what the success of the Quebec model was.

    Mrs. Megan Williams: We understand that there are lots of classes of citizens who do have tax breaks for various purposes, such as parents, students, and people with disabilities.

    Mr. Nick Discepola: But it's not just parents who are artists who have it. All parents have it. That's where I have a hard time—

    Mrs. Megan Williams: What we're arguing here is that artists have to make their own investment in their own research and development. It's a lengthy process that requires education, practice, and research in the case of writers. It's lengthy and costly, and there's often a long period of time before these people recoup any money. So we're looking at a way to provide them with a tax break in the year when they do recoup some money.

    When we are talking about artistic income, we can't just say copyright income, because when an artist sells a painting, they don't sell the copyright to it. So the description has to be a little bit longer than simply copyright.

    I said earlier in my remarks that this measure in Quebec has encouraged artistic activity and artists in their work there, and that's why they recently raised the ceiling from $30,000 to $60,000.

    Mr. Nick Discepola: What is the actual tangible success from that measure? That's what I'm trying to get at.

    Mrs. Megan Williams: I don't think I can answer in tangible terms.

    Mr. Nick Discepola: What are you hoping to get by introducing it for your members?

    Mrs. Megan Williams: The average income for working artists in this country is around $18,000. We're simply hoping that these people, who are at the bottom of the pay scale of workers, would be able to increase their viability as citizens and as workers in the economy.

    The Chair: Thank you.

    Mr. Peterson has one quick question. He was sharing the last minute.

    Hon. Jim Peterson (Willowdale, Lib.): Mr. Lacombe, are the steel producers continuing their efforts to have the government impose tariffs on the five types of offshore steel that are causing serious injury to Canadian producers?

    Mr. Barry Lacombe: We feel strongly that we need those tariffs. As you know, the CITT found that the Canadian industry was seriously injured by unfairly traded imports. We believe quite strongly and firmly that the tariffs should be put in place. We also believe they should be put in place as quickly as possible

    Hon. Jim Peterson: Thank you.

»  (1700)  

    The Chair: Thank you very much.

    On behalf of all committee members today, thank you very much for your presentations, preparing your briefs and getting them in so we could have them translated and distributed so early. We'll take your views into consideration.

    I am going to excuse you. Feel free to get up, but we have one piece of business to do before we continue on with the next part of our meeting.

    Thank you so much.

    I'll suspend for just one moment to let people shuffle their chairs.

»  (1700)  

---

»  (1701)  

    The Chair: Okay, we are back in session.

    What has occurred is Mr. Paquette wanted his motion not done at a future business meeting. I had ruled that because it is regarding witnesses it was in camera, because we do our future business meetings in camera, which we determined last year when we set up our rules. I'm following the rules of the committee.

    Right now you want a nominal vote, so we'll do a nominal—

[Translation]

    Mr. Pierre Paquette: Very briefly, I don't share your interpretation of what constitutes future business. Currently we are engaged in pre-budgetary consultations.

[English]

    The Chair: Yes, it is out of order right now. Mr. Paquette, you've talked. I've ruled. We're at the sustaining of—

[Translation]

    Mr. Pierre Paquette: Then I request a recorded vote.

[English]

    The Chair: Yes, we're at the sustaining of the vote so we can still get to the business. The recorded vote is to sustain the chair's ruling that we're going in camera to deal with the motion regarding witnesses as a future business meeting. We'll do it as a nominal recorded vote, please, to sustain the chair's ruling.

    (Chair's ruling sustained: yeas, 9; nays, 8)

    The Chair: It is sustained, so we will go now into our in camera meeting. I will ask people to clear the room except for those who are allowed to stay for the in camera meetings, please.

    [Proceedings continue in camera]