I call the meeting to order and invite our witnesses today to take the stand, so to speak.
The finance committee continues its hearings, as mandated by the House of Commons, on an annual basis, to consider and make reports on proposals regarding the budgetary policies of the government. This year the theme of our consultations is “Canada's place in a competitive world”.
We appreciate our witnesses being here today. We appreciate the briefs you have submitted to us already.
We'll now invite your testimony before the committee. It will be followed by questions. I think you've been notified of the format. You have only five minutes, which we don't apologize for, and it is true that your remarks will be limited to that. I will endeavour to interrupt you as little as possible. We'll leave maximum time for questions thereafter.
Thank you all for being here.
We'll begin with the National Anti-Poverty Organization. Debbie Frost is president. You have five minutes.
First, I'd like to thank you for the opportunity to participate in this consultation.
I'm the president of the National Anti-Poverty Organization, and I'm here from Saskatoon.
The National Anti-Poverty Organization is a non-profit, non-partisan organization that represents the interests of low-income people in Canada.
We would like to applaud the government for recognizing that if Canada is to have a meaningful place in the world of the future, then its citizens must prosper. I cannot emphasize enough that it is critical that this government work to ensure that all citizens prosper.
There are not two distinct groups of people living in poverty, welfare families and working families, but instead people who move from one group to the other. As well, many families listed on the welfare roles also receive some of their income from work.
We are going to emphasize a number of key points today, as we know that many of our national and local partners will also be providing important input into your deliberations.
People who rely on welfare in Canada are not just falling behind, they're also falling into despair and hopelessness. The cuts to and reforms of the welfare systems in Canada have created unprecedented suffering and have reduced mobility for both recipients and low-wage workers, persons with disabilities, and single mothers who fall into the welfare trap that they have little hope of escaping from.
For many low-wage workers in Canada, simply suffering from a serious bout of the flu is enough for them to lose their jobs, fall behind on the rent, lose their housing, become homeless, and end up on the welfare system. That is going to work against them returning to the workforce by providing an income that does not allow them to obtain and maintain secure housing, have enough food to eat without lining up at the food bank or soup kitchens, or provide the absolute necessities for their children to participate in school.
For many people, obtaining the basic necessities becomes a consuming daily struggle. Increasingly, people who fall onto welfare are staying longer and are unable to bounce back into the workforce. Canada has always been proud of and enjoyed a high level of mobility out of poverty. With the changes to the EI system, the increases in precarious employment, and the reduction in the real benefits that welfare systems provide, we have reduced mobility and have created a welfare trap.
We take exception with this government's belief that citizens need appropriate incentives to work and save. Speaking for people living in poverty, including those who fall into welfare, we know that the number one goal that is close to all recipients is to obtain a secure job that will allow them to obtain the basic necessities for themselves and their families. We believe that citizens need supports to go to work.
At NAPO we have just started to work on what we are calling “unclaimed benefits”. We are very concerned that most disadvantaged citizens are not receiving the government benefits they are entitled to. We don't feel this is fair.
We are hoping that your government will support our work in two key ways. First, we believe the government needs to provide financial contributions toward groups such as ours to provide tools and workshops for front-line workers. Secondly, we would like government officials from the various departments to work with us in simplifying the process of applying for and obtaining benefits.
Finally, we are happy that the government is interested in citizens saving for the future. This is an area the federal government could support, with funding for financial literacy programming and regulations against predatory lending, as well as ensuring that the banks are providing access to services without excess fees.
Let me make this very quick.
Members of the committee, thank you for the opportunity to appear as part of your pre-budget consultations. I'm here today to make a case for reducing the tax burden of the ethanol and biodiesel industry to a level that is competitive with that of other countries, most notably the United States. In addition to creating new economic opportunities by fostering the growth of the renewal fuels industry, these tax cuts would provide substantial benefits to primary agricultural producers and reduce greenhouse gas emissions in the transportation sector.
Before going any further, allow me to say a few quick words about our industry and our association. The Canadian Renewable Fuels Association represents a full-value chain for both the ethanol and biodiesel industry. Our industry is relatively new in Canada, with only 575 million litres of ethanol production today and 100 million litres of biodiesel production, but the industry is quite mature elsewhere in the world, including the United States, Brazil, and western Europe. All around the globe countries are rapidly expanding their production capacity for renewables as a way of reducing greenhouse gas emissions, expanding markets for agricultural production, and enhancing energy security.
During the last federal election the Conservative Party of Canada committed to a 5% average renewable content in gasoline and diesel fuel by 2010. This commitment was also advanced by two of the federal opposition parties and is consistent with policies of a number of provincial governments. In speaking about this commitment to increase the use of renewable fuels, the government has consistently spoken about the benefits associated with producing these renewable fuels domestically: benefits for agriculture, benefits for rural communities, benefits for the environment, and benefits for consumers.
It is relatively straightforward for the government to meet its commitment to require renewable content. Existing legislation allows for such a regulation to be implemented quite easily. However, to have the production of these fuels take place domestically in a country whose markets are integrated with a major established renewable fuels producer is more challenging.
In order to domestically produce ethanol and biodiesel needed for the 5% requirement, we require competitive tax rates for the production and sale of renewable fuels. Canadian producers cannot compete with producers in neighbouring jurisdictions that pay tax rates that are two to four times lower than those paid in Canada.
In the United States, blender tax credits for ethanol are the equivalent to 15¢ a litre, and for biodiesel they are 30¢ per litre. In addition to these blender tax credits, there are income tax programs for small producers and commodity inputs. These are not short-term initiatives to spark the growth of the U.S. industry. Rather, they are stable long-term tax policies designed to enhance energy security, reduce greenhouse gas emissions, and reduce the need for farm income support payments.
It is important to note that Canada has a number of natural advantages in its ability to produce ethanol and biodiesel. It is one of the world's largest agricultural exporters and has vast untapped pools of agricultural commodities like wheat and canola that are currently shipped abroad for processing. For example, we currently export over 70% of our wheat production for processing abroad. That's over 15 million tonnes, or enough to produce five billion litres of ethanol, twice the amount required for the government's 5% commitment.
My point is simply this. We're not looking to the government to mask some inherent inefficiency in the production of ethanol and biodiesel. We're asking the government to implement a series of tax credits that parallel successful tax policies that have existed in the United States since the 1970s.
I've tabled a series of charts that outline what these tax cuts would look like and what the associated costs are. I'd be happy in the question and answer period to go through some of the benefits as well, because I think it's important that we look not only at the costs but at the benefits as well.
Very briefly, if you look at the number of jobs and economic activity, you're talking in excess of 9,000 jobs and $1.8 billion in annual economic activity, which is really unprecedented and unparalleled in terms of the scope of what it could mean for rural Canada, and it could potentially offset some expenditures in agricultural support payments, as well as in greenhouse gas emission reduction programs.
With that, I'll move on. Thank you.
Thanks, Chair. I'm sorry that President Georgetti couldn't be here.
Because time is short, I'll try to speak very briefly to two or three key points.
The first point we'd like to make is that we would hope that there will be some sort of public process to look at the reductions in expenditures flowing out of program review. As we all know, there was a commitment in the last budget that there would be $1 billion in spending cuts, some of the fiscal room that was being provided by the previous government through expenditure review. Frankly, the rumour mill I hear was talking about very large cuts in all kinds of grants and contribution programs, some to areas that we would see as very important areas of activity by the federal government.
I ask you, if you cast your minds back to when the Mulroney government came into power, there was a major review of government spending that was chaired by Mr. Nielsen. I think it's quite appropriate for a new government to scrutinize areas of government spending, the need for focus, but I think there is a need for public input in the results of that process as it unfolds.
The second point I'd like to make is with respect to the issue of corporate taxation. The CLC at the moment is very seized with the scale of the economic restructuring that's going on in our manufacturing sector in particular. We're seeing thousands of jobs lost every month in manufacturing, and it's quite serious. I think if we were to see a turndown in the resources boom, a slowdown in our economy, those jobs would not be easy to get back.
We do agree with many people in the business community who have rightly pointed to the importance of incentives for new investment in the manufacturing sector at the moment. Because of the high dollar, the reality is many companies are looking at the stark alternative of also closing down or restructuring through new investment.
However, our preferred instrument would not be another cut to the general corporate income tax rate, but much more targeted measures. I draw to your attention the recent TD economics report, “The Economists' Manifesto for Curing Ailing Canadian Productivity”. It's not that I'd endorse every word in it, but I note that Don Drummond is calling for much more targeted measures, such as an investment tax credit that would go specifically to new companies making major new investments.
The problem with cutting the general corporate tax rate is that a huge amount of the benefit goes to the energy sector and the financial sector, which really don't need it. It's of no use to companies that aren't making a profit. We feel a much more targeted measure to deal with the crisis in the manufacturing sector is needed.
I want to say a few words about the importance of the skills agenda. To be blunt, what we fear at the moment is that the federal government might be inclined to take a very narrow view of its jurisdiction in this area and withdraw from what we would see as some very important areas of programming, everything from support for apprenticeship training to literacy training to settlement programs for new immigrants. Frankly, we thought we were on the right route with the previous government, with the conclusion of labour market partnership agreements with three provinces. It was going to roll out to more. There was a lot of flexibility in there to accommodate provincial priorities.
What parliamentarians really have to bear very much in mind is that Canada has a national labour market. We're seeing skills shortages in specific parts of the country and major adjustment challenges in other parts of the country. There really is a major role for the federal government in terms of training for national skills shortages, in promoting labour mobility across Canada, credential recognition, and recognition and upgrading of the skills of recent immigrants. I would hope that in this budget we don't see a major federal withdrawal from a very important area.
I would point to the importance of the employment insurance program. We're seeing many workers at the moment who have paid into that program all their lives and made very little use of it. The scale of assistance people get from the program in cases of layoffs and plant closures now is very limited. If you want an unemployed forest worker from northern Ontario to make the trek to Alberta, frankly you don't want a program that's going bludgeon them into taking the first available job just to keep an income stream going. You really have to support people through a period of reasonable job search and enable them to move across the country if that's their choice. I hope the committee looks carefully at that as well.
I'll wind up with that.
Thank you, Mr. Chair, for the opportunity. I address you today as a member of the boards of both JDRF Canada and JDRF International.
As an organization with a proud history in Canada and a global reputation for excellence in medical research, accountability for research dollars, and strong advocacy for investments in human capital, it is our privilege to appear before you today and take our place in this committee's deliberations on Canada's place in a competitive world.
Type 1 diabetes is different from type 2, otherwise known as adult-onset diabetes. Type 2 can be treated and in most cases prevented with diet, exercise, and sometimes drugs. Juvenile or type 1 diabetes is an autoimmune disease, which means it cannot be prevented, and it is the most severe form of diabetes, striking infants, children, and young adults, leaving them insulin-dependent for life. The constant threat of developing devastating complications is unavoidable.
Type 1 diabetes is an extremely urgent public health issue in Canada. If we fail to deal with this problem now, it will only continue to worsen. Diabetes is one of the most costly chronic diseases, with a price tag of over $13 billion a year in health care costs to Canadian taxpayers. Yet Canada has one of the lowest rates of government support for diabetes research among the largest countries doing such research. If a solution can be found—and we are close to that point—then a significant portion of that cost to all Canadians will be greatly reduced and eventually eliminated.
Canada's future is dependent on ensuring our citizens are healthy. Canadian expertise in diabetes research is world-renowned. Type 1 diabetes research was very recently recognized in the Globe and Mail series of the top 10 things Canadians do best. Since the discovery of insulin more than 80 years ago by Doctors Banting and Best at the University of Toronto, Canadian researchers have continued to make outstanding advances.
The well-publicized major breakthrough in 2000 in islet cell transplantation was engineered by a Canadian team of researchers at the University of Alberta led by Dr. James Shapiro. This procedure is now known throughout the world as the Edmonton Protocol. I might say that I have heard researchers and other people in other countries who do not have a wonderful grasp of English say very clearly the words “Edmonton Protocol”.
Another major breakthrough was in 2004 when Dr. Derek Van der Kooy, with a collaborative team of researchers located all across Canada from the Atlantic to the Pacific, discovered the existence of a pancreatic precursor cell.
Since its inception, JDRF has funded over $1 billion U.S. in research around the world. Over the past ten years, JDRF International has each year funded our Canadian researchers significantly in excess of the net research funds raised in Canada. This is directly due to the achievements and excellence of Canadian researchers as demonstrated over the past 85 years. Our researchers have shown us that “Made in Canada” cure therapeutics are within reach.
JDRF has for years now been a research organization run on a business model. Our research review, funding, and monitoring processes are widely recognized as being among the best in the world. To accelerate the research agenda, JDRF has adopted a proactive, goal-driven approach to research management. At the core of this approach is our commitment to quicken the pace of translating basic scientific discoveries into clinical applications called cure therapeutics. We identify gaps in research, fill those gaps by creating a pipeline of therapeutic candidates for Phase 1 clinical trials, and aggressively fund those innovative, high-risk/high-reward research projects. JDRF demands accountability, measuring progress in months, not years.
We propose a unique, innovative, and focused research partnership with the Government of Canada. JDRF is asking the government to specifically fund research for type 1 diabetes by dedicating $25 million a year over the next five years. This funding should be directly targeted towards JDRF-identified priorities, which have been carefully designed to produce tangible results over that same five years. This will support Canadian researchers in their quest, and in turn Canada's international competitiveness, for generations to come. To do this, direct investments in our country's human capital are vital, to create synergistic economic returns across the board.
I'd be happy to answer anything at Q and A. Thank you.
My name is Bruce Miller and I am the Chief Administrator of the Police Association of Ontario. I was a police officer for over 20 years before accepting my current responsibilities.
I apologize to the francophone members of the committee, because I will be making my presentation in English.
The Police Association of Ontario, or PAO, is a professional organization representing over 30,000 police and civilian members from every municipal association and the Ontario Provincial Police Association. The PAO has a history of working with government and community partners to ensure safe communities.
Safe communities are key to ensuring Canada's place in a competitive world. Canadians have a right to feel safe in their homes, on their streets, while at play, and in their schools. Safe communities create trust and comfort and attract investment, and can only lead to a stronger Canada.
We strongly agree with the government's position that Canada needs more front-line police officers and that many provincial and municipal police forces are seriously underfunded. We support the statement that it's time to reinvest in front-line law enforcement.
The PAO would urge the government to move forward with their commitment to put at least 2,500 new police officers on the beat in our cities and communities, and that sufficient funds be budgeted for that purpose. While appreciative that there are many demands for funding, we believe that safe communities are a priority for the citizens we serve.
Last November we commissioned a public opinion poll across Ontario from Innovative Research Group; here are some of the results: over half of Ontarians expect that they or a family member will have property stolen as a result of a break-in within the next five years; more Ontario residents than a year and a half ago feel that they or a family member will be physically attacked in the next five years; an overwhelming majority, 80%, say that gun violence is worse than in the past five years.
We've been fortunate in Ontario that two successive governments have recognized the need for additional officers and have acted to put 2,000 new officers on the street. The challenges faced by policing remain, and an additional influx of officers is urgently needed. We also need to ensure that police services are continuously rejuvenated with the front-line police personnel who possess the youth and the physical ability to do their required duties.
To their credit, the Harper government has moved forward with a number of important community safety issues. They are taking very needed steps to ensure an effective justice system. It is interesting to note that our recent Innovative Research Group poll showed that 93% of Ontarians felt that Canadian laws and eligibility for parole should be toughened to make persons convicted of crimes of violence and gun crimes more accountable for their actions. However, the bottom line is that community safety depends on an effective judicial system coupled with adequate levels of professionally trained and resourced police personnel.
We would make the following recommendations:
First, we believe that the upcoming budget is an opportunity to demonstrate the government's commitment to policing and community safety. We would urge you to make the 2,500 new officers a priority.
We would also urge that Ontario be given its share of the funding for new officers based on its population base, and that those officers be distributed to municipal police services and the Ontario Provincial Police.
Finally, we recommend that consultations take place with the federal government, the Province of Ontario, and the policing community to ensure that the goals of the program are realized.
Safe communities will attract business and growth. We need to ensure that Canadian communities continue to be safe and to prosper, and 2,500 new police officers could only add to that sense of prosperity. We would urge the government to move forward on this investment in both community safety and prosperity.
We appreciate the opportunity to participate in this important process and would like to thank all of you for your support and interest in community safety.
Thank you very much to the chairman and to all members of the committee for allowing me an opportunity to speak to you about self-employed artists making registered pension plan contributions.
My name is Paul Sharpe. I am a 55-year-old musician who has been a member of the AF of M in Canada for 40 years, and have practised as a full-time musician for approximately 38 of those 40 years. Throughout that time, I had no eligibility to enlist in a wonderful fund called AFM-EPW Fund (Canada), a registered pension plan that is of course, by its nature, under federal jurisdiction. I would only be eligible under an employee-employer relationship, and only rarely over my 38 years of performance did I enjoy that situation. That opportunity might have come through working with the CBC or as a studio musician by the session, but most of my gigs were for corporations, weddings, casinos, clubs, parties, etc., all freelance, self-employed work. I therefore feel very qualified to speak on the subject of asking that the Income Tax Act and the regulations thereto be amended to allow self-employed artists to participate, or to participate in RPPs.
Self-employment in Canada in all sectors, but particularly in the cultural sector, is on the rise and continues to be. This is a subject that I really urge you to consider, first, because it's something we can do that we don't believe entails a cost to the government. Secondly, we need to modernize the way this particular sector in Canada is engaged in the market.
What the impact on myself and generations after me would be only became apparent to me when I became employed by the AF of M. Every paycheque that I get now shows that there is a contribution made on my behalf, but up until then, 38 years of working, did not vest me in a pension plan.
This is something that, in my capacity as director of freelance services of 13,000 members of the AF of M in Canada, I would like to see made available. Our members are distributed among 28 local associations throughout Canada in each and every province and territory. They very, very much need to plan better for their retirement. This is something the government can do to assist them to improve their retirement life. Speaking with those freelance musicians across the country as I travel, there is a lot of support for this. We hope you will support it.
Once again, I thank you for the opportunity to address you. We believe this is a no-cost situation to the government, and because this is my second trip before this esteemed committee in two years, we hope we can work together to get the job done this time. Thank you very much.
Thank you, Mr. Chairman and committee members. I appreciate the opportunity to speak before you today.
To try to be consistent with the pre-budget theme the government has mandated to ensure we have the needed skills in Canada and to make certain that our tax regimes allow us to attract workers, I want to talk a little bit about an amendment to the Income Tax Act for construction workers with regard to travel and room and board. The issue I want to talk about is worker mobility and the deduction for travel and living expenses.
I'm a construction electrician, and the problem I see in the construction industry is unique in Canada. It's one where employment typically requires laid-off workers to travel beyond their metropolitan areas to obtain new or temporary jobs. However, once they go to those areas, they are unable to deduct any reasonable expenses for travel and living that are incurred with those employment opportunities. At the same time, they have to maintain their principal residences. Consequently, construction workers have a double financial burden when it comes to working.
There is some limited tax relief for employees when they're directed by their employers to work at remote or special sites, whereby payments of travel allowances are not included in their income. However, once again, no tax relief is available to the unemployed person who is seeking employment in another region or territory. The denial of such deductions has a negative effect on workers, the EI program, and Canada's economy. Without such tax relief, the worker has two choices. He or she must either incur high travel and living expenses without tax relief, or decline the job and collect EI.
Ladies and gentlemen, construction workers are proud of what they do. They want to work, but they need some incentive. They need some help from the government to do that. The construction industry is cyclical. In one region it will be booming, and in another region it will be quiet.
The rationale for policies to promote temporary inter-regional movement of labour.... In the absence of this movement there are two perverse consequences. First, labour shortages will emerge in some regions concurrent with unemployment in others. Second, unemployment causes apprentices who have not completed their training to leave the trade, thereby wasting the training investments and eroding future skill bases needed in that region. This results in workers being less productive, which is in nobody's best interest.
Ironically, if these construction workers became self-employed or independent contractors, they would be allowed to deduct many of their expenses for travelling abroad to work. It should be kept in mind that under the Income Tax Act, transport workers already enjoy tax deductions for meals and lodging. Performing artists are also entitled to a maximum of $1,000 in deductions for expenses. Therefore, as I see it, tax fairness demands that the inequity be remedied.
What I want to talk about today is that we have a solution to the problem: amend the Income Tax Act to allow construction workers to deduct costs incurred in taking temporary jobs away from home. However, those should be subject to and limited by the same requirements that apply to the special worksite exemption in the Income Tax Act. We're asking for relief, but we're also stating that there should be a mechanism in place to make sure everybody plays by the same rules.
In a nutshell, in the end, one of the key things we have to look at is the net cost-benefit. Is this going to cost the government or the citizens of Canada any money? No, it's not. Using the numbers we looked at, allowing the deduction for worker expenses, the estimated net benefit to the public purse would be approximately $95 million.
What I'm bringing forward here today would actually add money to the government's purse. This takes into consideration the expenditure for allowing the mobile worker deductions, which are approximately $71 million, less the benefits to the public purse from EI savings--because people will no longer be collecting EI--of $81 million, and adding the additional income tax generated, which would be approximately $85 million. However, the estimated net benefit does not take into consideration any additional EI contributions.
So it's just a matter of tax treatment, not location of raw materials and so on.
Okay, thank you.
My next question is for the Canadian Labour Congress. I think you have every right to be worried and to have concerns about this commitment to finding $2 billion in savings. I think “without consultation” seems to be a favourite way to do things around here.
I agree with your issue of no more tax cuts. In the previous government, we went from 28% to 21%. We had a commitment to go down to 19%, and a number of surtaxes removed, a number of CCA accelerations, and yet we have no productivity bang for the buck. In fact, our productivity numbers appear to be worse than they were in years gone by.
Can you give me the Coles notes answer, if you will, on why it appears our productivity is not being enhanced by the corporate tax treatment we've been giving corporations?
Thank you, Mr. Chairman.
I would like to thank our witnesses for their presentations.
I'm always surprised to find that particularly in the area of social affairs, which comes under provincial jurisdiction, Ottawa groups such as the Canadian Labour Congress and the National Anti-Poverty Organization have undue confidence in the federal government.
From your brief, I must of course conclude that we will not agree about the fiscal imbalance. I doubt that the FTQ agrees with the CLC's brief on this issue either.
At the end of your brief, for example, you say this:
||“The fiscal imbalance” issue should not be addressed through a withdrawal of the federal government from its major areas of direct and indirect social responsibility nor by a transfer of “tax room” to the provinces.
You also say on page 16:
||The reality of reduced fiscal capacity due to tax competition between the provinces could be countered by the provinces ceding to the federal government sole responsibility for corporate income and capital taxes, in return for a proportionate increase in federal transfers. ”
That flies in the face of the consensus that exists in Quebec. We want to have more revenues of our own so that we are not subject to fluctuations in the federal government's willingness to invest in social programs.
My question is to these two gentlemen.
You talk about a disability grant, an income support program for people with significant disabilities, a pharma-care program and a dental care program. All of this comes under provincial jurisdiction.
Of course, we do agree on other matters. However, I would ask you the following question, Mr. Jackson. What makes you think that the federal government will be more inclined to assume its responsibilities? We need only think of what happened in the case of employment insurance. As you know, probably better than I, the coverage has been reduced considerably. Now only one person in four who pays into the plan is entitled to benefits.
During the 90s, Mr. Martin slashed health care transfers unilaterally, despite the Canada Health Act. We have often heard that there must be federal standards, an education act, an so on. There are in fact even some new laws that I was not even familiar with. How can we be sure that the federal government will maintain its investments?
For example, the federal government had announced a child care program. Two years later, it was abolished because a new government came to power. Let us suppose that the program had been in force for six or seven years, that child care centres had been built, that child care providers had been hired, that the children had already been attending school and that the government would withdraw from the program. In such a case the responsibility reverts to the provinces, including Quebec.
For this reason, contrary to your proposal, we think that the only way of ensuring the sustainability of social programs is to ensure that Quebec and the other provinces can afford to take them over. In this way, the provinces are not the hostages of the federal government's decisions.
In closing, you talk about fiscal competition. Reducing the GST by one point is not a response by the federal government to North American tax competition. I would like you to explain for me, since this is implicit in your presentation, how the federal government is a better guarantee of sustainable social programs than is the Government of Quebec, for example.
First of all, just to be clear, the CLC has always taken the position that the FTQ speaks for Quebec workers on constitutional issues.
Second, in the paper on the fiscal imbalance it says very explicitly that a national framework for programs must recognize the need of Quebec, in particular, to control the levers of social development within its own jurisdiction. So we accept that Quebec has a particular need to develop programs within its own jurisdiction.
I'm not sure if I understood correctly that you want a transfer of tax room as a way of resolving the fiscal imbalance. At present, Quebec benefits quite significantly from having equal per capita transfers, as opposed to a transfer of tax room, just because the fiscal capacity of Quebec is below average. From a fiscal point of view, Quebec is much better off getting equal per capita transfers through the Canada social transfer, the health transfer, than through a transfer of tax room.
I absolutely agree with you that the provinces should know that federal transfers to the provinces for social programs are insecure. In the submission we call for at least a ten-year planning horizon so that provinces can count on their planning for that.
The other point I would make is that in many ways Quebec is different from other provinces. Through the 1990s, even when the federal government cut back its own social transfers quite significantly, Quebec was really the only province that maintained and increased social expenditures over that period, notably on the child care program and others. But while the federal government was cutting transfers, the Government of Ontario and the Government of Alberta were cutting provincial taxes, as opposed to making up for that room. So the experience of other provinces has been that there's a lot of political pressure to cut taxes rather than maintain social programs. The dynamic in Quebec has been different for that.
We are prepared to recognize that Quebec is different on many dimensions. But I think you're unwise to push for a transfer of tax room as a way of addressing the fiscal imbalance issue.
Mr. Miller, thank you very much for your presentation. I support a lot of what you're saying. I do believe that prosperity is built from a sense of security, and safe streets and communities are certainly something I'm working toward for my community.
I noticed a couple of statistics in your report that are really quite interesting. One was that we're now down to about 189 police officers per 100,000 population. You've compared that with a number of other countries, such as the United States, Australia, and England, where it gets as high as 262 officers per 100,000.
Wasn't there a number the Police Association of Ontario felt we should be at? Do you have a number you think is correct, with respect to number of officers per 100,000 people?
Thank you, Mr. Chairperson.
Thank you all for your presentations.
As we're meeting here with a very useful discussion, the Minister of Public Works and the Minister of Finance are busy announcing major cutbacks. We've just learned, in fact, that the full surplus of $13.2 billion for this past budget year is all going against the debt. There is not a penny to program spending or to meet any of the concerns we've been hearing about for years. Also, $2 billion in program cuts has been announced, covering just about every department. We're probably looking at hundreds of programs and hundreds of jobs.
Following Andrew Jackson's reminder that the government in the past had decried Liberals for daring to make these kinds of decisions without public consultation, were any of you consulted? Andrew, were you consulted? Was anyone consulted on these cuts?
No one was consulted. That's interesting. I remember sitting here and hearing nothing but outcry from members of the Conservatives, suggesting that these kinds of decisions should be brought to Parliament and that the people of Canada should have voice through their members of Parliament and that there should be some element of democracy when such dramatic decisions are made.
Let me start with you, Andrew. Although we're all interested in paying down the debt, what does this full allocation of the surplus of $13.2 billion to the debt mean in terms of some of the dire situations you have outlined, the concerns of workers, and our economy as a whole?
Right, but it points to the need for some sort of input into the budget process, especially when dollars are scarce.
Let me ask Debbie Frost, who has given a very compelling case about the depth of poverty in this country. I think by now folks around this table should see that as a national disgrace.
It must just gall you to hear how the government is making decisions, especially at a time when international studies put us at 14th out of 26 industrialized countries in terms of child poverty, and when a study has come out, just as it did this week from the Canadian Association of Social Workers, showing that poor Canadians die earlier than wealthy ones, and that poor women in Canada have only a 73% likelihood of reaching the age of 75, whereas rich Canadian women have almost an 80% chance of doing so.
What advice do you have you for us as we try to get this government to practise some sort of balance in its fiscal policies and budgeting practices?
I'm not sure I can answer this as clearly as you would like.
I think my first piece of advice--I did have some recommendations, but I forgot to read them--would be to develop a national anti-poverty program.
If there were more funding put into social programs, for instance, if we took social programs and indexed them to the cost of living, it would decrease government costs in other ways. But the federal government also has to make the provincial governments more accountable for the transfer payments, because right now the provincial governments are not accountable enough as to what they're doing with these payments.
If funding is put into social programs and it's indexed to the cost of living, people are going to be able to meet their needs, they're going to have their necessities, and they're going to be able to cover their health care costs. Right now, health care costs are being covered by the provinces because people can't afford it. So that's going to cut costs in that area.
Poverty is a big issue, and until we develop a national strategy.... Quebec has an anti-poverty strategy, and Newfoundland has one. It's something the federal government could help push towards the other provinces, with Quebec possibly being used as a model. I've seen the Quebec model and it's very good. It has a child care program. It has child tax programs. It has programs that are suitable for other people. Their people are able to live and to meet their needs, whereas in the other provinces we're not.
That's where the federal government needs to take responsibility and start pushing the provinces to be a lot more accountable as to where these social dollars are going, how they're being put into programs, and how can they be put more effectively into programs. If we do this, it's also going to provide incentives and more people will come off the system. People on the system need the supports to get off the system. With the money they get in the system now, the supports just aren't there. If we start--
My understanding--and actually I'm going to Newfoundland in a couple of weeks--is that Newfoundland is looking at some skill shortages now just because rates of mobility out of skilled work have been so high.
If you go too far the other way, what you run into--and I'll send you the reference, a recent research study that was done for Human Resources and Social Development Canada--is the fact that study pointed to, that if all you're giving a worker as a benefit is 55% of maximum insurable earnings of $38,000 or $39,000 a year, basically it's a poverty-line benefit. There is a question certainly for higher skilled workers, but really, do you run a danger of bludgeoning somebody into taking the first available job rather than taking the time to look around for better employment, to consider a move geographically?
I would suggest that we are in that situation now where--and I agree with colleagues down the table--at a time when presumably we want skill shortages in some parts of the country to be filled, in part, through labour mobility, how might we use the unemployment insurance program as a means of facilitating that movement? Really, the traditional approach has been all sticks and no carrots, if I could put it that way. We used to have mobility assistance directly under the unemployment insurance program. We used to have programs that took unemployed workers out so they could have a period of job search in another part of the country. It's worth revisiting.
I invite our committee members to resume their positions and I will welcome our second panel.
I'd also encourage those who are not participating to take their conversations to another part of the building, and we'll move on with our meeting.
Thank you, panellists, for being here. We very much appreciate your taking the time, and we look forward to your presentations.
Five minutes is what you're limited to. I'll give you an indication when one minute remains. We'll try to keep it on track so that we leave time for the exchanges that are so important in this process, which you just witnessed taking place in the previous panel.
To start us off, we have the International Association of Fire Fighters. The representative is Mr. Lee. Would you like to commence, sir?
Thank you very much, Mr. Chairman.
Once again, I appreciate the opportunity to be here today on behalf of the 20,000 professional firefighters we represent across Canada.
The national compensation benefit for the families of fallen firefighters and other public safety officers such as police is long overdue in Canada. It's a matter of equity. It's a matter of dignity for the family and it's a matter of ensuring that never again does the family of a fallen firefighter have to face financial hardship. Yes, it has happened, and it will happen again unless there is a national standard in place, a minimum amount of compensation covering all Canadian firefighters.
What currently exists is a patchwork of provisions. A small handful of these provide a meaningful benefit but the vast majority do not. What the family will receive depends upon where they live. It depends upon what province they're from or what city they live in. Should the dignity of a fallen firefighter's family depend upon which city or province they live in? I believe that an overwhelming majority of Canadians would want the federal government to establish a national benefit, and I urge you to recommend that the next budget include the funding necessary for the federal government to establish a national public safety officer compensation benefit here in Canada.
We propose that this benefit would be in the form of a one-time payment to the surviving family in the amount of $300,000. I ask you in your deliberations to recognize the essence of motion number 153, which stated that the federal government should establish a national compensation benefit for fallen firefighters. Motion 153 was adopted in the House of Commons in October 2005 by a vote of 161 to 112. We believe that was a clear indication that the majority of MPs, representing the view of the majority of Canadian citizens, believe that the government should establish this benefit.
With regard to funding for national hazardous materials and chemical, biological, radiological, and nuclear response training, five years have now passed since 9/11 and billions of dollars have been allocated toward national security here in Canada, but still not enough front-line first responders have received the training they need to respond safely and effectively to these kinds of emergencies. In 2005 the Auditor General identified problems in design aspects and in the pace of delivery of the federal government's CBRN training initiatives for the first responders. We note there have been improvements since then, but we assert that more needs to be done, and it has to be done immediately. Last year we surveyed 170 of our local affiliates to find out how many felt they had the training to respond safely and effectively to CBRN incidents. To our alarm, we found that only 19% of our local affiliates had any members trained to respond to a CBRN incident in their city. A full 75% had little or in fact no training at all.
A shocking number of Canada's first responders don't even have basic hazardous materials training. Just four days ago, fire chiefs in northern British Columbia told the meeting that fire departments throughout their region, and I quote, “were under-equipped and not prepared” and have “no protection of any kind” against hazardous materials emergencies. We propose that for $500,000 annually the federal government could solve this problem in all parts of Canada by funding the IAFF hazardous materials training for first responders program and our emergency response to terrorism operation programs.
Our programs could train 1,600 first responders every year to a recognized level of CBRN response. Our programs are not just for firefighters. They're also for police officers, paramedics, utility workers, and part-time firefighters, for example.
We can arrange a demonstration of our program for the federal government for something in the range of $8,000, but this should not be about money. It's about ensuring that all Canadians are protected against the aftermath of a CBRN incident.
I note that the public safety minister in a recent letter copied to our affiliate in Victoria, B.C., has indicated he wants to meet with the IAFF to discuss our programs, and we look forward to those discussions. In the meantime, I would urge this committee to recommend that this important national security item be reflected in the next budget.
Good afternoon, Mr. Chair. Thank you for the opportunity to speak to the committee.
The Canadian Home Builders' Association represents the Canadian residential housing industry of builders, developers, trade contractors, and the like. I'm a home builder and land developer based in Burlington, Ontario, and with me today is Richard Lind, a renovator from Bridgewater, Nova Scotia.
We hope that you've had the opportunity to read our submission. I must say that it does touch on a broad range of topics. In our introduction we note that government mandated costs, regulatory burden, and skilled labour shortages are amongst our greatest challenges. In the context of those challenges we'd like to concentrate our remarks today on four key areas: the indexation of the GST rebate for new home buyers, skilled labour shortages, infrastructure investment, and the underground economy.
Turning first to the GST indexation, I must point out that as an industry we are pleased about the reduction of the GST from 7% to 6%, and we look forward to a further cut. Certainly this is a step in the right direction. But in 1991, when the GST was introduced, the government made a commitment that the GST rebate would be indexed, and this has not occurred. Over time, since 1991, prices have risen significantly and the rebates need to keep pace with those price increases. More and more home buyers are unable to receive the rebate.
In page 10 of our brief, we have a chart that gives you an indication of the significance of the problem. It's not just in major markets, although, of course, that's where the biggest jumps are occurring. As an example, in Vancouver in 1991, only 24% of the houses being purchased were priced at above $350,000. Today, in 2006, 97.6% of the houses were priced higher than $350,000. As a reminder for the committee, the GST rebate was a sliding scale between $350,000 and $400,000, so the effective tax over that $100,000 would eventually hit 7%. Just as another example, in Ottawa--taking this municipality--in 1991, 6.1% of all homes purchased were greater than $350,000; today 47.1% are greater than $350,000.
I should note, though, that it's not only new home buyers who are affected by this, because of course resale or used homes will keep pace with new home prices. So whether people are buying new or used, they are affected by this.
With respect to skilled labour shortages, all Canadians now understand the serious nature of the problem in all sectors of our economy. Of course, our industry is no exception, and we've made representations to this committee in the past in this regard. It's time to move past research and discussion and take real action.
Our industry has developed a human resource development action plan, and in this plan it calls for the federal government to play a key leadership role and to take forward action across the country to address the development and delivery of training in the residential trades through Canada's existing education and training system. This is all about capacity building. It's time to get on with doing the work.
Of course, related to this is the need to address immigration issues as a way of helping to address skilled labour shortages in the short term. Specific actions there would include changing the language and the range of employment requirements to remove barriers to ensure that skilled residential construction trades are included in the list of temporary foreign worker programs and to resolve the issue of undocumented workers without recourse to deportation.
Thank you, Mr. Chairman and honourable members.
Intuit Canada appreciates the opportunity to present to the finance committee and to contribute to the current public debate led by the committee on what Canada needs to do in order to have a meaningful place in a very competitive world.
Intuit Canada, which is based in Edmonton and Calgary, serves approximately half of the small businesses in Canada, playing a significant role in our country's small-business agenda by reducing the paper burden through our accounting payroll and tax solutions. Our tax preparation software, such as QuickTax and ImpôtRapide, is used by millions of Canadians, supporting the Canada Revenue Agency in its objectives.
There are a number of issues you are looking at in your pre-budget consultations that are of interest to us. As you can imagine, ensuring that Canadians have the right skills to be competitive is something that is quite important to us as a technology company.
Intuit Canada has been consistently recognized as one of Canada's top employers. This is something we are proud of and work hard to maintain, given the challenge of recruiting, developing, and retaining knowledge workers in today's economy, especially in the west.
We are much more than a branch office of a multinational. We employ Canadians who are developing software solutions for Canadians, from nuts to bolts. Our Canadian innovation centre also works extensively on developing new products and technologies. We are in constant need of highly skilled workers.
We have been working with the Minister of Western Economic Diversification and the Software Human Resource Council to play our part in addressing the skills deficit. The skills deficit is an issue we are already solving with great outcomes for the public sector and taxpayers.
However, it is the fourth question in the outline for these consultations where I believe Intuit Canada can make its greatest contribution to public policy: What action should the federal government take so that it can afford measures needed to enable Canadians and businesses to prosper in the future?
Today, millions of Canadians use our solutions to prepare and file taxes and manage their businesses.
We have worked hard to become a partner of the Government of Canada, particularly with the CRA and those departments supporting small business. For example, our understanding is that the CRA's objectives are to increase the number of electronically filed returns and ensure universal access. Here's what we've done to deliver on that.
Our innovative products and services have enabled the CRA to be on track for its goal of having 70% of all returns filed electronically by 2010. In fact, 55% of all electronic returns submitted to the CRA were created using one of our products. It means that half of our 300 employees had a hand in almost nine million tax returns.
We've encouraged universal access by giving QuickTax and ImpôtRapide away to those who cannot afford it. It's free to anyone with an income of less than $25,000. Last year 170,000 Canadians took advantage of that offer.
We're pleased that the 2005 tax year was the first time that electronically filed returns exceeded paper returns. More than 12 million electronic returns were received by the CRA this year.
These results, which have strengthened service to Canadians while achieving significant government savings and improving business productivity, could not happen without private-public partnerships among our organizations. But we feel much more can be achieved by strengthening the line of sight between government and its partners. Private industry knows how to make an impact when they know the outcomes. If the 360 Canadians my company employs can have such an impact, think about the potential if we encourage more effective partnerships by clearly articulating line of sight and specific outcomes.
There is a need to encourage new and creative ways to combine the skills and knowledge of government and the technology sector to execute public policy objectives. The current government, and indeed the Clerk of the Privy Council, Kevin Lynch, have made much of the need for better delivery by the federal government.
So, for us, rather than specific tax measures, new incentives or programs, we think we need to raise the bar for public-private partnership outcomes, such as the examples that I've shared here today.
In addressing the four questions that we've laid out for consultations, this is what we think you should consider spending your money on.
We recommend that under a central leadership agency, the government undertake an examination of how a federal department agency can use partnerships with the private sector to further the delivery of federal government programs with a specific focus on outcomes.
We suggest that the scope of the work include a review of agencies and departments to identify best practices and features that characterize effective partnership.
We suggest that we provide practical suggestions as to how to dramatically expand these kinds of arrangements across the entire federal government.
We also propose that this work include both private and public sector executives with practical experience in the development and execution of public-private partnership.
Intuit Canada is ready to assist in this initiative.
I will be pleased to answer your questions.
On behalf of Canada's 71,000 chartered accountants, thank you, Mr. Chairman, for the opportunity to speak to you today.
Our analysis, comments, and recommendations are contained in the written submission, which was provided to you. We wish to highlight certain areas that we consider particularly important. These are debt reduction and reducing our debt-to-GDP ratio faster to strengthen Canada's future, and corporate tax relief to make Canada more competitive and productive.
Let me begin with the first item: strengthening Canada's future.
Despite recent surpluses, the federal debt still remains high at $500 billion. This amounts to approximately $15,500 per Canadian, which is well above the debt level of provincial governments. Lower debt would enable the government to permanently address the problem of tax rates that are uncompetitive with the U.S., our major trading partner, and with the G-7 average.
The recent trend in federal program spending also concerns us. In 2004-05, federal spending reached a record level of about $200 billion, an increase of 15.1%. Continued increases in spending at this level will threaten debt reduction and make tax relief more difficult to achieve.
Aside from a growing economy, the only reason to date that the government has been able to maintain surpluses and reduce taxes is because of low interest rates and declining debt charges. Indeed, had the government kept program spending at the rate of inflation since it began posting surpluses in 1997, we would see very different results today. The surplus for 2004-05 would be almost $45 billion, instead of the current $1.6 billion. This figure adjusts program spending since 1997 to core inflation and interest charges to declining debt. The actual federal debt would be $406 billion, down $93 billion from the 2004-05 level. And finally, the government would be only one year away—instead of seven—from meeting its debt-to-GDP ratio of 25%. With potential savings like these, we could then make Canada a more productive and competitive place in which to live and work.
Therefore we recommend that the government increase the amount to pay down the debt from $3 billion to $5 billion annually. We also recommend that government aim to reduce the debt-to-GDP ratio to 20% by or before the 2013-14 fiscal year.
The second area is creating a more competitive and productive Canada. An uncompetitive tax system is one of the biggest barriers to economic growth. Ireland is an excellent example. It has succeeded by making itself one of the most hospitable countries in the world for trade and commerce, with a corporate tax rate of 12.5%. Its GDP rate per person now ranks higher than Canada's and a full 40% higher than the European average.
What about Canada? While personal tax has remained virtually unchanged over the past decade as a percentage of budgetary revenue, corporate income tax has risen steadily. It is now 1.5% above its 10-year average. Lower corporate taxes would encourage firms to locate in Canada and spur economic activity.
Furthermore, as a recent article in The Economist pointed out, high corporate taxes also hurt individual citizens. When corporate taxes are high, workers shoulder some of the tax burden levied on companies.
It is a fallacy to think that companies bear the burden of the taxes they pay. The burden falls on real people, real citizens. In turn people save less and invest less. This results in a smaller capital stock, less capital per worker, and hence lower wages. This pattern is intensified in a global economy, where capital moves easily from high tax to low tax countries.
The C.D. Howe Institute also supports this. I quote: “Taxes on capital investments have the most powerful effect on Canada's productivity—the ability to produce more with the same resources—compared to all other taxes.”
Therefore, we recommend that the federal government immediately eliminate the corporate surtax and accelerate planned reductions to corporate tax rates. We also recommend that after this is done, the government commit to further reductions in general corporate tax rates to bring them closer to the rate for small business.
One final comment relates to compliance with our tax system and the stress it is under. In part this is due to the failure by trusts and other entities to deliver information such as T3s and T5013s to taxpayers by March 31. Over a thousand firms have recently raised significant concerns over this matter with us. The problem is, many of these slips are not getting to taxpayers until the second or third week of April and are often amended thereafter. This puts a huge burden on the filing of all returns, especially personal returns, which must be filed by April 30. I am not proposing extending the April 30 deadline. However, I am asking CRA and/or the Department of Finance to look at ways to ensure taxpayers get this information by March 31, the date in the existing law.
Mr. Chairman, this concludes our overview comments in support of our written submission. Thank you for the opportunity to speak to you today.
Thank you, Mr. Chairman.
The Canadian Teachers Federation coordinates and facilitates the sharing of ideas, knowledge and skills among its 17 provincial and territorial member organizations, which collectively represent over 215 000 teachers in primary and secondary schools across Canada.
In the brief that we presented, we decided to focus on two priorities outlined by the government, in particular. Those are, first, the promotion of measures to ensure Canadians are healthy and have the proper skills and appropriate incentives to work and save, and secondly, that Canada has the infrastructure required so that every Canadian can aspire to and achieve a high quality of life.
Our view, in particular, is that this budget should focus primarily on children and youth. We see this as the means to break a cycle that has accumulated over decades of non-discretionary expenditures that government has to make in order to redeem, rather than prevent, problems from occurring. I can refer specifically to enormous expenditures in terms of our justice system, our health care system, when measures designed to focus on prevention could have resulted and can still, for future generations, cut tremendous amounts of non-discretionary expenditures. We believe that there should be increased focus on learning initiatives at the level of government. I refer to an OECD study on page six of the English version, in which the OECD indicates that, on average, every year of education that a country adds to its citizenry accomplishments would increase per capita GDP anywhere from 4% to 7%, all other factors remaining equal.
We're particularly looking at the work the National Literacy Secretariat is doing to try to increase literacy levels in Canada. We believe that the secretariat requires additional support. We're looking at the modifications that should be made to the Copyright Act, to ensure more and easier access for students and teachers to publicly available Internet materials for which creators do not require payment. We're looking for an expanded federal role on particular elements of our population--I'm talking about aboriginal children and youth; I'm talking about immigrant and refugee children and youth. We feel that the current focus, particularly on immigrants and refugees, is on job training and language training. This is fine for adults, but there are many, many family-related issues. I think the government has indicated that family is a priority, and certainly in dealing with family issues there is much work that can be done that is not only individually applicable to the families themselves but to the collective responsibility that our country has to ensure that services are made available.
We believe that the publicly funded and regulated child care system that was embryonic in terms of development over a period of years is something that should be restored. There are multiple studies, in Europe in particular, that indicate the importance of this in terms of the learning process and in preventing problems that require heavier expenditures in the future.
Those are the areas, Chair, that we cover in our brief.
I must also express on behalf of our organization some concern about the timing of the announcement that came from the Department of Finance about the disposition of the $13 billion accumulated surplus. Regardless of the merits of that particular decision, it would seem to me that in the consultation process, which is ongoing and will be continuing for a period of months, it would have been important and interesting for government to at least listen to the stakeholders and the views they have on how that surplus should be dispensed.
I'll stop there. I would be more than happy to answer any questions that committee members may have on any aspect of our brief.
Thank you, Mr. Chairman.
The Canadian Construction Association welcomes this opportunity to present its views and recommendations. CCA is the national voice of the non-residential construction industry, representing some 20,000 individual member firms located in every region of Canada.
I guess the simplest way to demarcate the Canadian Construction Association from my colleagues from the Canadian Homebuilders' Association is perhaps simply to say that while housing starts are music to their ears, it's building permits that make our world.
Mr. Chairman, our submission and comments here today directly respond to the committee's request for specific measures to ensure a skilled and healthy workforce, a competitive economy, and state-of-the-art infrastructure--all within a prudent fiscal environment. The details are in our written brief, so I will simply highlight a few of the recommendations therein. They are grouped primarily under four main areas, and indeed most are building on announcements that were made in the previous budget. In five minutes before this committee we tend to be critical and come forward with what might be termed negative criticism. In many cases we would applaud the government for its last budget, but I don't want to take all my five minutes just to speak about what you've done, but would prefer to speak about where we think you can go further.
First of all, with respect to infrastructure investment, while the federal government has committed to impressive investments in Canada's key physical infrastructure, we are concerned that the investment timeframe is too long and will result in additional costs and further deteriorating infrastructure. We recommend that the ramping-up period, the phase-in period, for three programs in particular be accelerated by at least two to three years, so that by 2008-09 the new deal for communities will be in full swing along with the new highway and border infrastructure fund and the municipal rural infrastructure fund. We also urge the federal government to establish a minimum threshold for continuing investment in these programs, and that certainly will be part of the current discussions ongoing with the provincial and territorial governments on the fiscal imbalance where infrastructure is a key part of those discussions.
The second category is meeting Canada's human resource needs. We are facing unprecedented demand in our industry but at the same time a dwindling workforce, primarily due to an aging and retiring workforce. Our preference is to grow our workforce within Canada. We do that by promoting construction as a career of choice to youth, under-represented groups such as women and first nations peoples, and removing barriers to labour mobility so that unemployed workers can get to where the work is. We also do this by strengthening proven training systems in our industry, such as the apprenticeship system. We were very pleased with the measures announced in the last federal budget that recognize the importance of the apprenticeship training system in our industry and others, but we must go further. The current measures are restricted to red seal trades. This should be expanded as quickly as possible to all construction trades.
There are barriers to apprenticeship training built into our current employment insurance system. Removing the two-week waiting period and allowing apprentices while at school to supplement their income by working in high unemployment areas such as Alberta without risk of losing their EI eligibility would be great improvements to addressing a labour shortage and ensuring that EI does not operate as a barrier to apprenticeship. Look at measures to assist EI recipients in relocating on a temporary basis to seek employment in high demand regions of the country. Alternatively, look at tax incentives for prospective employers. We had mobility provisions in the EI some time ago. Unfortunately, those provisions only dealt with permanent relocation of EI recipients. In our industry we need a mobile workforce that can move from province to province to meet our demands, and in many cases those workers do return to their home province.
The third grouping is the need for strategic tax reform. There are a number of specific measures in the brief, and I'd like to highlight some quickly.
With respect to the small-business deduction, great strides were taken in increasing the threshold in reducing the rate, but that is perhaps one of the most underrated and underutilized tax measures, levers, that we have to increase technology integration and productivity, for who knows better where to invest in their company, in their business, to achieve greater productivity and competitiveness than the entrepreneurs themselves. And this measure when it was introduced was introduced to ensure and to provide an incentive for business owners to reinvest in their firms.
Finally, take a look at employer-provided vehicles. It is a terrible inequity that is occurring when we have the Tax Court of Canada finding for taxpayers with respect to the use of employer-provided vehicles, and CRA and Finance Canada turning a blind eye.
There are also measures in there on environmental incentives for reducing diesel emissions that we would like you to look at.
Thank you for the opportunity to express our views.
Thank you, Mr. Chairman. Good afternoon.
The Heart and Stroke Foundation of Canada is one of Canada's leading health charities, and we're pleased to be celebrating our fiftieth anniversary this year. Over those fifty years we have invested about a billion dollars in research, raised from donors twenty bucks at a time.
Thanks for inviting us to speak to you today to address some of the questions you've put to us. I want to thank you as well for a number of recent initiatives that came out of this committee, I believe. Investments in a strategy for chronic disease and healthy living couldn't have been more timely, and there were tax incentive measures in the last federal budget for children and youth involved in organized sports, and the purchase of public transit passes. In addition, there was the capital gains elimination on gifts of listed securities to charities. So we do appreciate that progress has been made.
The good news is that mortality and hospitalization rates due to cardiovascular disease have been dropping for a number of years. You have a graph in your notes. The bad news is the burden is still enormous. Heart disease and stroke represent the leading cause of death, the leading cause of hospitalizations, the leading disease-based cost driver in the economy, and the leading cause of drug prescriptions. It has become the leading cause of death world-wide. It's a huge burden on the health system, driving costs upwards, and we need to focus on prevention.
More bad news is that obesity, a major risk factor for heart disease, has increased over the past 25 years across all age groups. Our children are not only not immune; they are proving to be the most susceptible. We must ask ourselves, if obesity rates are projected to increase, will 60 become the new 70, and 30 the new 50? Rising obesity rates could have the effect of undoing much of our progress in tobacco reduction.
The increasing rate of type 2 diabetes is truly shocking. We are at risk of turning back the clock in our fight against cardiovascular disease. We're coming to you to say that we need to use the lessons learned from the tobacco control to fight this epidemic. Education is important, but it's far from sufficient. To truly tackle the obesity epidemic, a wide variety of public policy interventions are needed, including federal tax incentives and program spending measures. So I want to speak to the first question you have put to us.
The HSFC recommends that the federal government continue to utilize tax incentives to promote physical activity and healthy living. You should increase the tax credit for children and youth participating in organized sports from $500 to $1,000. You should extend the organized sports tax credit to adults. You should provide tax credits to all Canadians for participation in non-organized sports, and you should remove the GST from products that promote physical activity, such as bicycles and skates.
We also need the government to remove a disincentive that has been created by a recent federal government program. As I mentioned, health charities invest $150 million a year in health research. The federal government now pays 24 cents on the dollar to universities for every dollar that CIHR spends on health research, for the indirect costs of research, such as heating and lighting in our universities.
The federal government needs to remove the disincentive this has established against health charity-funded research--which the universities are now beginning to say they don't wish--or ask the health charities to pay it. The result will be that though we've been the leading funder of health research in this country for many years, we will have to take money from our life-saving research to fund the heating and lighting in universities. This means that the government will be competing with charities and communities that are trying to support themselves. It will hinder Canadians who are trying to lighten the load on the federal government, in terms of health research funding, by funding it themselves, and it will lead to double-taxing Canadians.
The HSFC therefore recommends that the federal government look at this program in terms of its disincentive.
You also asked us about infrastructure. HSFC recommends that the federal government allocate at least seven percent of transportation-related infrastructure toward the development of community infrastructure that promotes the use of active modes of transportation, and includes social infrastructure that facilitates physical activity, such as parks and community recreation centres, as an eligible expense under the gas tax program.
Finally, in addition to physical infrastructure, this government needs to better support data infrastructure. Health surveillance data is appallingly lacking in Canada. We cannot support health research, program development, health practice, and program evaluation with the level of health surveillance we have in this country. It's a huge issue.
Thank you very much.
Well, if that's my only choice, I'd like to see it also with the elimination of the employer multiple, which, for some reason, people believe came over with the ark. A while ago employers and employees were sharing the cost of that program. I'd like to see that first.
I'd also like to see the YBE, because it's fair to employees, particularly the employees in our industry who are working for more than one employer, and also the refund of employer over-contributions, which this committee, I understand, if not the House of Commons sitting committee on HR, have also recommended, along with the YBE.
I think a number of those go together, but the YBE makes a lot of sense. We basically have that for our CPP. So it does make a lot of sense, but we'd like to see other reforms as well, in that area.
Mr. Chair, each contractor has a different way of pricing the jobs and whether or not they include the HST or, in our case, the GST nationally in the price of their projects. So, indeed, for those who have kept the tax as a separate item, it showed up immediately on July 1 as being 14% in Nova Scotia instead of 15%.
On the extent to which other trades and suppliers and other contractors in the new home construction have been able to pass that on to the consumer, in one fashion or another it did get passed on to the consumer. The important thing is that each of those businesses does have to take a regular analysis of what its costs are and what its overheads are running at and what level of profit is feasible. So I'm sure that 1% reduction was included in those recalculations, which some businesses do on a monthly basis and others less frequently. It does go into the calculation.
Thank you very much, and thank you to all of you for your presentations.
Clearly today, at our table, we have a dichotomy, a real polarization of views. On the one hand, there's a message from business suggesting that more corporate tax breaks will actually spur the economy and the benefits will trickle down. Others, like the teachers and health professionals, and probably the firefighters, suggest that an investment by government in certain targeted areas actually can grow the economy and deal with inequities at the same time.
The problem with the business argument on the trickle-down stuff is that we haven't seen any of that happen. We've been trying corporate tax breaks for a long time. Right now we're in a situation where the corporate tax rate, relative to GDP, has dropped from about 3.2% to 1.6%, and profits are higher than ever--we have a 14.6% profit rate, the highest in the country ever. We've seen government revenue from the corporate sector drop from about 15% to 11%, whereas personal income tax is now growing from about 45% to 65%. Contrary to what Mr. Dancey and others have said, the opposite is the case. The burden has shifted to individuals, and inequities are growing.
What I think we have to do now is listen to the voices of teachers, nurses, health care professionals, trade unionists, and firefighters and say that it's time to try something else.
I'm going to start by asking Harvey and Sally how we make this case, especially given today's context, where we've just heard that millions more dollars are being cut from health research--everything you talked about, Sally, in terms of having a database that's reliable and useful--gone, millions are lost in terms of literacy, youth employment, skills development, and crime prevention. How are we ever going to build a productive economy that's competitive if we keep going in that direction?
That's the first question.
Thank you. We welcome the question.
How do we make it happen? We've been struggling with that for a while. At first, the focus on prevention and the need to invest in that was pooh-poohed, because there was no evidence that it worked. That is now profoundly untrue; there is evidence everywhere, so it's not based on lack of evidence.
Secondly, I think there's been a huge misunderstanding that people can just change their behaviour without help, that if you just excoriate people to stay in school or eat better, this will work. It won't work. The government has accepted that in certain areas, regulation and interventions and exceptions are needed. When they have done that, through a comprehensive approach, it has always worked. I guess what we're saying is, let's become evidence-informed as governments and do what obviously will work and where the downstream benefits will result in economic benefits over the longer term.
Does it take a bit of a leap of faith, because it's not going to happen in two years, it's going to happen in twenty years? Absolutely. But all the evidence is in, and it's time we accepted it and moved on.
In the four or five times that I've been before this committee, the member and I have had some conversations in this regard. I'll speak specifically to housing as a particular measure.
We believe as an industry that a way.... Well, I can give a quick anecdote. This morning when we met in a hotel, the waiter came into the room—and he knows who we are—and he said, “You know what? There are two things you guys need to worry about: putting roofs over people's heads and making people know that there is food on the table.” It's an anecdote, but it gets to the point.
With respect to housing, we've suggested that one of the major issues is that it tends to be an income problem. There are places, and we talked about Winnipeg as an example, where there are specific issues we need to deal with, where we need to build new housing. But in other parts of the country a portable housing allowance would help to deal with that and an expenditure in that regard would be an effective way of getting people good housing that is available right now. That would be an effective way of dealing with a part of the social issue happening in this country.
Thank you, Mr. Chairman. I apologize for missing your presentations, but I had to give a speech in the House on the softwood lumber treaty bill.
I will begin with the Canadian Institute of Chartered Accountants. I did look at your publication. A number of your proposals are very interesting. I want to ask you some questions. I simply want to emphasize that your presentation is biased to some extent. Take, for example, government revenues as a percentage of GDP. If we look at the various G7 countries, Canada is in the middle. Japan is at the top, followed by the United States, then Canada and Great-Britain at the same level, followed by Germany, etc. Look at G7 averages makes no sense from an economic standpoint, since no one is average. I find that argument a bit weak and unconvincing. Government revenues are used for programs spending. What we need to look at — and this is what an accountant normally does — what are the liabilities and the assets. That money is used for spending, which can be questioned, of course. However, the fact that our government revenues are low does not necessarily guarantee that productivity will increase.
To make the situation clearer, you should have indicated the various countries debt levels. The United States and Japan have lower revenues, but their debts are growing up exponentially. Down the line, that will cause problems.
As I said, I agree in part with the measures that you are proposing, in particular your suggestion that the government bring the capital cost allowance, the CCA more in line with the economic useful life of assets. I would like to hear what you have to say about that. We hear various opinions. Some people have told us that the current level is actually based on the useful life, but it should actually goes faster. I would like you to explain a bit more about what you mean when you say that the capital cost allowance should be increased.
There are a lot of questions there. Let me deal with a couple of them.
You talked about the fact that Canada's rate was about the average of the G-7. That's a fair comment on where we are right now. Look at a lot of the emerging economies around the world--where India is, and where China is--in terms of where the world's going to be five to ten years down the road. Look at what Ireland has done. That's why I talked about Ireland today. Its tax rate is 12.5%. It's markedly lower than the rates of these other countries, and it has had exponential growth. It's been a Celtic tiger, and there's no reason why we shouldn't be a northern tiger in our hemisphere right now. So that deals with the particular issue around the corporate rate.
I go back to the point that federal spending is around $200 billion, so there's a lot of money on the table. It's really just about living within your means, as I talked about earlier. Families have to live within their means. Companies have to live within their means. So it's about looking at that big expenditure. I don't disagree with the comment made earlier that what those priorities are and where that money is spent are key.
On the question about the CCA, I used to be the ADM of tax policy at the Department of Finance, so it's something that just needs updating on a regular basis. It needs to be looked at to make sure that the write-offs companies get for the assets they buy reflect the economic life of those assets. It could be around technology assets; it could be around in various degrees in various areas. It's just something that needs a regular focus to make sure that the CCA they can claim is in line with the economic life of the asset.
Thank you, Mr. Chairman.
Thank you to the presenters. We know that you went to a lot of work to put this material in front of us, and we do appreciate it very much.
Ms. Brown, one of your recommendations was for transportation infrastructure funds to be allocated to promote the active use of transportation. I just want to tell you a little story. I have a friend from Holland, and of course people in Holland bicycle almost everywhere. When she came here, she and her husband bicycled everywhere. But they ran into some snags. Our terrain is quite hilly, so there they were in the thick of traffic, labouring up hills. They also found that at certain times of the year—about eight months of the year—it was pretty damn cold on their bicycles.
So I'm just curious to know, given our topography and given our climate, what you would expect to achieve by this allocation of funds.
I want to go to Jim Lee, further to your question, Mr. Chairperson, about training for first responders in the event of a chemical or hazardous materials problem with terrorism involved, etc.
You've been at this for five years. I've written to three different ministers--John McCallum, Jim Manley, Anne McLellan. Each time, they said, “Don't worry. It's all being looked after.” Five years later it looks like we've spent $7 billion in this whole area, but nobody's really been trained in terms of what you think is needed.
You've come forward with a cost-effective proposal, $500,000 a year. Am I missing something? It just seems so logical that this should be immediately acted upon. What do we do?