This is our first panel here in Calgary, so I want to welcome the panellists. Most of you have experience in making presentations, so we're going to go with a five-minute period to allow you to present your briefs and then we're going to go to the members.
Some of the members, as you can tell, are not present. We had some problems yesterday in terms of some members not coming in because of a budget bill being debated in the House. It's supposed to come out of the House today, so some of the members had to stay behind because of that.
All of your testimony is going to be on the record, so if members want to go back and review it, they can. Other members can also review it. There's a research staff here, so everything you say will and can be held against you in committee work!
We're going to start with the people I have here. Pursuant to Standing Order 83(1) on pre-budget consultations, I'm going to start with the Calgary Chamber of Voluntary Organizations, Ms. van Kooy, for five minutes.
Thank you. I'd like to thank the chair and the committee for this opportunity to provide input regarding the government's budget priorities.
My name is Katherine van Kooy. I'm the president and CEO of the Calgary Chamber of Voluntary Organizations, otherwise known as the CCVO.
A registered charity, CCVO's purpose is to strengthen the voluntary sector. We support and are supported by more than 330 diverse non-profit member organizations, ranging from small grassroots groups to large umbrella organizations that operate in areas such as human services, arts, recreation. We also work on behalf of the broader non-profit sector in Canada and across Canada through our partnerships with organizations such as the national charity Imagine Canada and the Federation of Voluntary Sector Networks.
I'm here today in a policy leadership capacity as decisions and priorities regarding the federal budget will have a large impact on what non-profits are able to achieve in their communities.
Canada is blessed with a very large and vibrant charitable non-profit sector that contributes to our communities in areas such as health, education, sports and recreation, environment, arts and culture, and services for individuals such as seniors, children, and immigrants. These organizations play an essential role in building and maintaining healthy communities.
The core recommendation, which was outlined in our submission, is the need for a national charities strategy to provide a more comprehensive approach to ensure that Canada's charities continue to be able to meet the needs of their communities.
In our pre-budget submission, we identified four key components of the strategy: reforms to the administration of grants and contributions; sustainable funding for the collection of mission-critical sector data; further encouragement for increased private donations through adjusting the federal charitable tax credit to a single rate of 29% for all charitable donations to the maximum allowable income level; and an exploration of alternative methods for debt financing for non-profits that go beyond the current tax measures to encourage donations.
Given the time constraints, I'll speak briefly to the need for a strategy and then focus my comments on the first two components.
A national charities strategy would be a more comprehensive approach to strengthening the non-profit/voluntary sector for the benefit of all Canadians, and there are precedents in terms of other actions the government has taken for this national approach, including the science and technology strategy, which was announced previously.
Such a strategy would recognize the priority that is given by Canadians to the work of charities and non-profit organizations in their communities, as reflected by their level of financial and personal volunteer support. More than 22 million Canadians donate to charities and close to 12 million Canadians volunteer two billion hours of time to community-based organizations.
The first component of the strategy is for the government to sustain its commitment to implementing the recommendations of the blue ribbon panel on grants and contributions. That panel found that the administration of federal grants and contribution programs, which are how most charities and non-profits receive federal government funding, impose significant burdens on the organizations that partner with government through these programs, taking scarce resources away from delivering community-based services.
I chair a committee of Imagine Canada members that's monitoring the implementation of the panel's recommendations. We applaud the government for accepting the recommendations made by the panel and recognize the work that's being done by Treasury Board and the lead departments in implementing these recommendations.
However, the major changes required to streamline and coordinate processes across government require sustained political and administrative commitments. These changes within government will enable charities and non-profit organizations to operate more efficiently, making the best use of government investments as well as donor contributions.
The second component of the national charities strategies that I'll speak to today is the need for sustainable funding to collect essential data about and for the charitable and non-profit sector.
The Canada survey on giving, volunteering and participating, and related satellite accounts compiled by Statistics Canada are among the few sources of data about the non-profit and voluntary sector. This data provides a consistent national information base, which is essential to understanding the sector. It's the only reliable source of information about Canadians' commitments of time and money to charities and non-profit organizations. This information is used extensively by individual organizations. It's a valuable source of information for governments and organizations working to strengthen the capacity of charities and non-profits to serve their communities.
As the government changes the way it supports charities, such as through enhanced tax measures, these data sources would provide vital information and a planning tool for government as well.
The Government of Canada has traditionally recognized the importance of reliable data to support the economic activity of various sectors of our economy. Collection of information about this sector is relatively recent. However, it's essential for a sector that contributed more than $25.4 billion to the GDP in 2001. Non-profits themselves are not in a position to collect this information, but they do need it, and so do the people who make decisions regarding non-profits.
It's often assumed that community-based organizations that fill essential roles throughout Canada will always be there to support individuals in overall economic activity. Unfortunately, many organizations are struggling to perform their roles and they face significant barriers to maximizing their contributions.
In the federal government's upcoming budget, we ask that the non-profit sectors' essential social and economic role be recognized and supported by a comprehensive government strategy aimed at strengthening this sector.
Thank you for the opportunity to speak to our submission. I welcome any questions.
Good morning. I want to start by thanking you for this opportunity to speak to you and by welcoming you to Calgary.
The first temptation, when looking at the Canadian tax system, is to debate how the government should collect taxes or how much every individual or business should contribute to the system. I believe it is more important to discuss and understand the fundamental reasons that justify our tax system. In other words, why does government collect taxes?
Regardless of the jurisdiction, most Canadians will probably admit that health care, education, infrastructure, the environment, security, sovereignty, justice, and heritage and culture constitute the essential domains for which government should collect taxes. The challenge for political leaders, I believe, is to support these domains by meeting financial obligations for current and past commitments while recognizing and investing in national strategic opportunities for Canada's future.
In my view, Arctic Canada is definitely one of the latter. It is a strategic opportunity, and the federal government has a responsibility to enhance the north.
Baba Dioum, a Senegalese conservationist, said, “In the end, we will conserve only what we love. We love only what we understand. We will understand only what we are taught.” In this context, if we want Canadians to care about the north, it is imperative to connect them to the Arctic. In tax terms, Canadian taxpayers will understand and support federal government initiatives in the Arctic.
Our proposed Polar Interpretive Centre of Canada initiative is the perfect instrument to connect Canadians to the Arctic. It is an opportunity as well to erase northern stereotypes and to discover the new north.
To achieve its goal, the Polar Interpretive Centre of Canada is planning to use a variety of methods, such as adaptive and interactive educational programs, for different audiences from coast to coast to coast. We are also planning to provide direct, firsthand, and virtual experiences with Arctic charismatic megavertebrates, such as polar bears and seals.
We want to establish distance learning opportunities. We want to disseminate bio-science research findings to national and international audiences. We want to initiate meaningful conservation programs and to support community economic development in the Arctic.
Located at the Calgary Zoo, the Polar Interpretive Centre of Canada will benefit from the zoo's existing expertise, infrastructure, networks, and world-renowned education and conservation programs. The Polar Interpretive Centre will also directly connect with millions of on-site and virtual visitors annually.
Don't get me wrong; this is not a traditional zoo project. Our initiative is as close to being a traditional zoo as the Cirque du Soleil is to being a traditional circus. The Polar Interpretive Centre of Canada will be a platform connecting Canadians to the Arctic—its wildlife, its people, and its challenges. The Polar Interpretive Centre of Canada will be a platform stimulating Arctic awareness. This platform will be a perfect venue for Canadians to learn to conserve, love, and understand the Arctic. This platform can be the perfect instrument to communicate federal Arctic initiatives to Canadians.
We sit before you today to tell you that we have secured or are in negotiations for almost 70% of the funding for the project. We still need to raise another 5% from the private sector. We need federal funding support of 25% of the cost. We request $35 million.
The federal tax system is in place to address national and strategic issues facing Canada. The Arctic is without a doubt critical to Canada's future. Sovereignty, national resources, climate change, species at risk, and heritage and culture are just a few of the issues facing the north. Only with the federal government's support will the Polar Interpretive Centre of Canada connect Canadians to the Arctic.
Thank you. Merci.
Welcome back to Calgary, Mr. Chairman. It is nice not to have to appear before you six times this year. I look forward to one budget or two. Six certainly stretched our limits the last time we saw you.
Mr. Chairman, we live in interesting times. Some may dispute whether this is a blessing or a curse, but there is no denying that the business environment for the oil and gas activity in this country has captured public attention as one of the most reported news stories of the year: high oil prices, low natural gas prices, a high dollar, low netbacks, high profits, low drilling, high costs, low labour availability, higher royalties, and lower corporate taxes.
Canada's oil and gas producers have seen it all in the past 12 months. While each of these on its own is nothing new, it is the combination of them that has led to a very turbulent year.
Volatility is part and parcel of exploration and development. It is inherent in the nature of the commodities business. The industry has gone through cycles in the past, it is going through ups and downs now, and it will continue to cycle into the future. What is new is the volatile policy environment.
Capital is mobile, maybe more so now than ever before in the oil and gas industry. It moves where it can find the best return on investment. This is no surprise to anyone, especially as we see live examples of what's happening today interprovincially and internationally.
These movements have been and will be affected by surprises. In the last 12 months, the oil and gas sector has gone through several policy surprises, including the tax changes for income trusts, the cancellation of the accelerated capital cost allowance for oil sands while it is being extended to other parts of the economy, the proposed limitation on foreign interest deductibility, and of course, most recently, the results of the Alberta royalty review.
With this as a backdrop, in our written submission this summer we recommended that the federal government continue its broad-based tax reductions, refrain from punitive sector target measures, and consult with industry to avoid surprises before announcing new initiatives.
There are a few other recommendations in our written submission, but I won't go into them today.
However, the panel asked recently what the impact of the high dollar is on the different industries. We get asked this a lot. The effect on the oil and gas industry is not unique among Canada's exporting industries. With oil and gas prices based in U.S. dollars, a higher exchange rate means fewer Canadian dollars back to Canadian producers. As with all other exporting industries, the higher our dollar goes, the lower the price we see in Canadian dollars.
What this means is that when oil is trading at $88 U.S. a barrel with our dollar at parity, it's the same to Canadian producers as when oil was at $57 U.S. with a 65-cent dollar. Almost all of the uptick in oil prices has been eaten up by the rising exchange rate. The case with natural gas is even worse, with the double hit from the lower natural gas prices in North America and the higher exchange rate.
The cumulative impact of all these factors has put Canada at the bottom of competitiveness rankings for oil and gas investments internationally. While in the past this was somewhat mitigated by Canada's high ranking for government stability and its environmental policy certainty, the past year has caused many to question that stability.
I don't want to give you an overly negative impression. I am here to tell you that Canada can have a strong, vibrant upstream oil and gas industry, one that invests more money into the Canadian economy than any other from coast to coast and that now accounts for 14% of Canada's exports and is responsible for 80% of our trade surplus with the United States. We employ half a million Canadians across the country. We contribute to the value of pensions and RRSPs as one quarter of the share value traded on the Toronto Stock Exchange, and over $27 billion of industry revenue will find its way into government coffers in the form of royalties and taxes.
CAPP also clearly recognizes the efforts and expenditures taken by the government to address two key constraints facing most Canadian industries, including our own: those of infrastructure and human resources. Public infrastructure and people are two of the vital foundations needed for economic growth that are often overlooked until they are lacking. CAPP wants to express our appreciation for the growth in federal expenditures in infrastructure, such as Highway 63 to Fort McMurray, and in human resources in areas such as apprenticeship training and immigration. It is recognized and appreciated, and most importantly, it needs to continue and even accelerate.
Above all, what I am here to ask this panel is to continue its focus on broad-based tax reduction measures and to treat the oil and gas industry just like any other Canadian industry, fairly and equitably, whether in terms of a policy response to the high dollar or to trade concerns, or of a climate change policy, to name just a few.
Mr. Chairman, thank you for our opportunity to appear. I look forward to any questions you may have.
Good morning, welcome to Calgary, and thank you, Mr. Chairman, and members of the committee.
I'll be briefly elaborating on a presentation I submitted in August, a submission that I'm assuming you have received and reviewed. I also alert you that my colleagues in Halifax and Montreal will be delivering a similar message.
This is my first time before the committee, but since I believe so passionately about sport, its role in Canada, and its role in making Canada even better, I decided to bring this perspective forward. Secondly, we were totally forgotten about in Budget 2007 last year, so I felt it necessary to have this conversation today. Thank you for this opportunity.
Briefly, the Canadian Sport Centre is an RCAAA organization, part of a network of sports centres across this country. Every day we work with Canadian athletes and coaches who are preparing to represent Canada at the highest international level. We also connect with athletes from across Alberta, with the other centres from across the country connecting with young, developing, emerging athletes and coaches from every region of Canada: athletes from Calgary, from St. Catharines, from Burlington, from Sherbrooke, from Montreal, from Victoria, from Halifax—as I say, from coast to coast.
I'm firmly convinced of the many values and benefits that accrue to a country when sport is encouraged and supported. First of all, I believe sport inspires excellence, excellence in both doing our best and being our best. That's why I think we need to have a collective focus on allowing our athletes to be excellent. It shows the world that we can compete and be the best.
But perhaps more important than the medal itself is what the medal does. I think we are all inspired by and enjoy watching and being associated with people who are among the best in their chosen field. The pursuit of excellence in itself is a very worthy goal, but it does take a long-term commitment and lots of support over a long period of time. I think Canadians want our athletes to do well and perform well, and they want to see them on the international podium.
As I said, it's what the medal does. I think the medal creates heroes and role models for Canadians, especially for our youth. I think the medal changes people. It changes our attitudes; new behaviours are formed. And people of all ages are inspired and stimulated to get involved, and not necessarily just in sport. I'd like to think our country is unified when the flag flies and O Canada is heard at international events. Our mental health is improved when we celebrate Canadian achievement. I think competing and winning internationally shows Canada that we are a player on the world stage.
Also, I believe involvement in sport develops many other skills that are transferable to the workplace and make us a much more productive society. I think if you were to recall times when Canadians were smiling all at the same time, I contend that most of those examples would be sport related. Whether they're the double gold medals from the 2002 Olympics, whether they're speed skaters like Catriona LeMay Doan or Marc Gagnon, I think those are examples that would have the country inspired at any given moment.
I think there is a need for new investment in sport as it is a public good. It's not a direct benefit to a select few that we're talking about. I think it's an indirect benefit for all Canadians. The outcome is that the taxpayer investment contributes to a public good—a better place to live, a better community, a more active and healthy population, especially in our youth.
Specifically on the sports side, on the winter side we're doing very well. Our performances over the last several Olympic Games have been very good. We're currently second in the world on the winter side. Though it's a fragile position, I think we'll do better in 2010 in both the Olympics and the Paralympics side.
My concern today is on the summer side; it's a totally different story. We're trending in the wrong direction. From a medal standpoint, we've gone from 22 to 14 to 12—obviously not the right direction. It makes no sense to me that we have two different types of athletes in this country, winter and summer, depending on the season in which they choose to compete for Canada.
On the summer side, we're the lowest of the G-8 countries, and we're in the bottom 25% of the G-20 countries when it comes to investment in sport.
For my last comments, I'd like to say that in my August 15 submission I also suggested some investment in infrastructure at Canada Olympic Park. I'd like to just thank the committee and the government for their support. That's been achieved, and we appreciate it very much.
What I ask today is that the committee draft a recommendation to the Minister of Finance. The substance of that recommendation is that the Government of Canada invest $30 million annually—that's basically one dollar per Canadian per year—to implement Canada's summer sport program called the Road to Excellence.
Thank you again, and I look forward to speaking with the committee and entertaining any questions you may have.
Thank you very much, Mr. Chair and committee members. Welcome. It's good to see you.
I am here from Winnipeg, where Red River is based, and it's my great pleasure to be here to present about what's going on in colleges, mine in particular.
My presentation will focus on three areas. Innovation is number one and where the primary focus will be, number two is institutional renewal, and number three is student access.
On the innovation side over the last few years, colleges and technical institutes have been embarking on a greater degree of applied research and are working closely with industry. We've always had strong partnerships with industry to do training, but what has emerged over the last few years in both colleges and technical institutes is a greater degree of partnership with industry to do things like applied research, innovation, and, ultimately, commercialization. This is something that we all know is important to the Canadian economy—diversifying, innovating—and we believe that colleges have been underutilized in the realm of research. Our approach is very applied, hands-on, and very pragmatic.
For that reason, we think there are some things that can be done in the tax system that can help to inspire more industry and college partnerships. The focus here today is on the SR and ED program, which is the scientific research and experimental development program. We would like to see the program sustained, first of all, but also expanded. There are opportunities to grow this program. It's already been hugely successful, but more can be done. We would like to ensure that industry contributions within such programs—those provided by CFI, which is the Canada Foundation for Innovation—are explicitly eligible for SR and ED treatment. There is some confusion as to whether the industry contribution that comes as part of a CFI-funded research initiative is eligible for SR and ED treatment.
Number three, we'd like to see the SR and ED potential for a top-up incentive for companies who work in partnership with colleges. We have a tremendous resource here of colleges—150 colleges across Canada in 500 different communities. We think we can further leverage research and innovation activity, and that can be done through a top-up incentive for companies that work closely with colleges.
We would also like to see the opportunity for individuals who emerge from our colleges and technical institutes, who have had that very applied, hands-on, pragmatic training, to start their own businesses, and there may be opportunities to work with colleges to do things such as tax holidays for young entrepreneurs who have their college diploma and want to start their own businesses. Given the strong linkages between industry and community colleges in Canada, we want to continue to support and enhance college involvement in applied research. Page 204 of the 2007 budget cites a project that relates to my institution, and we'd like to see that continued and expanded. That's cited in the briefing document you have.
Finally, on SR and ED, we'd like to see SR and ED expanded to include relevant commercialization activities and work outside of Canada that will ultimately benefit the Canadian economy. We recognize that a lot of the partnerships we're involved in are global, and we believe projects that are global in nature should still be eligible for SR and ED treatment.
I wanted to talk briefly about institutional renewal. Many of our colleges across Canada were built in the 1960s or before, and often to a great extent with federal funds. The infrastructure is in decline in many institutions, and we see an opportunity to reinvest. A couple of ways the tax system might assist us is that the Excise Tax Act could be changed to allow a 100% GST rebate for public post-secondary institutions. There already is a proportion rebated back, but we see the opportunity for a full rebate back that can then be returned to institutions for such things as institutional capital renewal.
This is something we've said many times, but we continue to believe that the separation of post-secondary funding from the Canada social transfer and the creation of a dedicated post-secondary education transfer fund is important for us. Currently education falls into the CST—it's not separated—and there are competing challenges, for instance, related to health, that often take precedence. We'd like to see that as a separate transfer to the provinces on behalf of post-secondary institutions.
Finally, a quick reference to student access, which is increasingly important for us. We see the opportunity to revamp the Canada student loan program to expand the current needs-based grant allocation from one year to two years for students from low-income families and underrepresented groups. We don't have nearly the participation in post-secondary education, either at the university or college level, that we need for the innovation that we need in society, and an opportunity to move from one year to two years would be important there.
Introducing a needs-based allocation process geared to assisting middle-income families.... Currently the cut-off is such that even middle-income families can't afford to send their young people off to post-secondary. We would like to see some changes around the student loan program and then a renewal of the Canada millennium scholarship program, or, by another name, introducing a similar program that will continue to meet the needs of students on a needs-based grant. It's been a successful program, and we would like to see it, or a similar program, continued.
That's my presentation, Mr. Chair. Thank you very much for the opportunity.
Thank you, Mr. Chairman.
Thank you all for being here this morning.
I am going to continue with Mr. Alvarez from the Canadian Association of Petroleum Producers, because a number of statements and visions are different for the petroleum industry.
During your presentation—and I read this in your brief—you stated on several occasions that you wanted to be treated like any other industry. You explained to us that capital is mobile and that industries can obviously invest elsewhere. While it is true that capital is mobile, the oil, as such, is not, since it is concentrated in specific places. At present, major investments are being made in certain regions of Canada, primarily in Alberta, naturally, and these investments, among other things, are the reason why you are facing such high development costs.
The other thing that really surprised me when you talked about being like any other industry is that for years, petroleum companies, namely those developing the oil sands, received preferential treatment: the accelerated capital cost allowance was in place for years, and there was the tax treatment for royalties that was modified and that favoured oil companies over mining companies. During all of those years spent developing the oil sands to make them profitable, you asked for special treatment.
But now that the oil sands are profitable and making money—we see the huge corporate profits—you are asking to be treated like everyone else. To me there seems to be an imbalance there, and as a society, it would be normal to ask oil companies to bear a portion of the environmental costs resulting from both the development and extraction of the resource rather than only when it is ultimately used, because greenhouse gases are essentially produced through the combustion of oil or natural gas.
As an industry, are you prepared to bear the burden of the environmental damage caused by petroleum development? For example, if an industry causes a spill, accidentally or otherwise, should it be responsible for the consequences?
You have asked several questions; I will do my best to try and answer them. I am going to give you two or three examples. Why are we afraid? Why do we see a threat of discrimination?
There are two very recent examples. First of all, budget 2000 treated our sector very differently from other sectors of the economy. We paid much higher taxes than other sectors of the economy for six years. That was a very significant form of discrimination.
Moreover, in terms of climate change, we saw reduction targets that might have been twice as high for us as they were for other sectors of the economy. We have been ready to launch a program since 2002. When Mr. Chrétien was Prime Minister, there was a program slated to begin in 2008. We reworked a program with Mr. Dion, when he was Minister of the Environment. We were ready to begin. We are also ready to begin with the new government. We are prepared to pay our share for our emissions. However, we do not want to pay for others' emissions. We are prepared to begin.
What's more, this has started in Alberta. Since July 1, 2007, Alberta has had a carbon tax, like the one in Quebec.
The support we get right now from the federal government at our centre for high-performance sport is about a third of our total cost. But particularly with the recent investment the federal government has made, along with sponsors from the Vancouver organizing committee—again, that's specific to the winter side—I think we've seen tremendous improvements in our Canadian athletes.
As I tried to indicate, looking at it from a medals standpoint, we have consistently gone up. We were third in 2006; we were second last year. The intent is to be number one in 2010. As I said, that's a little fragile, but I'm confident we'll be there.
The bigger issue is on the summer side, where we haven't had any new investment, and I think it shows. Not that there's always a direct correlation between investment and results, but there is a pretty good correlation there. On the summer side, it's just going down.
That's why the focus today is not necessarily on the winter side; it's more on the summer side.
I wanted to thank the committee for appearing here. I wish you had more time. I wish you had time to see around the city. I'm sorry that it's snowing out there. You might get the notion that the streets really aren't paved with gold, that it's very much of a free enterprise society that we live in here. I know that comes as a very strange thing to some on the committee.
One of the things I think it's important to know is how it all works together somewhat differently from perhaps other parts of the country. I think of Ms. van Kooy's volunteer organizations, the amount of support they get, for example, from our leading industries, the oil industry. I think we probably have the highest per capita of volunteer cooperation and charitable donations of any jurisdiction in Canada.
I look, too, at the numbers of our employees who are employed in the oil industry and spin-off industries, for example. I look at the benefits out of all our organizations as a result of this, like the sports centre, like CODA, like the zoo. And it's simply a different way of looking at things that we like to leave some of this in the hands of the people who create the wealth so that they can decide where they want it spent as well as to funnel it through bureaucracies.
I had a question here, but it's dragged out. I just want to get that on the record. We don't always do things the same way out here, but we manage to have a pretty good quality of life as a result of it.
Who might want to comment further on that sort of thing and how we develop that? There are those of us who sometimes take offence at the shots at our industries here and how we work and the contributions they make to the rest of the country. We don't have an accelerated capital cost allowance any longer, for example.
I would like to ask Mr. Alvarez what the impact of that has been and what he expects it to be. I personally didn't think it was a very good idea to lose it.
There are two ways to look at it. One way is from an activity level. We've seen natural gas drilling drop from 23,000 wells to 15,000 wells. We will probably see somewhere between a 5% and 10% reduction in natural gas production this year—not exploration, production. Those are big numbers.
More importantly, where you've seen it is the value of RRSPs and everything else. Over the last 12 months the performance of the international oil and gas stocks has been on a tear and has grown very, very significantly. In Canada, at best, it's been flat. In many sectors, and Mr. Andrew can talk to you about that later, it's been negative.
So we have not enjoyed, as a country, that uptake in prosperity that a lot of the larger international firms have, and that flows through not just in production, as I said. That's the value of the Alberta heritage fund, it's the value of RRSPs, it's the value of pension funds—all of those have a huge weighting in the oil and gas industry, because we're 25% of the national economy now. We can't take any more hits.
A couple of you spoke about the scientific research and experimental development tax credit. We've had a lot of discussion about this as a committee. Obviously, our industry committee came forward with some pretty solid recommendations, and a number of them were put into the 2007 budget.
The finance committee itself actually, for good reason, I think, decided to abstain on that vote of endorsing it from a finance committee perspective based on the fact that moving on the scientific research and experimental development tax credit without making sure you're going to do it properly is a concern for us. If we're going to do it, we want to make sure it's done properly and has the maximum amount of impact. That's why the Minister of Finance actually started the panel on this, to discuss it to make sure that it does comes forward in a positive way.
I noted, Mr. Alvarez, that you did use a couple of words that I think are pretty important, and I'd like you to expand on that; the words are “ transparency” and “clarity”. It would be good to get your thoughts on that, because we are just in the middle of trying to move forward on this, and it would certainly be helpful to get your thoughts.
I think it's all about the outreach component of our program. We will definitely have education programs that will talk about the Arctic and raise the issue of the Arctic, but those programs will not only be delivered in Calgary. They will be available for all of the institution members of the Canadian Association of Zoos and Aquariums, which reach 11 million visitors per year. The same program or an adapted program will be available and will be given to the Aquarium de Québec or the Toronto Zoo or the Vancouver Aquarium. We need to build those programs that will be available.
We also want to disseminate all the bio-research that is coming from the Arctic. In the throne speech, there was an initiative to talk about an institute to build a new Arctic research facility, but the research that will come out of this institute will definitely be published in peer-reviewed journals. We need to find a way, and it's one of the mandates of the Polar Interpretive Centre to take the abstracts coming from those peer-reviewed research journals and make them available, to translate them in such a way that they will be accessible, for Canadians, for schools, and for kids.
We need to talk about the Arctic. We need to make sure that Canadians will connect and will be aware of what's going on, so that they will create a sense of ownership of the Arctic and support the federal government.
I can go on and talk about the conservation initiatives that we want to—
Good morning to the panellists. We're here in the second part of the first panel here in Calgary.
I'm going to allow you five-minute time intervals to present your briefs or memoirs, to make your opening statements. Then the members will be asking questions.
As you can see, there are not too many members around the table. That's because we had some problems getting in yesterday. Some of the members got snowed in or snowed out, whichever expression you want to use. We also had some other problems: there's a budget bill going on, and the same committee is responsible for that budget bill. There are problems in planning by the Conservatives, but we're not going to get partisan.
In case any of you want to swear, you cannot swear, but to comfort with respect to your testimony, everything you say will be recorded. All your testimony is going to be on record for all the members to look up and review; everything is on record.
We have somebody filming. To whoever is going to be the first presenter—I think it's going to be Mr. Andrew—he'll be filming you for the first minute. Don't feel the pressure; it's just a camera.
Let's get started. From the Coalition of Canadian Energy Trusts, we have Mr. Andrew.
Go ahead, for five minutes.
Thank you very much, and thank you to the members of the committee.
My name is Bill Andrew. I'm the president and CEO of Penn West Energy Trust, and I'm presenting here as co-chair of the Coalition of Canadian Energy Trusts.
Over the past year, many members of our coalition have been in front of you on a number of occasions. We've also had the opportunity to meet privately with committee members and the committee as a whole, in the hope that we could influence some change to the federal government's decision to tax income trusts.
I note that Mr. Pallister, the chair of the Standing Committee on Finance, is from Whitecourt. Our company, Penn West, conducts a lot of business in Mr. Pallister's riding. We employ a total of 1,100 employees in western Canada, 75 of whom live in and work around Whitecourt and 600 of whom drive trucks made in the Golden Horseshoe area of Ontario.
Our ability to do business and to sustain these jobs has been significantly challenged since October 31, 2006, due to the downward pressure on our unit price caused by the reaction to the government's decision to change the rules regarding income trust taxation. I'm sharing this with you not to tug at your heartstrings but to bring home a story that is being played out in ridings across western Canada among people living with the consequences of your government's decision.
Mr. Chair, the oil and gas sector brings significant benefits and tax revenues to towns and rural areas throughout western Canada, towns and rural areas that are home to the hardworking Canadians the government loves to single out for recognition. The actions of this government have significantly reduced the ability of energy trusts to access capital and are putting many energy trusts firmly in the sights of foreign interests. It follows that these actions, which replaced a made-in-Canada solution that fit our mature oil and gas asset base, and the potential fire sale of these assets, clearly cannot be in the best interests of Canadians.
The federal government has asked us to speak today on the tax system needs for a prosperous future. We'd like to reiterate one more time the Coalition of Canadian Energy Trusts' main points regarding the need for a continuation of the income trust structure, which fits the energy industry reality in Canada.
Firstly, we believe it is the responsibility of government to formulate policies in a transparent manner. We are dismayed and continue to be dismayed at the government's continued refusal to provide documentation and evidence concerning how the Department of Finance arrived at the decision to implement the tax fairness plan.
Secondly, as expert witnesses at the finance committee's hearings have testified, the Conservatives' one-size-fits-all approach to the income trust decision was not the most appropriate model for the Canadian economy. Many witnesses have cited the need to consider sector-specific exemptions to the policy. We continue to believe there's a strong case for this made-in-Canada solution, which would keep our energy assets in the hands of Canadians and provide options for accessing capital to companies working to extend the economic life of western Canada's energy industry.
Thirdly, the federal government has “unlevelled” the playing field. We believe the corporate tax model should be competitive with those in other countries. This is one of the reasons for our objection to the October 31, 2006, decision. Contrary to the government's assertions in the tax fairness plan, oil and gas exploration businesses and development and production businesses do continue to qualify for similar treatment in the U.S. In fact, since the Halloween announcement, the size of the U.S. MLP sector has grown dramatically. The sharp devaluation of the energy trust sector since October 31 has imposed a significant cost of capital disadvantage to Canadian entities relative to our U.S. counterparts. This puts the entire sector at risk of increased foreign ownership of Canada's energy resources.
Fourthly, from an investor's point of view, there has been a significant and detrimental effect on the growing population of Canadian seniors, who had come to rely on revenues from income trusts as a legitimate income stream. These investment decisions were made in good faith, based on a promise made by Canada's current Prime Minister. The Conservative government's decision not to keep this election promise betrayed our investors and caused incalculable damage to their long-term fiscal well-being and to Canada's financial reputation on the world stage.
In conclusion, the Coalition of Canadian Energy Trusts again urges the Standing Committee on Finance to revisit the recommendations that emerged from the committee's investigation into the income trust decision, namely, to extend the period from four to ten years for all entities currently operating as income trusts, and, secondly, to consider sector-specific permanent exemptions from the policy, based on precedents being set overseas and as in the United States, where they've done so through the MLP structure in the energy sector.
Thank you very much.
I'd like to thank the chairman and the committee for this opportunity to speak to you this morning. My name is Gordon Tait, and I'm a chartered accountant with Meyers Norris Penny.
I am here to address the circumstances of a small, highly productive, community-minded minority here in Canada known as Hutterites. Our firm represents over 300 of the 320 Hutterite colonies in Canada, and we have done so for over 45 years. We are here to ask for your support for amendments to section 143 of the Income Tax Act, which contains the provisions the Hutterite colonies are taxed under.
Specifically, we are asking that Hutterites, like other Canadian farms, be permitted to allocate a portion of their taxable income to members under the age of 18 who are actively involved in their business.
A Hutterite colony is a diversified grain and livestock operation. Colonies consist of 15 to 20 families and range in size from 60 to 150 people or more. As the colony grows in population, it will branch out or split, and it will purchase a new farm site and construct various agricultural and personal buildings and establish a new congregation. With the cost of approximately $15 million to $20 million for a new colony, we can be assured that any tax savings resulting from this request will be reinvested back into our rural economy.
There are approximately 30,000 Hutterites in the 320 colonies located across the west. The Hutterite religion is a Christian religion, and the members' fundamental belief is in the community of goods. The colony members share all things common, and they take a vow of poverty. Contrary to popular belief, Hutterite colonies are not self-sufficient. As does any other agricultural business, they require and purchase many goods and services in their local communities, including fertilizers, chemicals, feed, farm machinery and equipment, and vehicles.
Colonies are significant enterprises, with annual operating and capital expenditures of $3 million to $5 million per colony. That is about a $1.5 billion direct impact annually, likely helping to generate $7 billion to $10 billion in spinoffs. Colonies do not have a central buying group. They don't pool their resources or buy in mass quantities. Each colony operates quite independently and makes its own business decisions. There is no central pooling of financial resources.
Colonies play a very active role in their local communities. They support many charitable and community organizations with both their time and their finances. While significant in size as an agricultural operation, a colony supports 15 to 20 families. On a per capita or per family basis, colonies are quite small, with only 500 to 750 acres per family. They are a great example of a family farm, surviving and thriving because of their commitment to work and live together and to share.
Colonies are no different from any other farm or small business in Canada. Each member has responsibilities, and the young people are actively involved. Specific chores and responsibilities are assigned, and at the age of 15, Hutterites leave public school and begin their apprenticeship and training on a full-time basis.
The current income tax legislation regarding Hutterites puts restrictions on them that other Canadian farm businesses do not have. The legislation allocates the taxable income of the colony to specific individuals, but it does not allow an allocation to anyone who is under the age of 18. No other business is subject to an age restriction of any kind. They are restricted by the bounds of reasonableness.
Based upon the number of colony members under the age of 18 who are actively engaged in the farming enterprise, this restriction results in the loss of $22 million in non-refundable tax credits to Hutterites in Canada, which equates to a tax cost of $2.5 million per year. A Hutterite family will pay 45% to 50% more income tax than a non-Hutterite family. It is our submission that fairness and equity would be achieved if Hutterite colonies were permitted to allocate a reasonable amount of their taxable income to members under the age of 18.
We have had ongoing discussions with the office of the Minister of Finance and the Department of Finance, as well as several MPs, on this issue, and all of these discussions have been very positive and supportive. The changes that are being proposed represent a minor financial impact to the government but a significant amount to this small group of Canadians.
The history of section 143 goes back to the Carter commission of the 1960s, and this section has been updated only once or twice since then. We are not requesting anything special. We are looking to catch up with the rest of the act. It is with a focus on fairness and equity that we respectfully request this committee's support and recommendation that section 143 be amended.
I look forward to discussing this further or addressing any of your questions during question period.
Thank you very much. I am Adam Legge, volunteer committee chair for the Poverty Reduction Coalition. It's a community collaborative, supported by the United Way of Calgary and Area, that aims to reduce poverty in Calgary. We work collaboratively with all orders of government, the business community, social service organizations, and community members.
In terms of criteria to guide federal taxation decisions, we encourage the federal government to review its tax and spending programs through a filter that ultimately improves the well-being of all Canadians. We feel that decisions regarding taxation policy in Canada for individuals and for corporations should be based on three key concepts: incenting individuals to become skilled and to work; being globally competitive; and providing supports that will enable people to be part of the workforce to their greatest potential.
On incenting individuals to become skilled and to work, taxation policy should be supportive of individuals and companies that make investments in increasing skill levels and education. A highly skilled and trained workforce performs at the upper end of the value chain and results in higher returns. Both individuals and corporations benefit. Taxation policy should never discourage one from working, but unfortunately, the welfare wall experienced by many at lower income levels creates a disincentive to entering the workforce at a higher level of productivity and income.
Collectively, taxes and reductions in benefits should flatten and make the marginal effective tax rate an incentive to work rather than a disincentive. Canadians exiting social assistance through employment should be encouraged. In this regard, the federal government's commitment of $550 million per year to the working income tax benefit is to be applauded. This program should be increased to see greater advancement into employment by those on social assistance or at lower levels of income.
In being globally competitive, Canada's taxation rates should be competitive with other OECD and G-8 nations in order to attract and retain not only companies, but people, our most critical resource, particularly in a time of labour shortages. Studies by the CD Howe Institute indicate that some Canadians face a very high marginal effective tax rate, as high as 80%, depending on the province and the level of income, and therefore Canada is one of the most expensive jurisdictions in the OECD from a taxation perspective. Efforts should be made to reduce the marginal tax burden, particularly for those at lower income levels. Additionally, taxation reduction should focus on income taxation rather than on consumptive taxes. Canadians and corporations both benefit when we have a competitive tax system.
In terms of providing the supports that will enable people to be part of the workforce to their greatest potential, what the federal government needs from Canadians more than anything else is for as many as possible to be employed. Yet barriers exist for many to be employed. These barriers are those things that you and I take for granted every day. They include things like child care, elder care, transportation, and housing.
The recently introduced federal tax program given to employers who acquire day care spaces for their employees' families is a positive example currently in place. More of these programs are needed to assist with elder care and child care to enable more Canadians to be productive, earn income, and generate economic well-being. This would also include transportation support for those who need assistance with transportation.
Additionally, tax changes should also favour investments that grow the stock of affordable housing. Changes such as the elimination of capital gains on donations of real estate to registered charities that provide perpetually affordable housing would be beneficial. One interesting note is that under the current Canadian taxation system, one gains a greater benefit from donating land for ducks than from donating land for humans. Further, an elimination of GST on construction materials associated with affordable housing and affordable rental housing developments would create further incentives.
Both individual Canadians and their employer corporations benefit from an increased capacity to be part of the workforce and to focus on productivity and other life matters.
On behalf of Jim Dinning and Nancy Laird, our PRC co-chairs, and our 90 volunteers, thank you very much for the opportunity to present to you today.
Thank you. First I'd like to thank the committee for the opportunity to put forward our presentation this morning and welcome you to Calgary.
The Calgary and District Labour Council has approximately 30,000 members, and the Public Service Alliance of Canada has about 5,000 members in the Calgary district. In reality, we at the Calgary and District Labour Council, the voice of labour, truly try to represent the best interests of all working people in the city of Calgary, whether they have the privilege and opportunity to belong to a union or whether they're unorganized workers.
As we do our presentation today, we really feel it's about choices. We feel that taxation is about choices. I should go back and say that what we truly strive for, both the Labour Council and the PSAC, is equality in our society. That would include such things as the eradication of poverty and of child poverty. Taxation is about choices, and equality should be front and centre.
There are a lot of rosy things happening in Alberta, but a lot of things get left behind. The colleague before me talked about poverty reduction and things of that nature. I would echo a lot of those comments. A little-known fact is that what has happened in Calgary over the last couple of decades is that the gap between the rich and the poor has increased dramatically. In fact, when we go back to the tax year of 2003, Calgary became the capital of the rich—i.e., of high-income people and low-income people—and not only that, it was the highest divide ever in the history of Canada.
It has only gotten worse since. At that time, it was approximately $248,000 for the top 10% of wage earners and between $12,000 and $13,000 for the lowest 10% of wage earners. It works out to $19.10. As I said, that's the largest divide ever in the history of Canada, and it has only gotten worse since 2003.
We talk about taxation and about fairness. We need to do the things to change this, so that the divide between the low-income and high-income is reversing, not getting worse each and every year. We feel it was created over the last couple of decades not just by the federal government and its budgets, but more so by the provincial government and the local government as well—particularly the provincial government in going to a flat tax, which is great for some people but really negatively affects others.
I have to state that universality.... We don't believe in spending cuts for the rich. We have lived that. Twenty years ago I worked for the Alberta government, and the line there was, we're going to do the trickle-down effect. Well, let me tell you with absolute certainty, for the last thirty years, workers in the Calgary area have not been trickled down on. We have not received the benefits that have been portrayed by provincial and federal government leaders. The trickle-down effect on workers does not work.
We feel that taxes should not be cut, that tax cuts in the past have not benefited our society, and that in fact taxes shouldn't be cut. The money should be put into our fully funded public services.
To qualify that, they have to be universal. In public services, our priorities are a properly funded health care system, a properly funded national child care system, which I think is probably our priority, and also a national pharmacare system.
These aren't big, expensive items. We had hearings in Calgary about a month ago on the pharmacare issue. In fact, it would save the federal government money if we had a national pharmacare program.
It's things of that nature we would like to use our taxes wisely for, instead of taking tax cuts. We really and truly have to go back more to a system based on ability to pay and a fairer tax system, because flat taxes don't cut it. Tax cuts for the rich do not help anybody in our society, other than the extremely wealthy.
I want to bring people back to reality in Calgary. When I moved to Calgary in 1977, we had the highest minimum wage in Canada. It took 20 years for the Alberta government to achieve, by 1997, the lowest minimum wage in Canada. We have a lot of struggles here. It used to be that you could work for 42 hours and make the low-income cutoff line. In Calgary now, our minimum wage is $8 an hour. You would have to work 83 hours to afford a one-bedroom apartment in Calgary. If you were a parent with one kid, you would have to work 101 hours in Calgary each week just to make what it would cost to have 30% of your income going to pay for housing, for a two-bedroom.
We don't feel that the tax cuts we've seen are fair and that the tax system in Canada is fair in any way, shape, or form. We think it's totally disproportionate towards visible minorities, the aboriginal community, and women.
In fact, we find when we look at wages in Calgary.... We've developed a living wage at $12 here in our community, which I think is low as it is, but even at that we find when we look at the workers in Calgary making less than $12 an hour—and these are all our figures going back to poverty—that 60% of them are women; one-third of the disabled community in Calgary are in poverty; 50% of our recent immigrants are in poverty; one-third of our visible minorities are in poverty; 50% of one-parent families are in poverty; 20% of our children, i.e. one in five children in this city, are in poverty and in fact often go to school in the morning without food; and 25% of our elderly are in poverty.
To cap that off, we know for a fact that in the year 2007 there are almost 75,000 people in Calgary working for less than $12 an hour. These are the people who need tax relief, not the people who are setting record profits.
Just to go a little further on that, the reality is that when we look at low-income—
Thank you for giving us the opportunity to present to you this morning. This is a joint presentation from Simpson Roberts Architecture and Heritage Property Corporation.
Simpson Roberts Architecture is an architectural firm that has a very large focus on the preservation and restoration of our historic buildings. Heritage Property Corporation is a developer that is focused exclusively on the restoration and sensitive rehabilitation of our historic buildings in Alberta.
What we are advocating today is a tax credit for historically designated properties through a federal rehabilitation tax credit. Such incentives are already available in Canada in the areas of environmental heritage and also for cultural objects and should be extended to Canada's built historic resources. Such heritage tax incentives have been proven to be successful in other jurisdictions. The United States has had a program for decades that has proven to be tremendously successful.
Given that all Canadians benefit from the restoration and preservation of our historically significant resources, it is only proper that the federal government provide the necessary tax incentives to encourage their preservation.
The benefits of restoring our historic buildings and preserving the built historic fabric are numerous. Regretfully, tax incentives are often a necessary catalyst for historic preservation, but they've been proven to be cost effective.
One of the benefits, which has been overlooked recently and should not be underestimated, is the environmental impact that restoring our built heritage affords us. The amount of debris that contributes to our landfill and the reduction of costs to municipalities to participate in and maintain landfills are a substantial benefit to heritage preservation.
Unfortunately, programs such as the LEED program, which provides incentives or certainly a way of monitoring construction practices and environmentally appropriate construction practices, simply do not consider restoration or renovation in their models. They're exclusively focused on new construction. So historic preservation is something that has been significantly overlooked.
If we intend to have a sustainable society, we simply can't build our way to that. We must restore and renovate our way to that.
The second part of our presentation is going to focus on a particular project in Calgary, the Lougheed Building, as an example of how a tax incentive helped restore this important building. The Lougheed Building was built in 1912 and it occupied a significant future development site in downtown Calgary. In 2001 a development permit was issued by the city to allow for its demolition and replacement by a high-rise office building. When we purchased the building in 2003, the purchase price alone for the development site made the project uneconomical. The only way the building could be preserved was with government support. Unfortunately, the economic incentives from the Province of Alberta, through grants offered from the Alberta Historical Resources Foundation, were insufficient to change the economics of the proposal. This was an approximately $30 million restoration project, and the maximum provincial grant was $100,000.
The federal government at the time had a grant program under the Commercial Heritage Properties Incentive Fund, and we were eligible for $1 million under that program. That was certainly a significant incentive. Regretfully, that program has since been cancelled, but in addition, that was only available if the building were historically designated, and there would be no guarantee, if it were designated, that the grant would be either fully or partially available.
The grant we did obtain from the City of Calgary, which was a $3.4 million grant paid over 15 years, was the catalyst for the restoration of the building. This grant was calculated based on the estimated increase of property taxes for the 15 years following the building's restoration, and it was successful, because we knew immediately upon obtaining historical designation, the building could be preserved. Such an economic-certain tax incentive could be and should be provided by the federal government.
From a developer's point of view, the only way our historic buildings will be preserved is if the federal government participates through a tax incentive program.
Yes. That is again I think a rather common misconception. In the mid-seventies, actually, there was a tax dispute that involved Hutterite colonies. It got an awful lot of notoriety and an awful lot of press. That dispute was resolved.
The current legislation of the Income Tax Act goes back to 1961, and Hutterite colonies have, by and large, been taxed the same way since then. In fact, my father, Logan, and another partner of Meyers Norris Penny by the name of Dave Norris were involved with the Department of Finance and the Carter commission back in the sixties.
Basically, there was a recognition that while it was a religious organization, it was also a farming organization, and the government developed section 143 to tax the business profits of that farming organization.
Colonies have paid tax under this method since 1961.
Thank you all for coming this morning.
Mr. Legge, in your brief, you propose “[...] the elimination of capital gains on donations of real estate to registered charities that provide perpetually affordable housing [...]”. That is an issue I am concerned about for my riding, in Montreal. For starters, I would like to ask a somewhat technical question to gain a better understanding of the mechanics of your proposal.
Presently, if I donate land to an organization to build affordable housing, is it the market value of the land that will be considered? Technically, if I donate my land, it should not be a capital gain, but rather a capital loss. Am I to understand that at present, for tax purposes, the market value of this land is considered?
I'll take a minute on this, because I think this is pretty important to point out. The United Kingdom went into a program such as this, and we're actually emulating that program. What it basically does is establish a new entity called Canada's National Trust, and its focus will be to protect lands, buildings, and national treasures. Once set up, it will be able to receive donations and contributions to ensure its long-term sustainability. It will be managed and directed by private sector individuals. The best part of it is that it will be at arm's length from the government.
The approach you're speaking of, and the importance of our heritage, isn't something that's been lost on this government. Over the next couple of years, the intent, as you mentioned, is to collate, collect, and have a clear understanding of the inventory of buildings, land, and treasures we have in this country, and we'll be able to address those issues.
I'm going to switch gears a little. Adam, I'll ask you a question or two.
Mr. Richardson touched on the focus and the huge number of dollars the federal government invested in affordable housing across this country. In the 2006 budget, we carried through on an $800 million commitment to provinces and territories to specifically deal with this issue on a short-term basis. In fact, our government's part of the funding was put into a third-party trust so that it was available immediately if the provinces were able to move on it as quickly as we hoped. This isn't an issue, of course, that doesn't come up at every hearing we hold. It's obviously a very important one.
We can talk about more dollars. We can always talk about more dollars. There virtually isn't an organization that doesn't come to pre-budget consultations to ask for more dollars. Very few of them come to say they're getting enough and can actually take a cut. Based on that, and the volume of federal dollars associated with this, should we not perhaps be looking at a better way of delivering the services?
In Victoria yesterday we heard very clearly that the government's involvement in affordable housing, whether it be at the local, provincial, or federal order of government, is ostensibly, in Victoria anyway, done at three dollars to one in terms of what the private sector can deliver on behalf of those who need affordable housing. They can produce it at a much more reasonable rate and therefore can do more with the dollars.
I wanted to get your thoughts on that. What I've sensed in the last two years sitting on the finance committee and talking about and learning about this issue from a federal perspective is that there are a lot of dollars being spent. Do we need to spend more? Perhaps. But certainly one of the important components of this is whether we are spending the money effectively now and whether we should be trying to manage it a little differently.
I think that's an excellent point you raise. The approach we really proposed with the Poverty Reduction Coalition is what I would call a suite of solutions regarding affordable housing, because there isn't really one direct solution. It's not necessarily all about new building or new construction; it's not all about rental subsidies. It's contextual, based on whatever city it's in; it's contextual based on the individual.
So while more dollars are obviously better, we have to recognize that there are finite pools of dollars available. We're advocating looking at perhaps distributing things differently and looking at a package of options. Whether it is a way to increase the amount of land contributed to affordable housing organizations through an increase in the tax credit, a reduction to capital gains, or whether it is about creating a pool of dollars that can be drawn upon in individual cities....
In a city with a high rental vacancy, oftentimes it doesn't make a lot of financial sense to build a brand-new building, so why don't we put some of those people in some existing units, or why don't we purchase units in a complex that has already been developed?
So we can distribute the dollars in different ways instead of building a brand-new building that is solely affordable housing. Not only does that create a capital maintenance item, but it also, in some ways, can create social problems, with ghettoization of the affordable housing complex.
Thank you very much. I would like to continue on that topic. The Bloc Québécois has been calling for a moratorium on income trust conversions for a long time. While the Bloc Québécois agrees with the government on the end result, which was to tax income trusts, the Bloc Québécois does not agree at all with the means used to achieve it. First of all, promising not to tax income trusts and then doing so was outright irresponsible. Many people invested in these trusts in good faith, believing them to be an attractive investment tool. People were misled and deceived by the government.
Having said that, on the issue foregone taxes and revenues for the government, I was equally unimpressed with the demonstration here in committee. In my mind, it is an important tax issue, if only because the day after the announcements, stocks plummeted. That is the best indication that people who invested in those tools and companies that decided to structure themselves that way did so essentially for tax purposes. In my view—and in the view of my party, that was the main problem.
In your brief, you say that we should not impose a corporate model throughout Canada. I agree with you. There are different models that correspond to different organizations, but those models should be chosen based on the nature of the operations, and not based on tax considerations. That is why we are still in favour of taxing income trusts. However, as you reiterated in your brief, the proposal was for a ten-year transition period rather than a four-year one, which is somewhat short, in our view.
I would like you to repeat the figures. I heard you mention figures on Canadian ownership, on changes to Canadian ownership of trusts before and after changes made by the government. You gave them to us, but I did not have time to grasp them. I would like you to repeat them.
I just want to go back a bit, Adam, with respect to some of the requests you had.
A couple of things. One thing was providing tax incentives for employer-sponsored training programs and work-related supports. One of the things we did in the 2006 budget was address the issue of apprenticeship and the lack of attention that's been paid to that.
The trades industry, quite frankly, over the last 20 years or so...and obviously seeing that here in Alberta is probably the greatest example as any in the country. We've seen a lot of pick-up on the program, both from an employer perspective in terms of the additional tax credit they get at the end of the year from hiring an apprentice and, likewise, from the apprentice's ability to at least have a tax write-down on some of the tools he purchases and the equipment he needs.
Were you thinking a bit more about that type of program in terms of encouraging an employer-sponsored training program?
One of the other proposals you put forward that interested me was encouraging Canadian companies, for one thing, to constantly increase the skill of their employees, and for another, to reinvest in new equipment and technology, thereby improving productivity and environmental performance.
One of the things the industry committee recommended to the finance minister was the accelerated capital cost allowance for this exact recommendation you're making. We've seen a huge uptake from companies across the country; in particular, Quebec has really picked up on the ability to invest. I believe we're up to about $1.8 billion in the total of new investment in the country since the announcement in the budget, getting at the exact issues you referred to in the recommendation.
One of the points we've heard from a number of our presenters, both when we're talking about the value of the dollar and when we're speaking about pre-budget consultations and what we should do for the manufacturing industry, is that they believe the window is pretty short for this. It was in the 2007 budget, and they're talking about either extending it to five years from the two years that exists or actually going to an additional five years.
What would be your recommendation, and how do you see the benefits, in terms of why you think it's a good idea?
No, it's a good question.
From our discussions with Finance and the Canada Revenue Agency, we're not aware of any other group or organization that files under section 143. The terminology in that section never uses the term “Hutterite”, but it does describe the lifestyle of a Hutterite colony.
Going back to 1961, the general allocation rules were pretty similar to what happened inside regular and normal agricultural businesses at that time. Section 143 is a good example of legislation recognizing the unique nature of this organization. Prior to 1961, they filed as a religious organization and took a religious exemption, so they did not pay income tax. This recognized that there is a business there, and it is an agricultural business.
The colonies agree with that, and they are more than happy to pay tax on their profits. Because they take an individual vow of poverty, without section 143 the taxation system would be very different, and there would be some challenges I think with respect to some of their cultural and religious beliefs.
It's a good working mechanism; we just feel it needs to be brought up to date with the modernization that's happened throughout the rest of the Income Tax Act. As a matter of fact, it wasn't until 1997 that there was actually a recognition of income to a husband and wife at a Hutterite colony; only one adult number was actually permitted to file an income tax return.