I declare the 65th meeting of the Standing Committee on Finance called to order.
Our order of the day, pursuant to the order of reference of Wednesday, May 27, 2009, is Bill , an act to amend the Income Tax Act--tax credit for new graduates working in designated regions.
Colleagues, we have two panels today of an hour each. In the first panel we're very pleased to have our colleague, Madame Deschamps.
Welcome to the Committee.
Ms. Deschamps is the member of Parliament for Laurentides—Labelle. She is accompanied by Mr. Jean-David Beaulieu, a researcher for the Bloc Québécois.
I would also like to welcome Ms. Lysiane Boucher and Mr. Mathias Boulianne from the Fédération étudiante universitaire du Québec.
Welcome to the committee.
We will give each of you time for opening statements. You have an hour for questions and opening statements.
We'll start with Madame Deschamps for your opening statement. You may proceed at any time.
First of all, I would like to thank committee members for inviting me to appear today to discuss Bill , which is intended to create a tax credit for new graduates working in remote areas.
The main objective of the bill is to attract young graduates to remote areas. It is also intended to mitigate two problems affecting these regions—an exodus of young people and a serious labour shortage. It is important to encourage young graduates to move to the regions to take up their professional activities and ensure, in the best interest of the regions, that they are able to recruit skilled workers.
As mentioned, the youth exodus is a growing problem in terms of the economic vitality of regions located some distance from the major urban centres. They need the contribution of young graduates to stimulate regional development and increase their capacity for innovation. There is no doubt that providing a $3,000 annual tax credit, up to a maximum of $8,000 over a three-year period, to new graduates working in the regions would help to revive the local economy and meet labour requirements.
Many students leave their home region to pursue post-secondary studies in the major urban centres. Young people who leave their regions to study in these centres establish ties there, develop friendships and build networks. It is thus more likely that, when they complete their studies, they will have many more reasons and opportunities to establish themselves in their new environment, as opposed to returning to their home area. According to Statistics Canada, people with the highest educational attainment generally migrate to the major urban centres. The tax credit proposed under Bill C-288 would give young graduates an incentive to go back to the regions and establish themselves there.
The youth exodus has negative consequences both socially and economically. There is an acceleration of population aging and a decrease in average educational attainment among those who remain, which undermines the capacity for innovation. The most remote regions are those losing the most people. Often, they depend on a particular type of industry—the so-called single industry regions. Often there is little room for skilled jobs in the traditional economic base of these regions, which tends to be extraction or primary processing of natural resources. The time when resource regions could rely solely, for their prosperity, on the extraction of natural resources intended to be processed elsewhere, has come and gone. In order for the regions to develop, they must make the technology shift and further develop their processing industry.
My riding of Laurentides—Labelle clearly illustrates the disparity between a remote region and one close to an urban centre, as well as the impact of a resource crisis in a single-industry region. I am referring here to the crisis in the forest industry. The most southerly part of the Laurentians region has, for some years, seen an increase in its population because of quite significant interregional migration, primarily from Montreal and Laval. However, in the RCM of Antoine-Labelle, which includes the municipalities north of the Municipality of Labelle, the population is experiencing considerable decline. The forest industry crisis has hit that RCM with full force. Although its decreased population cannot be attributed to the forest industry crisis alone, many young people have had to leave the area due to inadequate job opportunities following the closure of forest companies and related businesses.
Of the 17 forestry companies in my riding, 14 have been forced to shut down their operations. More than 1,250 jobs have been lost. Heavy machinery operators, engineers, technicians and truckers are the ones most affected by these job losses. The people with the most education, with skills or with special expertise—engineers, for example—have been forced to leave this beautiful region in order to seek employment in their field elsewhere.
As for the Government of Quebec, it believes that diversifying the economies of these regions will mean developing new business activity in other areas.
This is a significant brake on development of secondary processing activities and high-tech industries in the region.
In all the studies that have been done, many entrepreneurs have said that they could only keep their business operating in the region if they were willing not to expand. As long as the business remains small, they can handle anything requiring professional or technical expertise. However, if the business expands, they have no choice but to hire skilled personnel. The problem associated with finding that kind of personnel in their region could mean they might have to move their business to urban centres, where they would be more likely to find skilled labour.
Bill C-288 would be a beneficial tax measure for all eligible young Canadian graduates. The youth exodus phenomenon does not only affect Quebec. All across Canada, economic activity has gradually been moving from the so-called rural areas to the major urban centres. Some provinces, including Quebec, Saskatchewan, Nova Scotia, New Brunswick and Manitoba, have developed a tax credit for young graduates. The government of Quebec created its own such tax credit in 2003. It was subsequently amended and now resembles the one proposed in the bill I am discussing with you today.
Many young graduates have taken advantage of this tax credit and, according to the most recent available statistics, more than 16,000 people used it in 2007. In the Saguenay—Lac-Saint-Jean region alone, as of April 2009, 22,074 individuals had claimed it since it was first introduced. So, the tax credit is enjoying tremendous success. In Saskatchewan, the government introduced a tax credit to encourage graduates with a post-secondary degree to remain in the province. The provincial government also created a tax exemption of up to $20,000 for graduates, depending on their educational level.
Bill C-288 has received support from many different groups and generations across Quebec, including the Fédération étudiante collégiale du Québec, or FECQ, and the Fédération étudiante universitaire du Québec, or FEUQ, which represent 40,000 and 125,000 students, respectively, all across Quebec. The FADOQ network, with 255,000 members, as well as the Fédération québécoise des municipalités, representing 972 municipalities across Quebec, have voiced their full support for this bill. In addition, the bill is supported by many RCMs, chambers of commerce and Carrefours Jeunesse.
When we toured Quebec to promote Bill C-288, people expressed strong support for this bill. The youth exodus is only too real for the people of Abitibi-Témiscamingue, Saguenay—Lac-Saint-Jean, the North Shore, Gaspésie, the Magdalen Islands, the Lower St. Lawrence region and northern Quebec.
According to the reference scenario used by the Institut de la Statistique du Québec in its most recent publication on population prospects from 2006 to 2031, there could be slightly negative growth by the end of that timeframe, one of the factors behind the decline being higher levels of regional migration in the later years.
The federal tax credit for young graduates could prove to be an effective means of countering too significant a population decline in the regions. The challenge today is to keep our young people in the regions and encourage others to establish themselves there.
I am therefore calling on the finance committee to help the regions of Quebec and Canada and support our young people. We must put a stop to population decline and the youth exodus, which are far more significant in the regions than in the urban centres.
What is at stake here, gentlemen, is the future of our young people and our regions.
Good afternoon, Mr. Chairman, ladies and gentlemen. First of all, allow me to express my thanks for this opportunity to take part in your work on Bill .
My name is Lysiane Boucher, and I am the coordinator, Federal and International Affairs, for the FEUQ, or Fédération étudiante universitaire du Québec. Mathias Boulianne, our policy assistant, is with me today.
The FEUQ represents more than 16 member associations. Today we are speaking for more than 125 000 university students in Quebec, almost half of whom are in the regions. Twenty years after this organization was first created, we continue to defend the rights and interests of university students before, during and after their studies through our interaction with the appropriate government and educational authorities.
The exodus of young people from the regions is a very real problem, the effects of which are deeply felt. Our member associations see students leaving to study in major urban centres, but not often returning there to live, for a variety of reasons. For example, the perception of greater job potential, relationships that have built over time, and so on. Migration to the urban centres is very much a reality. The effects of negative migration and prospects for population growth are now being felt. An example from Quebec would be Abitibi-Témiscamingue, which had negative net migration and population prospects, in 2006 and 2007, of minus 12.9% over the longer term. Studies have shown that people's propensity to migrate to the urban centres or other regions increases with age and over time. The number of people returning is not adequate to completely compensate for that progressive migration. As a result, the net population of some regions has declined.
That is the reality in Quebec, but also in the rest of Canada. At relatively comparable levels, all the provinces are experiencing an aging population, decreased birthrates and youth out-migration to the larger urban centres. Some examples of that would be the maritime provinces or northern Ontario.
Bill , which is now at second reading, is an excellent way of encouraging new graduates to go and live in the designated regions, in order to slow the youth exodus while at the same time fostering economic development in those regions. Some might say that this is only a stopgap measure. However, this incentive should be seen as an immediate solution in terms of lifting barriers to student mobility—one which, in particular, will complement regional revitalization measures. When they are fresh out of school, young graduates or couples don't necessarily have the money to pay back their student debts or purchase a home, for example. It should be noted that students in the regions generally have higher debt levels, because of the fact that they are required to be far more mobile in order to continue their studies. This tax credit would lower their tax burden, once graduates had established themselves in a region, enabling them to invest directly in the new life they are beginning.
Once the tax credit is exhausted, the graduates will finally be established and more comfortable financially, having the assurance of a stable salary. The idea of spreading the tax credit over three years is excellent, as it will encourage people to stay. After three years spent in a region, graduates are far more likely to establish themselves there—for example, by starting a family, buying their first home or setting up their own business—all of which serve to anchor them to the community.
In Quebec, a similar form of tax credit is already in place. It is yielding concrete, positive and—most importantly—irrefutable results. In the first year of operation, 4,578 students or new graduates returned to work in the regions. And, four years later, in 2007, 15,991 new graduates went back to the regions. So, every year, more and more new graduates are contributing to the revitalization of a designated resource region, by stimulating the local economy and providing skilled labour.
Certainly, in times of economic crisis, where political action is focused on economic recovery plans, it may seem ambitious to propose depriving the government of tax revenues. Most of the steps taken recently are intended to stimulate the economy by creating new jobs. But what happens if no potential candidate is interested in taking the position because of its geographic location? As a means of keeping young people in the regions, stopping the demographic hemorrhaging and fostering the development of processing industries, by giving entrepreneurs the ability to access the skilled labour they require, this investment is relatively small—not to mention the fact that the economic stimulus plan focuses on short-term measures.
The problem of the youth exodus can be seen in connection with the current economic crisis. However, this was an issue long before the crisis emerged and it probably will not diminish over time, if we don't act now. And, it is important to remember that Quebec's society will, sooner or later, be confronted with the obvious problem of an aging population. Now is the time to take action through legislation that will provide a stable, long-term solution to the problem of moving the necessary skilled labour to the regions.
The days when resource regions could rely on natural resource extraction are gone. Development of the processing sector and an ongoing concern for innovation are an absolute must in order to stimulate regional economies. Only with skilled labour can this challenge be met. And the first step is to attract and retain new graduates.
In a word, the FEUQ has always felt strongly about regional development, as we see it as a necessary ingredient for a prosperous Canadian economy. We believe that it is by responding to the youth exodus that we will be in a position to meet this societal goal. The introduction of skilled labour, thereby revitalizing the targeted regions at multiple levels, will serve to guarantee our long-term economic prosperity and competitiveness.
For all these reasons, the FEUQ is strongly recommending that Bill be passed. Thank you very much.
I have proposed an amendment. I have discussed this with your colleagues, Mr. Bouchard et Mr. Laforest, and I would like to ask you this: would you agree to this amendment? I am suggesting that the regions be defined as proposed in the bill, but that metropolitan areas with a population of 200,000 or more be excluded.
There are two reasons for this. Under the current definition, the provinces of Saskatchewan and Manitoba and almost all the Maritime provinces would be deemed to be regions. That means that if you live in Halifax, Saint John, Regina or certain cities in Quebec as well, you will be eligible. So, if the goal is to encourage people to return to the small cities and towns, it would not be a good idea to subsidize people living in large cities.
Also, if cities with a population of over 200,000 are excluded, the cost will be lower. Would you agree to such an amendment?
I am going to pick up from here, Mr. Chairman. There are two minutes remaining.
I may ask a question at the end, but first I would like to make the point to you, Ms. Deschamps, that the bill you are proposing responds to what people have been calling for, obviously, and also reflects the program introduced in Quebec, where it has had a very positive impact. It also meets the needs of many regions outside Quebec.
The Standing Committee on Finance has just completed a cross-Canada tour as part of its pre-budget consultations. I was present for almost all the meetings. Very often we heard from groups who came to talk about problems that your bill will correct. Many other regions of Canada are experiencing a youth exodus. We need help similar to the arguments you are making, to highlight the benefits of your bill. This bill would help the resource regions, that really need young people born there to go back home, so that they can benefit from their newly acquired knowledge and skills. This bill would make it possible for them to settle there, thereby ending the exodus. That would stimulate economic development, which is an important factor.
I don't necessarily have a question, but I do want to congratulate you. I want you to know that what you are doing is very important to all young people, not only in Quebec, but across Canada.
My staff and I appreciate the opportunity to appear before the committee today to answer your questions regarding our cost assessment of Bill , which is intended to provide a non-refundable tax credit to new graduates who settle in certain regions of the country.
Before we begin with questions, I wanted to first take the chance to provide members with some context regarding the terms of reference of our assessment, the key findings, and future analysis that may be warranted.
We prepared the terms of reference in consultation with committee members shortly after receiving the committee's request in September of 2009. This is a standard aspect of our work, intended to ensure that there is a common set of expectations between the requester and my staff regarding the scope of work, depth of analysis and timelines for delivering. The terms of reference are attached as Annex A to our cost assessment. At the time, there was a general consensus among members of the committee that the most useful contribution I could make to your deliberations would be to analyze the cost estimates that had been presented to this committee and to the House of Commons.
In addition, there was also interest expressed in determining the regional impacts of the proposed legislative amendments, if possible. A key aspect of the terms of reference was agreement among members to share the substantial work that had been completed to date and underpin the $180 million and $600 million cost estimates. By building on these earlier efforts, I ensured that I could avoid duplicating work already completed by others and respond to the committee's request in a more timely manner. With this in mind, my work focused on two key activities: reproducing each of the two estimates and determining their implicit assumptions; and, building a framework to assess if the assumptions' corresponding results appeared to be reasonable. I want to thank officials from Finance Canada and Statistics Canada, in particular, for their timely and patient help in preparation of my assessment.
Over the past seven weeks I have drawn on the expertise and experience of provincial governments, academics, and government executives to assess the reasonableness of the cost assessments presented to the committee. As I outlined in my note, the two cost estimates are based on different assumptions regarding the size of the regions that would be designated as eligible for the proposed tax credit and the propensity of new graduates to take up the new tax credit.
The lower estimate of $180 million is based on actual data from the Province of Quebec. The Quebec tax credit that has been available since 2006 is generally consistent with the proposal in Bill . It is available in regions that comprise approximately 14% of the provincial population and has an actual take-up rate of roughly 7% of total graduates.
The higher estimate of $600 million is based on a model developed by Finance Canada. It assumes that the tax credit would be available in regions of the country that were originally designated under the Regional Development Incentives Act in 1974, including urban centres such as Winnipeg and Halifax, comprising closer to 28% of the national population. It also assumes a take-up rate that would be closer to 20% of annual graduates.
Relying on data from Statistics Canada, I have also prepared an objective assessment of costs using sub-provincial census and labour market data. This analysis generally corroborates the low and high-cost estimates for the proposed tax credit, depending on the size and the number of the regions, as well as the take-up rate among new graduates.
ln general, the data suggest that the larger the coverage of the designated regions, the greater the take-up rate among new graduates and the higher the cost of the tax credit. The bottom line is that both estimates appear reasonable given their respective assumptions. ln effect, I conclude that the question posed by the committee is not really a costing issue, but rather a policy issue that is best left to you for further deliberation.
As committee members are aware, the proposed legislation would use the statutory authority of the Regional Development Incentives Act to establish designated regions. While there are regions that were designated at the time the act was brought into force in 1974, these expired in the mid-1980s.
Given the sensitivity of the tax credit's estimated cost to the size and number of the designated regions, members may wish to further refine this proposal to determine how many regions should be designated, and are these regions intended to cover an eighth of the population, as in the $180 million estimate, or a third of the population, as in the $600 million estimate? Members should also consider whether designated areas should include urban areas. Finally, there is the issue of prescriptive selection criteria for designated regions, such as the unemployment rate or some other factor.
After this additional policy work is completed, I am certain that I could calculate a more precise estimate of the potential forgone revenues that would arise as a result of this tax credit.
Thank you for the opportunity to make an opening statement. I look forward to your questions.
Thank you, Mr. Chair. I'll share my time with John McKay.
Thank you for being here.
I want to ask you a question. Unknown to you--because it just happened a little while ago--I announced that we would propose an amendment, and the Bloc members agreed, that the definition of “regions” would exclude metropolitan areas with population over either 150,000 or 200,000. So that would, I think, bring it closer to the Quebec situation, because if you exclude cities like Winnipeg, Regina, Saskatoon, Halifax, and no doubt many others, then you make the percentage of the population closer to the Quebec model, and you would bring the costs closer to the Quebec number, as compared with the federal finance number.
Certainly one could calculate the impact by looking at which cities and towns would be involved. Perhaps you don't know that off the top of your head, but can you give some sense of how big an impact this might have if we excluded all cities with population in excess of 150,000?
Thank you, Mr. Chairman.
Mr. Page, Mr. Khan and Mr. Jacques, thank you for the work you have done, this is an interesting analysis.
It says in your report that this bill takes its inspiration from the Quebec legislation dealing with regional development and encouraging young people to return to the regions. You say that it is available in 11 designated regions in Quebec. A little earlier, we heard from Ms. Deschamps, who is proposing this bill. I asked her whether this bill more closely reflects the model which yields an estimate of $180 million, like the bill Mr. Bouchard—who is actually here today—sponsored, or whether it was more in line with the $600 million estimate, as presented by the Conservatives.
You say that there are 11 designated regions in Quebec, even within these designations, the region as a whole is not included. I gave the example of my own region. There are 50 different municipalities there, but not all municipalities are eligible under the legislation, based on what is in place in Quebec. In the presentation made by Ms. Deschamps, those same criteria were reflected. It is the same municipalities that need to see young people come back to the regions, because they have a high unemployment rate.
In doing your assessment of the other regions of Canada, did you apply the Quebec model? Can you, as is the case in Quebec, measure differences within a single region? Are you able to do that for the other regions of Canada?
Okay, I appreciate that.
Now, I have another question for you. There was some confusion in my mind. I want to be frank. I know the mover of the motion is still here. I believe in the mobility of labour and that we use the levers of government to get individuals to move to where the jobs are. An effective tax system, or whatever, I don't disagree with. I think it's a bigger strategy than this piece of legislation, but I do believe in that. My in-laws came over from Italy for opportunity. My father moved nine hours away from his family for opportunity. I've moved for opportunity, and I believe in mobility of labour and that we should be supporting this.
So on the issue of whether an individual qualifies for, in this case, the credit, as you call it, there was confusion on whether they had to be educated in the field they got the job in. So let's say, to use a wild example, I got my engineering degree from Ottawa, or from the Université de Montréal, wherever. I go back, though, to my region and I get a job in a field other than engineering, maybe plant management. Who knows what it is, right? Does that count in your numbers as somebody who would qualify for that tax credit or not?
Thank you, Mr. Chairman.
I was saying that I disagree with Mr. Wallace's motion for the following reason: this motion requesting a 30-day extension to complete the study of the bill is unnecessary—at least, at this point, because the deadline for referring the bill back to the House is December 2—next Tuesday. Between now and then, we have two more Committee meetings. I know that our agendas are full, but there is no urgency at this time.
Mr. Wallace was saying, in support of his own motion, that he would like to review the amendments proposed by the Liberal Party. However, at those two meetings we will have an opportunity to look at those amendments carefully, and others as well, if there are any. We'll see. So, we have to look at them carefully and then move to clause-by-clause consideration. In fact, I would like to suggest that we do that next Tuesday, on December 1, which is the deadline.
It would be better to wait until we have reached the deadline to ask for an extension or additional time, rather than doing that now. It seems to me that would be a more reasonable course of action.