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37th PARLIAMENT, 1st SESSION

Standing Committee on Finance

EVIDENCE

CONTENTS

Wednesday, June 5, 2002

1545

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

1550

Mr. Neil Bregman (President, Sound Venture Productions)

1555

The Chair

Mr. Marc-André Charlebois (President, Association of Canadian Travel Agencies)

1600

The Chair

Mr. Anthony Pollard (President, Hotel Association of Canada)

1605

1610

The Chair

Mr. Harris

Mr. Anthony Pollard

Mr. Harris

Mr. Anthony Pollard

1615

Mr. Harris

Mr. Anthony Pollard

Mr. Harris

Mr. Marc-André Charlebois

Mr. Harris

Mr. Marc-André Charlebois

Mr. Harris

Mr. Marc-André Charlebois

Mr. Harris

Mr. Marc-André Charlebois

Mr. Harris

Mr. Marc-André Charlebois

Mr. Harris

1620

Mr. Marc-André Charlebois

Mr. Harris

Mr. Marc-André Charlebois

Mr. Harris

Mr. Neil Bregman

Mr. Harris

The Chair

1625

Ms. Pauline Picard (Drummond, BQ)

Ms. Pauline Picard

Mr. Marc-André Charlebois

Ms. Pauline Picard

Mr. Marc-André Charlebois

Ms. Pauline Picard

The Chair

Ms. Pauline Picard

The Chair

Mr. Gary Pillitteri (Niagara Falls, Lib.)

1630

Mr. Anthony Pollard

1635

Mr. Gary Pillitteri

Mr. Marc-André Charlebois

Mr. Gary Pillitteri

Mr. Marc-André Charlebois

Mr. Gary Pillitteri

1640

Mr. Marc-André Charlebois

The Chair

Mr. Scott Brison (Kings—Hants, PC)

Mr. Scott Brison

1645

Mr. Marc-André Charlebois

Mr. Scott Brison

Mr. Anthony Pollard

Mr. Scott Brison

Mr. Anthony Pollard

Mr. Scott Brison

Mr. Anthony Pollard

Mr. Scott Brison

Mr. Anthony Pollard

Mr. Scott Brison

The Chair

Mr. Discepola

1650

Mr. Anthony Pollard

Mr. Nick Discepola

Mr. Marc-André Charlebois

Mr. Nick Discepola

Mr. Marc-André Charlebois

Mr. Nick Discepola

Mr. Marc-André Charlebois

Mr. Nick Discepola

Mr. Marc-André Charlebois

Mr. Nick Discepola

Mr. Marc-André Charlebois

1655

Mr. Nick Discepola

Mr. Marc-André Charlebois

Mr. Nick Discepola

Mr. Marc-André Charlebois

Mr. Nick Discepola

The Chair

Ms. Carolyn Bennett (St. Paul's, Lib.)

1700

The Chair

Ms. Sophia Leung (Vancouver Kingsway, Lib.)

Mr. Neil Bregman

Ms. Sophia Leung

Mr. Anthony Pollard

1705

Ms. Sophia Leung

Mr. Anthony Pollard

Ms. Sophia Leung

Mr. Anthony Pollard

Ms. Sophia Leung

Mr. Anthony Pollard

Ms. Sophia Leung

Mr. Anthony Pollard

Ms. Sophia Leung

The Chair

Ms. Sophia Leung

The Chair

1710

Mr. Harris

1715

Mr. Harris

Mr. Richard Harris

The Chair

Ms. Maria Minna (Beaches—East York, Lib.)

Mr. Anthony Pollard

1720

Ms. Maria Minna

Mr. Anthony Pollard

Ms. Maria Minna

Mr. Anthony Pollard

Ms. Maria Minna

1725

Mr. Anthony Pollard

Ms. Maria Minna

Mr. Anthony Pollard

Ms. Maria Minna

The Chair

Mr. Roy Cullen (Etobicoke North, Lib.)

Mr. Anthony Pollard

Mr. Roy Cullen

The Chair

CANADA

Standing Committee on Finance

NUMBER 109

1st SESSION

37th PARLIAMENT

EVIDENCE

Wednesday, June 5, 2002

[Recorded by Electronic Apparatus]

¹ (1545)

[English]

The Chair (Mrs. Sue Barnes (London West, Lib.)): Good afternoon. Welcome to our finance committee. I apologize for the delay, but the House went a little longer after question period today, so people will be joining us as we do our presentations.

Bienvenue à tous.

The order of the day is pursuant to Standing Order 108(2), pre-budget discussions. We're very pleased to have as a witness from the Canadian Film and Television Production Association, Elizabeth McDonald, president and chief executive officer. Welcome to you.

As well Neil Bregman, president, Sound Venture Productions, has joined us today. Thank you very much.

From the Association of Canadian Travel Agents, we have Marc-André Charlebois, président. Merci.

Here to speak for the Hotel Association of Canada is Anthony Pollard, president. Thank you very much.

You will each have up to 10 minutes to do your presentation and put your views on the record. Your materials have been handed out to committee, and if at some future date you wish to add to these materials, you may do so by filing more materials with the clerk, which will then be distributed amongst our colleagues.

I would like to start with the Canadian Film and Television Production Association. Please go ahead with your presentation. Vous avez la parole.

Mrs. Elizabeth McDonald (President and Chief Executive Officer, Canadian Film and Television Production Association): Thank you, Madam Chair and members of the committee, for inviting us to appear before you today.

Actually, it's interesting that the three of us are grouped together as witnesses. While our members are not directly in the hotel and travel business, we are probably some of the heavier utilizers of travel agents and hotels.

My name is Elizabeth McDonald, and I'm the president and CEO of the Canadian Film and Television Production Association, the trade association that represents over 400 television, feature film, and new media production companies across Canada from sea to sea to sea. I am here with Mr. Neil Bregman, president of Sound Venture Productions, producer of the award-winning children's series The Toy Castle. He is a member of the board of directors of the CFTPA and of its executive and is a representative of producers from the Ottawa-Gatineau region.

This is not the first time our association has had the privilege of appearing before this committee, and we appreciate your efforts to consult with our industry on our priorities and on where we feel our industry can contribute to the economic prosperity and quality of life of this country. We would like to thank the committee for its attention to CFTPA submissions over the past years and for the committee's support of the government's commitment to the Canadian production industry as part of the government's overall strategy.

At this time I would like to say that we'll be making a more complete submission to the committee that will include some updated research we have commissioned but have not yet received. We hope to be able to make this available to you early in the summer, and thank you for your indulgence in this matter.

We have, however, brought copies of Profile 2002, our sixth annual industry profile, a report produced by the Canadian Film and Television Production Association and l'Association des producteurs de films et de télévision du Québec in conjunction with the Department of Canadian Heritage and in association with PriceWaterhouseCoopers.

Financial indicators in the performance of our industry tell what has been in the last five years a very positive story. The overall growth rate is very strong, with the overall production and distribution sector growing at an annual average rate of 9% based on GDP. Total production activity has increased over the past years to nearly $5 billion. The Canadian production industry counted 134,000 direct and indirect jobs in 2000-2001, some 51,7000 direct jobs and 82,700 indirect jobs.

Canadian certified production activity for 2000-2001 was $2 billion, showing modest growth from the $1.9 billion of the previous year. Total foreign revenues collected by Canadian producers increased slightly to $2.2 billion. Foreign location shooting increased to roughly $1.8 billion compared to $1.5 billion the previous year.

You can see from this that the Canadian film and television production sector has experienced stable overall growth. Economic activity has been due to familiar factors such as Canadian currency attracting foreign location shooting, domestic fiscal policy stimulation from federal and provincial governments, and exceptionally well-trained and competitive production crews in Canada.

Our remarks today will focus on the renewal of the Canadian Television Fund, the importance of non-CTF certified production, the simplification of the administration of tax incentives, and the renewal of resources directed to training.

Government investment in the film and television production sector continues to play a crucial role in the industry's health and growth, and long-term public financing commitment is an indispensable part of the funding mix. We thank the committee for its past support for the renewal of the Canadian Television Fund, and we call on the committee to urge the government to adopt a longer term for the renewal of the fund.

The fund has been a unique public-private sector partnership, supported as it is by contributions from the cable and satellite industry, distributors, Telefilm Canada, and Canadian Heritage, and overseen by a public-private sector board. The fund plays an important cultural and economic role, ensuring the presence of high-quality Canadian programming by providing vital production financing for distinctly Canadian content production.

Television plays a key role in the cultural life of a country, and the government to date has been committed to encouraging the presence of Canadian stories on the nation's television screens. As the number of domestic and international signals multiply, it is more important than ever to ensure that this presence is a strong one.

The consulting firm KPMG provided a positive evaluation of the CTF in its evaluation report of March 2000, and last year we tabled for your review a full study of the CTF's economic impact.

Some of the conclusions were as follows.

The CTF is the linchpin incentive to broadcasters and producers to create high-quality, recognizable Canadian content.

The CTF is a major contributor to the development of a strong production sector in the country.

The CTF's annual contribution of approximately $200 million generates well over $600 million in production activity. This activity in turn supports over 16,000 direct and indirect jobs. It represents over 40% of the English-language television priority programming and over 50% of French-language programming.

CTF-funded programming plays a huge role in encouraging production outside of the major production centres, assisting 93% of the Canadian production in Atlantic Canada, 58% in the prairie provinces, and 42% in British Columbia.

The report concluded that without the CTF, the financing model for recognizably Canadian programming would be destroyed. This and other data is presently being updated and will be included in our submission next month.

The current level of contribution to the fund is confirmed until March 31, 2003. The fund is clearly playing a critical role in the Canadian cultural and economic environment. We request the committee to repeat its recommendation of last year, that the government's contribution to the CTF be renewed, at minimum at current levels, on a long-term basis.

Neil.

¹ (1550)

Mr. Neil Bregman (President, Sound Venture Productions): Secondly, I'd like to outline the importance of the Canadian production that takes place without the assistance of the Canadian Television Fund. This is Canadian content, certified for tax incentives.

Fundamental to understanding the Canadian production industry is that it is virtually impossible to maintain any form of ongoing corporate viability on the strength of CTF or feature-film-funded projects alone. The CTF, for example, was oversubscribed by 57% this year. Many companies produce a range of productions, often financed in different ways, to ensure continuing production activity, project development, and revenue flow. This range of activity enables companies to diversify and expand and encourages greater technical and creative employment while attracting private sector investment opportunities.

The Government of Canada has attempted to find the optimal balance between the cultural goals of creating Canadian film and television productions that reflect Canadian subjects and perspectives with the commercial trend to work with foreign co-producers and to engage foreign performers. Indeed, François Macerola, formerly of Telefilm Canada, is presently conducting a review of the Canadian content system.

Our industry is moving into a very uncertain period. Increased concentration and integration of foreign media interests have resulted in changes to the international market and a shrinking demand for Canadian production, particularly in higher budget drama. As well, there are ongoing threats of countervail action on the part of the U.S. industry. This has put pressure on the Canadian producer to seek other markets and other modes of international participation. Financing Canadian content is getting harder, and companies need a range of financing mechanisms to ensure a critical mass of production.

One of the most important aspects of the CAVCO--non-Canadian Television Fund certified production--minimum definition was the move in 1995 from a tax shelter incentive mechanism to a corporate tax credit mechanism. The point system and Canadian cost requirements remained largely unchanged, but new elements were introduced such as Canadian corporate ownership, copyright, and producer control requirements. The tax credit regime introduced a new industrial development objective. It was designed to encourage a more stable financing environment and longer-term corporate development for production companies.

While the goals of the program were laudable, the implementation realities tell a much different story. There are major delays in the certification of projects and receipt of tax credit refunds, which have not only frustrated producers but have placed a major financial burden on us. The significant interim financing costs that have been generated by delays in tax credit receipt, coupled with financing policies of the public agencies forcing tax credits into the financial structures at inequitable recoupment positions, have all resulted in a system that is not fully accomplishing its corporate development objectives.

Government is currently addressing these issues, but progress is slow and the burden of delay is borne by producers. We strongly urge this committee to recommend to the government that these issues be resolved without further delay and that the administration of the tax credit regime be simplified.

Mrs. Elizabeth McDonald: Lastly, I'd like to highlight the training/mentorship program we've been running for young people aged 18 to 30 who wish to gain hands-on experience in the production side of the industry. There are six components to this program, and it's growing. They are funded from both public and private investment.

For purposes of my remarks today, I would like to focus on the international program funded by the Department of Foreign Affairs and International Trade. This has been an invaluable program, which has enabled from 15 to 20 young people annually for the last five years to gain work experience in an international setting. It included working on productions being shot in foreign locations all around the world. It also included working at markets such as the Cannes Film Festival, or MIPTV, and the NAPTE market in the U.S., where producers are selling and distributors and broadcasters from around the world are buying, or learning about how the co-production agreements between various countries actually work. We understand that this funding from DFAIT is up for review and may be threatened. We strongly recommend that this program be renewed and remain with the Department of Foreign Affairs and International Trade.

We thank you for your attention, and we'd be happy to answer any questions.

¹ (1555)

The Chair: Thank you very much.

Now I'd like to move to the Association of Canadian Travel Agencies.

Commencez, s'il vous plaît.

Mr. Marc-André Charlebois (President, Association of Canadian Travel Agencies): Madam Chairman, committee members, the Association of Canadian Travel Agencies, which represents approximately 4,800 travel agencies from across the country, is pleased to be taking part in your committee's discussions on next year's budget

[Translation]

As you're well aware, last year was especially difficult for travel agencies. The attacks of September 11 created havoc in our industry and the estimated travel agency loss in the succeeding months reached $20 million. In November, a major Canadian airline failed, throwing the travel plans of thousands of Canadians into disarray. Last August, major carriers in North America reduced their commissions to 5% and then eliminated those commissions completely in April. Finally, until there is more competition in the Canadian airline market, we remain subject to the abuses of a dominant supplier.

That being said, today I would like to focus my comments on the recent imposition of a new tax: the air travellers' security tax .

[English]

Passed at the end of March as part of Bill C-49, the Budget Implementation Act, the charge is a poorly thought out new tax, which is being borne unfairly by the Canadian travelling public. ACTA believes that the enhanced screening services being provided at airports should be paid for out of general revenues, as with all of society benefits from enhanced public safety, especially when the threat to public safety is in the form of terrorist violence.

ACTA was encouraged, however, by the fact that the government appears to have recognized that it may have acted a bit hastily. The former Minister of Finance has promised that there will be a review of the charge this fall. If at that time revenues from the charge exceed the cost of installing and maintaining new screening devices, the minister has indicated that the charge will be reduced accordingly. Today we urge members of this committee to recommend to the government, and particularly to the new Minister of Finance, that if the service cannot be financed from the Consolidated Revenue Fund, then every possible means should be explored for substantially reducing the security charge.

As it is, this special tax is acting as a depressant in all of our efforts to assure a greater level of economic prosperity for this country, one of the two themes for your committee's pre-budget discussions this year.

Moreover, the charge flies in the face of one of the four pillars of the government's important innovation strategy. Indeed, Canadians are being asked, as part of the innovation consultations now under way, to address the issue of what can be done to improve the business and regulatory environment. More specifically, are there tax laws and regulations that need to be amended to bring us in line with our international competitors? In this regard, ACTA believes the air travellers security charge should be re-examined both in the strict fiscal sense of who is to pay for a particular public service and how and in the broad policy sense of the charge's compatibility with other government objectives.

[Translation]

I would like to turn now to the specific terms of the security charge. First, the amount of the tax—$12 one way or $24 return—is out of line with the $5 that American air travellers must pay. It is a signal to the business community that Canada is a jurisdiction that is only too happy to tax its more mobile citizens.

º (1600)

[English]

Second, the charge is unfair in that it is imposed as a flat rate across all types and lengths of trips. For example, travellers on short-haul routes, with a $90 base fare, pay the same $24 as long distance travellers do. Relatively speaking, they will have to pay more.

From an innovation strategy perspective, this bias does not make sense. It is discouraging smaller airlines from competing with Air Canada for local and regional markets.

[Translation]

Third, the charge runs counter to the quality of life theme which has recurred in this committee's discussion. It hinders the development of efficient and inexpensive air commuting services between not-too-distant municipalities, such as Calgary and Edmonton for example, as an alternative to the bus and automobile. WestJet has already cut a number of its short-haul flights since travellers are choosing to drive instead.

[English]

Finally, the charge negates the government's injection of $15 million into an advertising campaign--announced last fall--to encourage travel among Canadians in the wake of September 11.

Beyond urging the committee to recommend a diminution or absorption of the air travellers security charge, ACTA believes that the broad-based economic prosperity of the country requires that members of this committee pay particular attention to the health of independent, small and medium-sized retail operations, such as travel agencies, and their ongoing capacity to serve Canadian consumers.

To meet the many challenges facing their part of the retail sector, travel agents are redefining their business model to position themselves as advocates of the travelling public. However, they need the cooperation of government, not just on the matter of security charges, but also to ensure a fair, competitive environment to support a passenger protection plan and to prevent misleading advertising by including all costs in the price of tickets.

Working together, we can ensure that Canadians get reasonably priced and value-added travel services.

I thank you for your attention and would be pleased to answer any questions you may have.

The Chair: Thank you very much.

Mr. Pollard, go ahead, please, sir.

Mr. Anthony Pollard (President, Hotel Association of Canada): Thank you very much, Madam Chair. Congratulations on your appointment to your position.

It's nice to be back here again. I appeared before this committee last September 25. There were a few different faces here then and many the same. That was exactly two weeks following the horrific events of September 11. At that time, I said, “I'm here today to help you to help us”. I think we've all benefited as a result. We work very closely with government. I'd like to acknowledge publicly how much I want to thank this committee, and all of the government, for the work we do collectively. I'll talk a little bit more about this later.

As background for the committee, who do we represent? What do we do? We represent all of the hotels, hotel chains, provincial hotel associations, resorts, inns, etc., across Canada. I have provided you with a kit telling you who our members are. Our mandate is to represent hotels nationally and internationally. Basically, at the end of the day, we're in business to make money. We're in business to make people feel good, and we're in business to take care of people. But we want to make money at the end of the day. I'm not ashamed to say this. It's part of our mandate.

How big are we? We generated about $10 billion in revenue last year. The value added from our industry--or the spinoff from our economic impact--is close to about another $10 billion. We employ about 237,000 people across the country, with total salaries of about $4.5 billion. In every one of your ridings, I know there are a whole slew of hotels. So I think you understand our industry quite well.

Out of the $10 billion that we made, we generated about $3.94 billion in tax revenues for all three levels of government. So we're a good money-maker for you as well. About $1.8 billion went to the feds, about $1.4 billion to the provinces, with about another $640 million to the provincial governments. I always like to throw these figures in for good measure

This committee has often referred to our industry as being the good news industry. I'd like to reinforce this. The reason is really quite simple: we create jobs, and we bring in revenue for you and for us--or for all of us together.

Let me just touch very briefly on the outcome of last fall. The ramifications or the results of an event have never been felt so swiftly as those of last fall. I have to say, our resolve has probably never been stronger. The results were devastating. But in fact our balance sheets going into last fall were fairly clear or clean. We weren't in that bad shape. We've been able to withstand the negative impacts.

What happened? Basically, business fell off by about 50%. Before last September, travel was already disappearing. Unfortunately, last September had a major impact. We lost about 780,000 room-nights. The member for Niagara Falls will appreciate this the most. Niagara Falls was the hardest hit in the country. I won't go through all the other places. But it hit certain areas more than others. We lost 144,000 room-nights in about a 30-day period. We lost about $300 million inside of about 60 days. Basically, business died.

How did we respond? It was very clear. The message we brought forward to the committee last September 25 was that safety and security were our biggest concerns. Until people felt safe and secure, they weren't going to go anywhere. In fact, this is still a problem right now in the United States of America. For the most part, Canadians are back travelling where they were before.

We said, okay, look, what we need to do is a promotional campaign to promote travel within Canada and to Canada. We asked the federal government for $25 million. You came back with $20 million. We said thank you very much. In fact, we went out and we thanked each member of the committee, the cabinet, and members of Parliament for their support in this area.

We also stated very clearly what our position was with safety and security. The Prime Minister and Deputy Prime Minister responded directly to us. We also took a very active and leading role in the border coalition. As you all know, any tightening up of the border would have a devastating impact on the hotel business. In fact, it would destroy our entire economy in Canada very quickly.

º (1605)

We attach a great deal of importance to this. We're working very closely with the Deputy Prime Minister in the work he is doing with the homeland security director, Governor Ridge, and we expect that some very good things are going to emanate from that. We're already seeing some of it, for example, with the NEXUS system, which has been introduced in Canada and the United States.

The markets are starting to look a little bit more positive. We're seeing some good results out there, and a lot of this is as a result of that one-time $20 million contribution that the federal government made to marketing efforts through the Canadian Tourism Commission. And although it was not requested, and I want to underline this, when the Government of Canada came through with $20 million worth of new funding, industry followed suit. The hotel industry and the airlines came in and matched that money, even though the government didn't ask us for it. We just showed that we have an appetite for such things as cooperative marketing.

Now this is where I come to the crux of the matter. The federal money that we've seen before is not going to be available in 2002-2003, just when we're seeing travel and tourism come back to where it was before. I'm going to be very clear in my numbers here. As a result of the one-time and carry-over funds, the Canadian Tourism Commission budget for this year, the year we're in right now, is $120 million, but it goes back to its base amount of $83 million next year. What we must do is continue to take advantage of the momentum we're building right now, i.e. have Canadians travel in Canada and have people from outside Canada come up here.

We did--and my colleagues from the television and film industry will appreciate this--a television campaign called “There's No Place Like Home”, with Jann Arden--and I won't try to sing; I'm a terrible singer. I think you've all seen the ads, and they were very well received. We cannot, as a joint body of industry-government working with the Canadian Tourism Commission, sustain this without additional funding.

I know you're saying, okay, now you're looking for money. Let me put this in a global context, and I'm going to explain how in fact it doesn't cost the feds one penny. In terms of the Canadian Tourism Commission, although it doesn't have a similar comparable body in the United States of America, a lot of state organizations spend more than the CTC does. For example, in the State of Illinois they spend $91 million a year to promote people to go to the windy city, but we in Canada don't even have that amount of funding. As I noted before, we paid out $3.94 billion in taxes in 2000, $1.8 billion to the feds, but unlike most sectors that come and appear before this committee we aren't asking to have the money given back. We're making a proposal to you to show how you can make even more money.

What we're asking is that the federal government commit an additional $30 million in A-based marketing investment to the Canadian Tourism Commission. This would be matched by industry investment and would make $52.8 million in new tax revenue. Twenty-eight million dollars alone would go to the feds. Industry would earn an additional $170 million, it would create 2,400 new jobs, and there would be an economic spinoff effect of another $107 million.

So we're saying we can all work together. Maybe that's why you call us the good news industry.

You'd asked in the submission to us to talk very briefly about a couple of other points--and I'm conscious of time--about how we can ensure economic prosperity and the highest quality of life. We believe the government needs to make deeper and faster cuts in taxes and debt, and it needs to have more stringent controls on government spending, and I think everybody at this table would agree with that. Only in doing this will we be able to bring our standard of living closer to that of the United States.

When we talk about how our after-tax incomes have fallen further behind those in the United States, the Canadian Chamber of Commerce has said we're now at about 80% of where they are in the United States. Let's face it, it's not the brain drain to the United States that's killing us; it's the taxes that are.

What we're asking the feds to do is to extend and accelerate its tax reduction plan Specifically, we're asking for a reduction in the top, middle, and general tax rate by 2%. We'd like to see the EI premium cut by 20¢, and we'd like to see RRSP limits increased by $2,000. Frankly, all of us would benefit from that.

º (1610)

I'd like to very briefly talk about the Trans-Canada Highway system. It's something that needs additional support. We'd like to see that done in a strategic way. We'd like to also see a reduction in the onerous tax burden on all Canadians by initiating meaningful tax cuts for both individuals and corporations. This would benefit all in terms of job creation and economic growth.

So now, ladies and gentlemen, Madam Chair, I'd like to suggest the time has come to make further selective and perhaps I could use the word “judicious” changes.

In closing, I'd like to say we always welcome the opportunity to come before this body and make a contribution to this very important process.

Thank you very much.

The Chair: Thank you very much, all of you.

Mr. Harris, 10 minutes, please.

Mr. Richard Harris (Prince George—Bulkley Valley, Canadian Alliance): Thank you very much, Madam Chair, and thank you for your presentations.

I have some questions for all of you. I hope I can get them in. I'll start with Mr. Pollard.

Subsequent to September 11, the government gave funds directly to the airline companies to compensate them for cancellation of flights and loss of revenue. Was there any money given directly to the hotel/motel owners in the country to compensate them for loss of revenue in room cancellations and revenue?

Mr. Anthony Pollard: No, not one penny, nor did we ask for it.

Mr. Richard Harris: In your discussions with the government, your suggestion was, if there was money coming, to use it to promote travel, and your industry would hope to play catch-up as opposed to having the money given directly.

Mr. Anthony Pollard: Yes, that is correct. We had a board meeting. It was much like this--a group of about 20 or 25 people. We asked what is going to stimulate travel in the country. We came forward with all kinds of ideas, some of which were really off the wall. But we realized that we had to show that it was safe to travel. All of you travel all the time, going back and forth to your ridings. You remember what it was like last fall. The planes were empty. My colleagues at ACTA can attest to that.

What we asked the government to do was to come forward and demonstrate leadership in safety and security through a variety of ways. We realized that was going to cost a lot of money, but we supported the government in that completely. We just simply said that the government has to take a leadership role. In times of crisis, people always look to government, so different now than it was 20 or 30 or 100 years ago. We said that we, as an industry, believe that if the federal government makes a commitment to some advertising dollars, it would work very effectively. What I didn't know, what our industry didn't know...we asked for $25 million and you gave the CTC $20 million. The industry I represent came along and matched it, even though we were losing money hand over fist.

º (1615)

Mr. Richard Harris: I have one quick, short question. In order to catch up from the revenue loss you had following September 11, was it necessary in the industry to have some sort of an overall rate increase? It reminds me of a strike where there's no revenue coming in during a strike. You almost never catch up. Did the industry have to raise rates in order to try to catch up?

Mr. Anthony Pollard: We're a very competitive industry. If you look at this room with 25 people...let's say each of you owns a hotel...

A voice: I wouldn't be here.

Mr. Anthony Pollard: You wouldn't be here. Thank you very much. You have hotels in Vaudreuil, I know that.

The rate actually came down a little, because we're a competitive business. We saw our occupancies obviously fall off drastically. For example, Toronto airport hotels are still suffering from it today, actually. No, our rate didn't go up. In fact, it came down marginally.

Mr. Richard Harris: Thank you.

Mr. Charlebois, I agree with your comments that the additional traveller security charge was unilateral and extremely arbitrary. I don't hold up much hope that at the end of the day, if they find out they've been charging the passengers--air travellers--too much, we're going to see a penny of that money coming back.

Can I ask you this question? Of the overall additional funding required for traveller security, are the airlines paying any of that or is it being borne totally by the air-travelling public?

Mr. Marc-André Charlebois: The responsibility for security in airports is borne by the airlines. The surcharge was to bring onstream new and more sophisticated equipment and additional staff, to make sure those new requirements you face when you travel are funded.

Mr. Richard Harris: All those new requirements are being borne exclusively by the travelling public.

Mr. Marc-André Charlebois: Yes, sir.

Mr. Richard Harris: And the airlines are continuing to pay what they paid prior to September 11--

Mr. Marc-André Charlebois: Yes, sir.

Mr. Richard Harris: For what we would call the base security.

Mr. Marc-André Charlebois: Yes, sir.

Mr. Richard Harris: So these enhanced--

Mr. Marc-André Charlebois: We're not hoping to get any of that money back. What we would like to see in the end is either the charge being absorbed by general revenue, because this benefits all Canadians, not just those who travel, or, if not, at least reducing it to reflect the actual cost.

Mr. Richard Harris: I might have added that I don't see any hope of it being reduced. It's a nice cash cow for the government, in my opinion, and if it finds that there has been overcharging, I doubt if we'll get it back.

I've been asked this question and maybe you can help me answer it. We are of course focusing on airline travel as far as security measures go, but I think we're all aware that cruise ships, trains, and buses could even be targeted. Has there been any additional security charge or any enhanced security at bus depots, train stations, or embarkation ports for cruise ships in Canada?

º (1620)

Mr. Marc-André Charlebois: To my knowledge, there hasn't been anything done for trains and buses. I've been on the train recently, and on a bus actually as well, and I haven't seen anything new there. I understand the cruise industry has beefed up the security at the embarking ports, but I'm not sure there's been any assistance from the government there.

Mr. Richard Harris: Okay. So there's no charge demanded by the government for any increase that you know of.

And last, I agree the method of assessing the charge per flight is quite confusing. I would have thought it would be fairer to the travelling public, particularly on low-cost airline flights, if it were to be based on a percentage of the ticket cost. Therefore, someone paying a $100 ticket wouldn't be paying the same charge as someone paying a $2,000 ticket. I think this would be a fairer way to do it and would probably be a more manageable or reasonable way to assess it.

Do you agree with that?

Mr. Marc-André Charlebois: My hope would be that this surcharge would be eliminated completely and built into the general revenue. But if not, certainly some notion of fairness could be brought in by addressing the very issue you raised.

Mr. Richard Harris: Thank you.

I have time for Ms. McDonald and Mr. Bregman.

You talked about public funding in order to promote recognizable Canadian programming. Is this something done in the U.S., for example? Is there government funding going to the television and film industry to promote any type of programming that is recognizably from the U.S.?

Mr. Neil Bregman: Everything is U.S.-recognizable programming.

Mrs. Elizabeth McDonald: That's probably the issue we have.

First of all, the United States is the anomaly in terms of funding to the entertainment or film and television industry because of its dominance. The entertainment industry, film and television production, is one of the top five industries. It varies depending on where the defence industries are, but it's up near the top. So they don't actually have to.

However, in the United Kingdom, all through Europe...Australia has Australian-look requirements and assistance. Even in New Zealand it's very common. Part of the issue is to respond to the global domination of American product.

Mr. Richard Harris: Okay. We see public television channels coming up from the States that are supported through subscriptions and donations. In Canada, in order to promote recognizable Canadian television and film, we use public funding from the governments, plus I think there's an assessment to cable companies that goes into that fund as well. Why haven't we ever established a public television funding system like they have in the U.S.?

Wherever I am in the country, there's always a U.S. public television station broadcasting from the U.S. side, and they have their marathons and their telethons. They raise millions of dollars a year, and a lot of it is Canadian money. Why haven't we ever done something like that in Canada? Why haven't we asked the people who want to watch that particular flavour of programming or filmmaking to contribute to it then? Why is everyone asked to contribute to Canadian television and film through their tax dollars, rather than only asking those who would simply prefer to watch that flavour of programming?

Mrs. Elizabeth McDonald: While it has very high-quality programming on it, first of all, the public broadcasting system does not reach as many Americans, percentage-wise, or is not watched by as many Americans as CBC Radio Canada. I think that's really important. It's a wonderful system of stations. It's locally based. It's licensed completely differently. You really can't match PBS and CBC Radio Canada.

To begin with, when you go to the movies, you actually are paying to go to a movie. So if I deal with the movies, first and foremost, the problem is that in Canada, because of our difficulty in changing distribution policy, we actually have access to less than 2% of our screens. That's even true in Quebec, where the predominant language is not English and where still the screens are dominated by the American studios. That's how the system works, and so even when people want to go to Canadian movies, they're often hard to find. They certainly don't get the same....

Mr. Richard Harris: Why aren't--

The Chair: Mr. Harris, that's all. We're five minutes over.

Go ahead, Madame Picard.

º (1625)

[Translation]

Ms. Pauline Picard (Drummond, BQ): Thank you, Madam Chair.

Ms. McDonald, I did not quite understand your last remark, namely that the Quebec market is completely flooded by American films. I think that we currently have very good Quebec production and that the Quebec public likes to watch those movies. I also think that we are very well-rated on this point. Perhaps we watch fewer English Canadian movies, because it is not our language and most Quebeckers are not bilingual. I think that our Quebec film industry serves us very well.

[English]

Mrs. Elizabeth McDonald: May I respond to that?

First of all, the point I was making is this. Even in Quebec, for Quebec filmmakers like Denis Arcand...with many Quebec filmmakers in Cannes, it is not that Quebeckers don't want to go; it is just that they also have challenges in accessing screens because of the domination of the studio distribution system in Canada. The issue is not that Quebeckers or Canadians don't want to go...but the question that I was responding to, how do Canadians contribute.... Film is a more obvious one to do. There's no question that Quebec films are very popular.

I was listening to Roger Frappier, Denis Arcand, Denise Robert, and others, all of whom were talking of the challenges even in Quebec in accessing the screens. So I absolutely acknowledge that in Quebec there's a fabulous filmmaking industry, but even where there's a little more protection because of language, it is still hard.

So it has nothing to do with the ability of filmmakers or the demand by Quebeckers and francophone Canadians. I think the real issue there is that even in that situation, those extremely talented filmmakers have to really work hard to get the screens. And that's the issue in terms of how Canadians contribute back and vote with their wallets.

[Translation]

Ms. Pauline Picard: Mr. Charlebois, do you live in Quebec?

Mr. Marc-André Charlebois: I come from Hull and I now live in Ottawa. But I have just come from Toronto, where I lived for 10 years.

Ms. Pauline Picard: All right.

I wondered whether you were aware of what the $24 tax can mean to small regions like Îles-de-la-Madeleine and the Lower St. Lawrence. Are you aware of what has been going on since this tax was implemented? We were told right from the start that this would greatly impact on air transportation in these regions, because of competition. Tickets are very expensive. For instance, people from the Magdalen Islands have to add $24 on top of several other charges for a two-way ticket. There's also the management side of it. I think that the agencies have to collect this tax.

Do you know whether the implementing of this tax has had a real impact on the small airports?

Mr. Marc-André Charlebois: Our agencies have, in fact, told us that this has a negative impact on their business. We have no figures yet because this has not been going on long enough. The time is too short for an adequate sample.

In damage assessment, the problem is to find out to what extent people who intended to travel have decided not to travel. All this is difficult to determine. If we were dealing with regular travellers who suddenly stop, it would be easier to estimate. No doubt, there is a major impact. The greatest impact is on travel between small populated centres, where the only way to go is by air, as in the case you mentioned.

I also mentioned large cities like Edmonton and Calgary; these are fairly large municipalities. The ticket used to be cheap, but it has gone up 25%. Now, people think twice before travelling.

Ms. Pauline Picard: All right. Thank you.

The Chair: Is that all?

Ms. Pauline Picard: Yes.

[English]

The Chair: All right, then. Mr. Pillitteri, you may take ten minutes, please.

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

It's good to see you making a presentation here again, Mr. Pollard. I remember last year and the year before. I'm sure you do not have these facts and figures and room losses here just because of my being on this committee: that was very real. Businesses have a tendency to be resilient, and really to be innovative. Yes, the government did give $20 million in order to assist short term, but any one dollar given to the tourist industry is sometimes returned tenfold and with the most expediency of any sector.

Specifically, the money was given there. Actually, what they did--the fact is that I live in Niagara--specifically was to match funds and to target what you call the rubber trades, specifically in the four adjacent states to that of Ontario: Pennsylvania, New York, Ohio, and Michigan. It's already paid dividends. I do in some sense live within that industry's orbit myself. As a matter of fact, tomorrow the Canadian Tourism Commission will be heading down again into the Niagara Peninsula area, specifically to Niagara Falls, to spend money and find partners in order to promote the area. And of course it's quite an area to promote--I have to be partial; I live in it--and it has much to offer.

I have a problem sometimes. I love the tourist industry and what we have, but I hate sometimes being totally compared to the Americans as to what they're doing and what we're doing. I know they spend much more in promoting an area. They have to; realistically, they haven't got places as natural as we have and the actual beauty we have within Canada. But the wish of individuals to visit Canada cannot all be based on dollars and cents in our income tax system. It only has to be based on their wanting to come to Canada to see what we have to offer. I understand the hotel industry. But when we take a look at cost factors within the hotel industy in the southern part of the United States, or in Canada, some of our hotels are cheaper, our services are excellent, and our security is sometimes much better.

So just give me an idea: why do you want to mix the situation of the tourism industry and hotels with whether we as a committee or as a country should lower taxes? Do you think the tax regime has a diverse effect, causing Canadians not to invest in Canada within the hotel industry, that they would invest elsewhere? I can't quite figure what the tax structure of a country has to do with visiting the tourist industry within a country. And when you say... I understand that possibly we have to take a look at RRSPs because the regime is not equivalent or not fair as it stands right now--nothing is fair in the tax system--but what has lowering the overall tax collection we as Canadians get and then return to our people got to do with comparing our system with that of the United States? Would you put some light on that?

º (1630)

Mr. Anthony Pollard: First of all, I'd like to say that we should use you as a tourism ambassador. That was a great ad for Canada and for Canadians to stay here at home. I thank you for that, sir.

If you look at some of the tax structures we're faced with in Canada and you look at the pricing we have in Canada, first of all, we're the best deal in the world. We know that. We have a product that's equivalent to anything anywhere else in the world, and we do a very good job at what we do here.

If you look at the average cost of a hotel room in, for example, Paris, it's $475 a night. In London it's $365 a night. You go down to places like New York and you're looking at about $325--I'm using U.S. dollars here for comparison's sake. Toronto--Dr. Bennett, your riding is just outside it--is $99 a night for the same product, the same thing. Down in Halifax you're looking at about $75 a night, right? It's the same product all over the world. A lot of the problem we have is the Canada-U.S. dollar difference, but the fact of the matter is that we are still faced with things such as taxes, which kill us.

I realize that property taxes are under section 92, not section 91, where you people are involved. Let me give you a little example. Your average hotel room in Toronto is $7,500 a year per room for property tax, whether it's occupied or not occupied. It's out of your bailiwick, and I understand that fully, but compare that to a place like L.A., where it's about $1,500. Those are comparisons for Canada versus the U.S. and for Canada globally.

One of the things the committee asked about was, how do we ensure that our standard of living and the excellence we have in Canada are maintained? Our first and foremost point is, let's get people moving in Canada. Let's get them staying in our hotels. Let's get them using all the various transportation sectors.

The second thing is, how do we ensure that we keep more people here and not have them go south of the border? How do we ensure that we make a bit more money? That's why we put recommendations forward with respect to things such as EI premiums, RRSP contributions, and so forth. That's where this committee has an opportunity to bring forward a recommendation for the budgets. Is it a case of apples and oranges to a degree? Yes, you're right, sir, but at the end of the day these are things that can ensure that Canada remains the number one country in the world.

º (1635)

Mr. Gary Pillitteri: I'd like to continue with the travel agency representatives. I just want to ask you a question. We think of tourism--and I think it is--specifically as an export product. As to this charge, it has never been written on any stone that we'll maintain the same amount. Legislation calls for it to be self-sustaining, and if there's an overcharge, of course it'll be lowered. But as it is an export product, would it be cheaper to buy a ticket in the States if someone is travelling back and forth from Canada, or would it be the same as if you bought it here in Canada before going abroad? What happens a lot of times, I notice, is that you have a high season or a low season in different countries. Sometimes it's better to purchase a ticket from the country you're travelling to, and sometimes it's better to buy it in the country you live in and travel abroad from. Is there any difference in this tax?

Mr. Marc-André Charlebois: Yes. If I were to purchase my tickets in New York to travel to New York, I would not pay that surcharge.

Mr. Gary Pillitteri: I mean, if you were to purchase the ticket in New York to travel into and out of Canada, would that charge be on it?

Mr. Marc-André Charlebois: The charge that would apply would be the U.S. charge.

Mr. Gary Pillitteri: So it would not be the Canadian charge.

Have you found that since we have almost no competition here within the airline industry--I'd say that quite clearly--the industry has lost ticket sales across the river into the United States because people haven't bought them in Canada for the same travel, or are there any statistics on that yet?

º (1640)

Mr. Marc-André Charlebois: There's absolutely no data to support this at this stage.

The Chair: Thank you very much.

Mr. Brison, go ahead. You have ten minutes.

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

Thanks to each of you for your interventions today.

My first question is for Ms. McDonald. You had cited the impact of the relatively low Canadian dollar on the industry. We're seeing signs not as much of the strengthening of the Canadian dollar but the weakening of the U.S. dollar now. What would be the impact on your industry if we see a fairly significant increase in relative terms of the Canadian dollar value over the next period of time, say the next year?

Mrs. Elizabeth McDonald: The value of the dollar has the greatest impact in what we call foreign location shooting, which had a value of about $1.8 billion last year. There are a number of factors that I think will affect foreign location shooting. It's very important for helping to build the infrastructure.

You come from Halifax. There's imX communications, a company run by Chris Zimmer, who's been on our board. It does a mix of foreign location work and Canadian work, for example. Having that income can actually cross-fertilize the stability of the company.

So it becomes very important for some producers to do that as a stabilization, and also to make sure there are jobs for technicians, actors, directors--people who stay in hotels and fly into and out of Canada and eat in restaurants and all of that. So this is a sector that is obviously important. It's been a growth area for the sector.

If you look backwards in time and look at what has happened to the industry, generally the volume of work done by foreign interests in Canada tracks where the Canadian dollar is. And I think as the Canadian dollar moves towards 70¢, the real issue is that we're in a global environment. Our biggest competition in this area is Australia, New Zealand, and the Czech Republic.

And the Australian dollar is very vibrant--it's not as strong as the Canadian dollar, but it's vibrant in terms of attracting people to work there. It has put in some tax incentives. The New Zealand dollar is even lower than the Australian dollar, and it has built the infrastructure related to The Lord of the Rings. The Czech Republic has been an important contributor for a long time. I was looking at some data in New York the other day, and eastern Europe is starting to move up. That's the first factor.

Couple that with the move in the United States to ensure production stays in the United States and doesn't move. I just debated this with the California industry in New York the other day, and there's a very strong feeling about it. That song, Blame Canada, has been taken up with quite a vengeance in California among people who feel we are attracting work away from them. There are a lot of efforts being made to make it attractive for work to stay in California and not come here, including cities like Santa Monica trying to make every effort to do that.

There are tax incentives in the United States, but....

So clearly, if the dollar starts balancing out and there are incentives put in place.... There was a countervailing duty petition against Canada that was dropped in January. This will probably either re-emerge in August and/or come back as a USTR 301, something I wish I'd never known about but have become familiar with.

So you have several factors together that really have a grey cloud out there for those dollars that come, dollars that are important not only to our sector but also to the people our sector uses, including the people sitting here. As we get closer to that level with these other pressures, I think this growth area is going to have some difficulty, no question.

Mr. Scott Brison: Thank you.

Mr. Charlebois, you'd mentioned the security tax and its impact, particularly the disproportionate impact it has had on regional and short-haul carriers.

What's your opinion on the revisions to the Competition Act before Parliament, given that it took the Competition Bureau 60 days to respond on CanJet and 45 days on Canada 3000, and in both cases the demise of the airlines preceded government action? Are you confident the changes to the Competition Act will provide the type of enforcement capability the Competition Bureau will need to act more quickly and effectively and to prevent Air Canada or whoever from practising unfair competition policies?

º (1645)

Mr. Marc-André Charlebois: Yes. My worry is whether or not this piece of legislation will make it through and be enacted.

I'm happy to say that some airlines are rising from the ashes, if we can use this cliché. CanJet is relaunching service, and we welcome this additional competition in the marketplace.

But yes, I think the legislation, the way it's been drafted, would address the problems. It's just a question of when it's going to be enforced.

Mr. Scott Brison: We're strongly supportive of getting it through Parliament as quickly as possible, because we're entering the season where it's going to be extraordinarily important that a Ken Rowe, Michel Leblanc, or others who have the intestinal fortitude to re-enter Canadian air space ought to be able to do so with reasonable support from competition policy.

Mr. Pollard, you mentioned payroll taxes as one form of profit-insensitive taxation. What's the impact on your industry of capital taxes? Is the lion's share of your costs more on the payroll side or the human resources side?

Would a reduction in capital taxes, the other dominant form of profit-insensitive taxes, help your industry as well?

Mr. Anthony Pollard: Our corporate tax structure is something that obviously is onerous. The single largest cost for hotels, outside of all the taxes we talk about, is payroll.

We employ, as I mentioned at the outset, 237,000 people, and we have a total payroll of about $4.5 billion. I realize your question is on the capital side, but reductions on the HR side would certainly be very beneficial for us. Obviously, the big one for us is the EI premium, and I've appeared before this committee before talking about how much it would mean if we could drop it down by, say, 15¢ or 20¢. It works out to about $90 a year per employee.

The former Minister of Finance asked me last November in a meeting whether we would go out and hire more people on the basis of saving $90 a year. I responded by saying, no, sir, we wouldn't. But I added the caveat that when you add up all of these other little things that come along, it becomes very burdensome for us, if you will.

For example, I often get the point made to me, “Well, why don't you do this? It's equivalent to the cost of only one room per night.” Well, you add them all up and suddenly the burden becomes very onerous.

So we try to chip away a little bit here and a little bit there, and often it does work well in the end.

Mr. Scott Brison: And then there are those guests who don't keep the shower curtain inside the tub.

Mr. Anthony Pollard: Oh, you've read the Hilton book as well.

Mr. Scott Brison: And they take the soap with them at the end...

Mr. Anthony Pollard: Yes.

Mr. Scott Brison: Sorry about that.

Mr. Anthony Pollard: Well, I know you travel a great deal, so you can appreciate this.

Mr. Scott Brison: Thank you very much.

The Chair: Thank you very much.

We'll go to Mr. Discepola for 10 minutes, followed by Ms. Leung for 10 minutes.

[Translation]

Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.): Thank you, Madam Chair.

I will not use up my 10 minutes because I have an appointment at 5 o'clock. I have two questions, one for Mr. Charlebois and one for Mr. Pollard.

[English]

I'll start with Mr. Pollard, because I find your proposal extremely interesting, and it's probably a no-brainer. If we can invest $30 million and get back 2,400 new jobs and all the economic spinoffs, then it's a no-brainer for me. So I would like you to elaborate more.

My real concern is how you have arrived at... well, you're estimating $52.8 million in new taxes, for example. Is this through concrete market studies? Is it just your association's gut feel? How sound are those numbers, in other words?

Before we propose it as a committee, I'd like to know.

º (1650)

Mr. Anthony Pollard: It's a very good question. I would be posing the same one.

We did this in conjunction with actually three or four different government agencies and departments to come to this conclusion, as well as private sector organizations, and maybe I can go through it and name them for you.

We worked with KPMG in terms of developing what is the impact of our industry, how big are we, what do we do. We worked with the Conference Board of Canada on what is called the “team model”, which determines what is the economic impact and spinoff effect. So for every dollar this generates x or y.

We then worked with CCRA in terms of the revenue structure that's coming in, and then with the Canadian Tourism Commission and Statistics Canada in terms of knowing what is the multiplier effect of all of it.

I've been coming to the railway committee room for a few years now, and I've seen too many witnesses come and float a balloon and think that something really neat is going to evolve from it. Then you have some government economists or analysts go look at it and say, this is a bunch of malarkey.

No, we stand by these numbers, and they were done with a great deal of analysis to come to these conclusions.

[Translation]

Mr. Nick Discepola: All right.

Mr. Charlebois, when you answered Mr. Harris' question, you said, as I understand, that airline companies no longer paid for security. Perhaps I am mistaken, but I thought I understood that previously, airline companies included security costs in their price.

Mr. Marc-André Charlebois: I said that they picked up the cost of airline security, as it has always been their responsibility, but that the surcharge would help to install new apparatus and to step up security measures in airports, and it would be spent on these things and not on the general functioning of airport security systems.

Mr. Nick Discepola: Aren't the local authorities in charge of security in every airport? For instance, in Montreal, it is ADM.

Mr. Marc-André Charlebois: The airline companies are responsible for it.

Mr. Nick Discepola: But they do not pay because the government picks ups the tab. Am I right?

Mr. Marc-André Charlebois: Yes.

Mr. Nick Discepola: All right. Then why did the airline companies not lower their ticket prices?

I will put all my questions so that you can answer them too.

I do not know in what year this was done, but a cost recovery program was implemented. You yourself said that the costs would probably have to be picked up by the general operating fund. I do not agree with you. The user must pay for this service, because he is the one who benefits from it.

Whether or not $12 is too much is subject to debate. When the amount was set, it was compared to what was being done in the United States. You yourself said that there were charges in the United States. Perhaps they should have charged $10, but this is not a cash cow, as was said earlier. We are not trying to make money with this. We simply want to cover our costs.

As I understand, you also said that the amount should be based on a percentage of the full cost of the trip. I would like you to explain this. I think that there is a point of departure and a point of return. In this way, we are not charged for the distance flown by the airplane, but according to the airport of departure and the airport of return.

Mr. Marc-André Charlebois: But the cost is the same.

Mr. Nick Discepola: That is it.

Mr. Marc-André Charlebois: The problem is that sooner or later, this model no longer makes any sense. This is why we would like to save the user all that cost.

It is perfectly all right to apply the user-pay principle, , normally. In my opinion, this should be our usual approach, but when dealing with airline security, passengers are not the only ones to benefit from increased security measures. Canadians as a whole are benefiting from it. If we can prevent tragic events, of course we save the passengers from certain death, but we also prevent all the further impact, like the damage done to the buildings in New York, for instance. Passengers paid for security. But this involved not only passenger security, but the security of everyone who was affected by the disaster. And the same applies to all the economic fallout all over the land when such events cause a great slowdown of the entire travel industry. The entire economy is impacted, and not only travellers. This is why we think that the user-pay principle no longer applies. In fact, vast numbers of people profit from the transportation industry. When security problems arise, all those people are affected and not only the passengers.

This is the logic behind our position.

º (1655)

Mr. Nick Discepola: The problem is that since the implementation of this program, new fees have sprung up all over the place. I think that even immigrants are subject to a $950 fee to cover the cost of an application.

Thus, I think it is difficult to make exceptions at this stage. This is why I said that our government's commitment—because the commitment was made by the former minister who was representing the government—is not aimed at making money out of all this, but to cover our costs. And if there is a surplus, we will adjust rates accordingly. Very simply, I think that this is it.

Mr. Marc-André Charlebois: If this situation must continue, we would like this tax or surcharge to be reviewed in autumn, as the former Finance minister promised. If we want to keep it at its current level, we must take another look at the cost, because in the United States, it currently costs $5 per passenger.

Mr. Nick Discepola: We know that US $5 is worth CAN $8. So we are comparing $8 to $12.

Mr. Marc-André Charlebois: No, we comparing it to $24 because we are dealing with a round trip.

Mr. Nick Discepola: Because they do not have round trips?

All right. Thank you.

[English]

I'll give the balance of my time to one of my colleagues, if you wish.

The Chair: Okay.

Dr. Bennett, you said you had just one question, so maybe you can take the balance before I go to Ms. Leung.

Ms. Carolyn Bennett (St. Paul's, Lib.): I apologize because I missed the presentation. I just need a little explanation in terms of two things. The first is that there were some concerns because of foreign production. Vancouver production companies, Canadian companies, are having trouble finding crews. Is it the responsibility of the federal government to even that out? How attractive do we want it to be for the American companies to come and film here if Canadian companies can't find crews?

Second, can you explain to me the subsidy versus tax credit? How do the Americans view us? What is a subsidy? What's a tax credit? What is an even playing field? What makes Jack Valenti mad?

Mrs. Elizabeth McDonald: Jack Valenti is not mad about this issue. It is a conglomeration of people who are called below-the-line workers. In California, those are technicians and directors and others. In fact, the Motion Picture Association of America has taken the position that filmmakers should be able to make films wherever they want. In this unusual circumstance, as with copyright, Jack's with us. That's the first part.

The second part is that I think there is a balancing factor between what work the U.S. studios do here and.... Last year was an anomaly. I didn't get a chance to say that earlier. At this time last year, the U.S. film industry did not know whether it was facing a strike of the Screen Actors Guild and/or the Writers Guild of America. It could have been two strikes or one, so a lot of work moved up here. I think we'll see a natural diminution of that work. Based on what we're seeing as anecdotal at the moment, in British Columbia, for example, there is less work. There's less work in Toronto, but it's natural. I think everybody projected that. I don't think some of the unusual problems we saw last year in that spike situation will happen.

This is a very mobile industry, as you know, and crews do come from other places to do the work. But it has become important in terms of stabilizing and providing.... I'm not saying we go out of our way in that way.

In terms of the countervailing duty issue, you were asking what the balance is. The U.S. interest claimed that the tax incentives that have been put in by the production services tax credit, which is lower than the tax credit we were referring to, and the similar provincial subsidies are unfair. Based on our understanding and our last go-around in the countervailing duty, we do not agree. In fact, there are tax incentives in 44 of the U.S. states, I think. In this situation, not unlike softwood lumber perhaps, that doesn't seem to matter. I guess our concern is that we're going to find ourselves in that situation.

There are balancing factors in terms of how many people can come up, how many permits they get to have, what the taxes are. It's not just a free ride up here. It does generate some activity, and it's excellent for some Canadian workers in the film industry to be in an American film. It actually can give you box office and really heighten your value in the Canadian market as well. So it's a mixed blessing.

» (1700)

The Chair: Okay, Ms. Leung, go ahead.

Ms. Sophia Leung (Vancouver Kingsway, Lib.): Thank you, Madam Chair, and thank you all for your good presentations.

First, for Ms. McDonald, I'm pleased you're back again. You mentioned the Canada Television Fund, which is very helpful for trying to ensure the high quality of Canadian programming. First, do you find this funding actually serves that purpose?

Mrs. Elizabeth McDonald: Absolutely. I think Neil could address that, but I don't think there's any question. In fact, it has become so oversubscribed that the Canadian element may have become more important as a way of judging programs.

Neil.

Mr. Neil Bregman: The fund has been exceptional in stimulating production from coast to coast. Our company, which is located here in the nation's capital, which is not known as the production industry by any means, has been able to grow and create all kinds of very high-quality cultural programs, many of which actually do export a little bit. We do very Canadian programs with the fund, and then we do Canadian programs with the fund that actually have some value internationally. When we look at what the fund has done to stimulate the industry, we're a good example of a small business that has been able to contribute to culture, heritage, and economics in this country. Without the fund I don't think we'd have a chance at all.

Ms. Sophia Leung: That's good to hear. For the last couple of years—you know I'm from B.C.—we've been working with your industry on foreign actors tax issues. Do you find this was happily resolved? We worked very hard to this end.

Mrs. Elizabeth McDonald: Yes, actually, it was. I think it has worked out in a way that provides a more equitable contribution from people who are coming up here, certainly, and that appears to have been well worked out. I have to say that in CCRA and this committee a number of people really rolled up their sleeves and got to work and made it work, and made sure that some of the concerns of the government in terms of inequitable contributions of people who work in Canada were resolved.

Ms. Sophia Leung: That's good to hear. Also it was with the cooperation of the former finance minister. We all worked together.

Now I have a question for the tourism industry. I'm sure a lot of foreign tourists is a good attraction for your industry. Do you find that the low Canadian dollar is actually more attractive for the tourist or the reverse?

Mr. Anthony Pollard: Let me answer your question by throwing the following numbers at you. In 1994 Canada's travel deficit, i.e. the number of people leaving versus the number coming in, was running at $6.4 billion. Canada's travel deficit today is about $1.3 billion. I'd like to be able to point out that it was the contribution of the Canadian Tourism Commission, by industries working together to promote Canada abroad, by the airlines, by hotels, and so forth. But I think we would all agree that one of the largest single factors that contributed to this was the dollar.

The dollar is an interesting phenomenon. When it was about 90¢ about 10 or 12 years ago, it didn't really have an impact, other than a little bit of people doing things. When it went to about 85¢, you suddenly had people saying, well, there's a bit of a difference. When it hits about 80¢, that's when Canadians start saying, oh, oh, it's getting too expensive. There's a direct correlation between people coming up here and Canadians staying at home. When it hit 75¢, that's when people say, whoa, I don't want to leave here. When it hit 70¢ and then went down to 65¢, it has a major, major impact on us.

When you talk about a return on investment for the federal government to make a commitment for marketing dollars, I wish I could get into a business where for a $100 million investment I get about $4 billion back—not a bad little plan if you can get into it. I don't know too many legal industries where you can do that. So I encourage the committee to keep that in mind.

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Ms. Sophia Leung: Thank you.

Mr. Anthony Pollard: I apologize. It was a long-winded answer to a very short question.

Ms. Sophia Leung: You requested an additional $30 million. In what way would you utilize those funds?

Mr. Anthony Pollard: It would be used for a continuation of much of what the Canadian Tourism Commission is doing today, namely, marketing and advertising programs. It's doing things like ensuring that Canada gets a good profile in the travel weekly sections on Sundays, in papers like the Los Angeles Times, or the New York Times, or the Chicago Tribune. You can do a big splash about coming up here. It costs money to do this. It's funny that, in Canada, our travel sections are still on Saturdays. I don't know why.

I would also like to see a continuation of the “There's No Place Like Home” television campaign, which has proven to be very, very effective, both here in Canada and elsewhere. At the same time, I'd like to see that if the government comes up with $30 million, our side will come up with $30 million. A year from now, I'll sit before this committee and hope that I'll be asked that question. I'll say, “Yes, we did it”.

Ms. Sophia Leung: Maybe you could find other private investors for that?

Mr. Anthony Pollard: But just remember that the Government of Canada is also getting one heck of a return on this too. So we're all benefiting.

Ms. Sophia Leung: Thirty million dollars is not very much.

Mr. Anthony Pollard: Thank you very much. I hope we can take that to the bank.

Ms. Sophia Leung: In the private sector, it's not very much.

Just one little question--

The Chair: A short one.

Ms. Sophia Leung: —for Ms. McDonald.

B.C. is famous for having a lot of skilled workers in the film and television production industry. Is there a shortage? Have you developed a training program for this? We've been praised for our work there.

Mrs. Elizabeth McDonald: Yes.

It's actually very interesting. We've had a training program for about eight years, or longer than I've been at the association, which means a very long time. Several years ago we reviewed it when it was plunking along. We had Peat Marwick do a study. We were partnered with Human Resources Canada at the time and doing some work with Foreign Affairs and others. Peat Marwick did an assessment and noted, first of all, that the contribution of the industry is three to four times any moneys that are put in by matching investors.

One of the issues in this sector is that it does need trained people. I agree with you that British Columbia—with BCIT and other involved parties—has trained well in some areas. But the production industry could contribute back enormously by taking young people in. We've done this: many of our interns are now coming from British Columbia. We actually do have a program specific to British Columbia, in partnership with CanWest Global.

Our subscription rates are incredible. We have one position available in London, England. The young person in the position will be paid $10,000 for six months. One would hope that they have relatives nearby, which we've encouraged, because I don't think you can live in London on $10,000. We've had 85 applications for one position. We'll have 120 intern positions in total, and we expect to have over 500 applicants. They will be matched with production companies, who not only surpass the dollars put in, but also give a lot of personal time—and often open their homes to these young people. Many of them are young people at risk.

Ms. Sophia Leung: Thank you.

The Chair: Mr. Harris, five minutes, and then we'll finish with Ms. Minna for five minutes.

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Mr. Richard Harris: Thank you, Madam Chairman.

Ms. McDonald, I need to get your help on something. An incident happened a few short months ago. I was stuck to provide an answer to the calls that were coming in to my B.C. office between the 6:30 and 8 evening time slot, which is pretty much the prime family viewing time. There was a program on CBC television that looked like it was going to be an opera of some sort, but about 20 minutes into the show, all of a sudden, there were an abundance of naked bodies and simulated sex acts. This was during prime family viewing time. I said to my wife, “I'll bet my office phone is going to be ringing tomorrow morning”. Surely it was. Parents were outraged that this was shown in that time slot, or maybe even at all. They were threatening that they would never watch that station again.

How can this happen? I assume that your organization makes the films. It was a Canadian production. You have nothing to do with when they're shown. However, when things like this happen, it hurts your industry, because people turn off their television sets. I realize it's the responsibility of parents as to what their kids watch, and rightfully so. But if parents are turning off their CBC television--which is a good source of revenue for you--how do I answer the questions of parents and people in my riding who have said to me, “I'm never watching again, and by the way, why should I have to pay for television and films that I'm never going to watch anyway?” How do I answer their questions?

Mrs. Elizabeth McDonald: To deal specifically with the first part of your question, I could say to you that we're not responsible for scheduling; however, I'm also a parent. Mr. Bregman, who makes children's programming, is also a parent. We all care very much about what our children see. In fact, we work with the broadcaster to try to ensure that there's appropriate scheduling at times that people want and that make sense.

Frankly, on an issue like this, I think it is appropriate to direct these concerns and complaints to the CBC. I have a 15-year-old son, and know what I would have done.

I don't know why they would have scheduled it at that time. It was obviously an inappropriate time for that scheduling. There are watershed hours for programming. I believe the CBC must adhere to the same conditions private broadcasters do.

So there are two bodies, the CRTC and the CBC--

Mr. Richard Harris: My earlier comments led up to my main question, which is that this type of thing must hurt your industry. You said earlier that the reason you need public and private funding is because of the American dominance of the market.

I don't suppose your market is shrinking. Maybe as many people who are shutting off that station in favour of an alternative might be turning it on. I don't know. But even if your market stays level, this means the public funding must continue in order for your industry to survive. So--

Mrs. Elizabeth McDonald: There is a body that deals with content and scheduling, and that's the Canadian Radio-television and Telecommunications Commission.

That is a very fair question, and Canadians should make it known if they are unhappy about the scheduling.

The other thing is we do have one of the richest systems in the world, and the best way you can signal to a broadcaster or producer that you don't like their programming is to change the channel. That works every time.

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Mr. Richard Harris: Yes.

Mrs. Elizabeth McDonald: So those are two answers.

In terms of our public funding, we have a completely different model in this country from any other country in the world. We have ceded, because of our geography and technology, the principal amount of our prime time programming to foreign interests. Outside the CBC the maximum you'll see of prime time programming that's Canadian is 35% . That's the maximum. That's not what you see in the United Kingdom and other places. You see that it's quite the reverse.

The other thing is the funding of programming because of the mix of foreign programming and what Canadian broadcasters pay for it. In countries like the United Kingdom, Australia, and the United States, the basic fee paid by a broadcaster in exchange for the plays they have is somewhere between 80% and 90%. A Canadian producer with a very high-quality product, if they're really lucky, might get 25% of programming from the broadcaster. They have to cobble together the other 75%.

So I'm always asked, why are we paying this amount in Canada? Part of the issue is we have a mixed system, because technology allows those foreign signals to come in, so Canadian broadcasters pay the rights. So the amount the broadcaster pays in the programming is lower because they're buying foreign programming as well. Frankly, the interesting thing is, as other systems are growing, the 80% to 100% paid by the BBC or an American broadcaster—in the United States the American broadcasters pay 80% to 90% of the costs just for the privilege of playing it, not for copyright—is starting to change with the growth in the system, because the broadcasters just don't have the same amount of money. Also, with globalization, as you may have noticed, some of the entertainment companies aren't doing as well in the New York Stock Exchange as they were at one time. They are working on tight margins and they're starting to pay less. But if we could even get 50% of a licence fee from a Canadian broadcaster, that would be phenomenal.

So we have a different model. Some of it is because of geography and technology, because those signals come in anyway. There's no other country in the world where that happens. Even in Mexico, where they have the geography, they're protected by language. So if you want to have a broadcasting system that has Canadian programming, not only in the areas that we talk about in terms of news, etc., you're going to have to look at a different way of financing it. But I can assure you as well that Canadian producers are the most entrepreneurial in the world. Absolutely.

Mr. Richard Harris: I want to thank you. I didn't mean to put you on the spot with that, but—

Mrs. Elizabeth McDonald: You should write to the CRTC and you should write to Mr. Rabinovitch.

Mr. Richard Harris: They are questions I've had trouble answering.

Mrs. Elizabeth McDonald: And tell people to change the channel.

The Chair: Thank you very much for that.

Ms. Minna, go ahead, please.

Ms. Maria Minna (Beaches—East York, Lib.): Thank you, Madam Chair.

I want to address two questions and two comments to Mr. Pollard. In your submission you are recommending a $30 million investment, and I consider it an investment rather than just spending. I don't have a problem with this kind of investment, but what I do have some concern with is that on the one hand you're recommending a $30 million investment in the industry, while on the other hand you turn around and say we have to stop the errant spending sprees. To me, spending sprees suggest frivolous spending.

Just about a week ago, I think it was, a group of councils appeared before our committee. We had the innovation council, the health research council, and so on, and they were all talking about the importance of investing in innovation and other areas for Canada if Canada is to be productive in the future. The universities were here with respect to the problems of our brain development, and PhDs, and what have you. And infrastructure, housing, and the Canadian Television Fund, which I support, are investments.

I find it a little bit contradictory. On one hand you're asking us to spend money; on the other hand you're telling us to stop the spending spree. So which ones do you consider to be frivolous? I'm being a little blunt, but I find this type of presentation a little disingenuous.

Mr. Anthony Pollard: No, not at all. In fact, I think it's a very good question.

The reality is that the investment gives an ROI to the Government of Canada and to industry, as well as a spinoff effect, which is an ROI we all benefit from.

What I've stated at the beginning, and I reiterate this, is that the committee always asks the question: what do you want to do to enhance the quality of life for Canadians to ensure that our economic standards are maintained or grow? I've seen this committee many a time in the past issue a series of questions, and nobody wants to answer them, so they just jump up on their soap boxes and go off on whatever issue is of interest to them. Hence, when the committee asks very clearly what other things the Government of Canada should be doing in an upcoming budget, the $30 million investment is not a contradiction, because, as you've said, it gives an ROI to the government--

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Ms. Maria Minna: Mr. Pollard, sorry to interrupt, but I'm not quibbling over your $30 million. You made the statement that we should stop spending sprees. I've given you a list of other investments. Which of our investments do you consider to be bad or things we should stop spending our money on? To me, a spending spree means we're spending money frivolously. I'm not quibbling with your request. Which areas do you suggest we stop spending in?

Mr. Anthony Pollard: The one that I think causes a lot of grief for many Canadians is when you come to the end of the fiscal year in the month of March and a series of purchases are made by various government departments and agencies. I think many people recognize that in many cases those funds are spent because you won't be maintaining your budget for the following year, as opposed to the private sector where they continue into the following year or you're rewarded for it.

Ms. Maria Minna: I know that in the last budget, which was at the end of the year, we put additional money into the innovation fund, the housing strategy, and the infrastructure. I consider those to be investments.

Having run a department, I can tell you that we did not run out to buy the latest computer and ditch the old one just because we had an extra couple of thousand dollars to spend. I just find that comparison not to be a very helpful type of discussion. I think it belittles the hard work that goes on and the kinds of discussions we have to have.

My other question is on your recommendation to increase the RRSP limit by $2,000. This is an expense to the government. If I'm not mistaken, because of the average income of people who work in the hotel business, they're never going to be able to contribute the maximum. I think they'd be lucky to be able to contribute anywhere near the average of $5,000. On the one hand you're recommending that we cut the debt, but on the other hand you're recommending an expenditure increase that will not necessarily benefit the average employee of your industry. I'd like to know how you square that.

Mr. Anthony Pollard: Actually, there's a very simple answer to that. In Canada we have about 6,500 hotels, of which more than 95% are independently owned and operated. You may see a sign on the door saying it's a franchise, but in reality those are independent individuals, who in almost all cases do not have the benefit of a pension plan, such as you will find in large organizations and the government. As a result, these people are always looking for ways to enhance their personal assets, and one of the most effective ways--and I think the Government of Canada recognizes this--is through RRSPs. So we recommend an increase in the opportunity for an individual to invest in them.

Ms. Maria Minna: This is a discussion I've had with some of my colleagues. How high do you think the Government of Canada should go in increasing the RRSP limit? What is the ceiling? In a discussion I had a couple of years ago with some of my colleagues when we were looking at pension reform, we said at what point does the government stop subsidizing or assisting? If the RRSP payment can give you an income of, say, $60,000 when you retire, is that where you stop? Is that the threshold? Have you thought about that?

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Mr. Anthony Pollard: What we've suggested on our end, as you've seen in the submission, is to allow us to increase it from $13,500 to a $15,500.

Ms. Maria Minna: No, I understand, but I'm wondering whether you've thought about the uppermost level. Where do you feel is the ideal level for RRSPs to give people a decent pension at the end?

Mr. Anthony Pollard: I think at the end of the day a lot of it depends upon demographics. It depends upon how long a person works or what part of the country they live in.

I would ask you the question: what is your thinking on it? Where do you think the government should be going? What would you advise?

Ms. Maria Minna: Well, I haven't come up with a specific number, but--

The Chair: I have to disallow a dialogue, and I do have Mr. Cullen on my list to ask a last question.

Thank you.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Madam Chair, and apologies to the presenters. I got yanked to the justice committee, but I'm glad to be here.

I have a question for Mr. Pollard. In my riding of Etobicoke North, we have many hotels by the airport, along Dixon Road, so I work with the hotel association out there quite closely. But I and other colleagues have been working with another group, the Canadian food and restaurant association, on this concept of the yearly basic exemption with respect to EI.

In other words, of the first, let's say, $2,000 or $3,000, employers and employees would not be paying the EI. The argument there is that, especially in the food and restaurant business, there are a lot of students who come and go, and it would remove that deterrent for business to hire people like that.

I notice in your brief you talk about the government continuing generally with reductions in EI premiums, and you suggest pulling up 20¢. I'm wondering if your employee mix is different from that of the food and restaurant association, or whether this is simply a stance that you prefer, to continue with a general tax reduction. Are you apprised of the YBE proposal?

Mr. Anthony Pollard: I've worked very closely with the Canadian Restaurant and Foodservices Association. We share many of the concerns, challenges, and difficulties that they do. They obviously have a different mix. We don't employ quite as many people as they do, but at the end of the day that would work well. That works out to about $90 per employee when you have that holiday, if you will, through the first amount.

I made the comment, Mr. Cullen, before you came in, that last year, when I met with the former Minister of Finance at a meeting on November 18 in Montreal last year, he asked me what it worked out to. I said about $90 per employee. He said that when he was running CSL, that really wouldn't have been an incentive or a disincentive to go out and hire another person. He asked would I agree with him, and I said yes, 100%.

The problem, though, is in the mix. When you start adding this consideration, that consideration—a whole bunch of them all together—it suddenly adds up to something much bigger. As a result of that, what we're suggesting is if there is some way we can reduce that to make it easier for us when you combine it with all the other considerations we have when it comes to taxation and employee tax rolls and so forth, it would be beneficial for us.

Mr. Roy Cullen: Thank you.

The Chair: Thank you very much.

On behalf of all my colleagues who have joined us here this afternoon, we really appreciate your input for our discussions and our thought process. Again, if you have further documentation you'd like to provide, I invite you to do so, because there probably won't be a return visit, and we'll be continuing with these discussions in the fall.

So thank you very much.

We are adjourned.