EVIDENCE

Standing Committee on Finance NUMBER 022 1st SESSION 41st PARLIAMENT Monday, October 31, 2011 Le lundi 31 octobre 2011 Standing Committee on Finance CANADA [Recorded by Electronic Apparatus] EVIDENCE October 31, 2011 Committee Edited Evidence * Table of Contents * Number 022 (Official Version) Official Report * Table of Contents * Number 022 (Official Version) Témoignages * Table des matières * Numéro 022 (Version officielle) 22 31 10 2011 2011/10/31 08:30:00 House of Commons Comité permanent des finances Standing Committee on Finance FINA Chair Mr. James Rajotte 41 1

(0830) [ Translation ] The Vice-Chair (Mr. Hoang Mai (Brossard—La Prairie, NDP)) : Good morning, ladies and gentlemen. We are here for a pre-budget consultation. This is the 22 nd meeting of the Standing Committee on Finance. We are in Toronto. Although I am not from this city, I want to welcome you all here.

Today, we will be meeting with representatives of the Canadian Vehicle Manufacturers' Association, the Canada Company, the Canadian Energy Pipeline Association, Electric Mobility Canada, Spectra Energy and Financial Executives International Canada. [ English ] You'll each have five minutes to present your brief and then after that we'll have a round of questions from the members. We'll start with Canadian Vehicle Manufacturers' Association. Mr. Mark Nantais (President, Canadian Vehicle Manufacturers' Association) : Thank you very much, Mr. Chairman. Good morning, members of the committee. My name is Mark Nantais.

I am president of the Canadian Vehicle Manufacturers' Association. We're certainly pleased to be here and certainly welcome your comments on our recommendations for the federal budget 2012. In 2010 CVMA member companies Chrysler, Ford, and General Motors produced 65% of all vehicles manufactured in Canada and accounted for roughly 50% of all vehicles sold. Currently our member companies produce 22 different light-duty vehicles in six high-volume assembly plants along with a variety of high-volume components, including engines and transmissions, at four additional facilities.

Through their sales, assembly, and research activities, as well as their head offices, CVMA companies directly employ 35,000 Canadians and support an additional 50,000 retirees. For every one assembly job, seven other jobs are created in the economy. We know of no other sector that has such a high job multiplier. Our suggested budget actions are as follows. Recommendation one: Budget 2012 should re-introduce competitive, flexible automotive investment funds to attract new automotive investments as well as investments that upgrade and retain the existing Canadian automotive footprint.

Company decisions are now being made every three years or less, and the next horizon for new investments is already upon us. The existing competitive challenges facing Canadian manufacturers related to a high Canadian dollar, high commodity prices, and high energy costs will all affect the auto industry’s ability to compete for new investments.

Given that the automotive innovation fund is scheduled to sunset soon and that Canada must compete globally for automotive production mandates, an automotive investment incentive program that is not just equal to but better than competing jurisdictions around the world remains a necessity. We actually have examples if you wish to get a sense of these types of incentives.

Recommendation two: Budget 2012 should eliminate the green levy excise tax and focus on policies that deliver environmental benefits through measures aimed at getting the oldest and most polluting vehicles off the road and encouraging the use of clean and renewable fuels. The green levy was introduced in the 2007 budget under the vehicle efficiency incentive before the new fuel efficiency standards were to take effect in 2011 in order to achieve revenue neutrality of the auto eco-rebate program, which was actually established in that same budget. Two significant milestones have since occurred.

First, the government has eliminated the eco-auto rebate program in 2009, no longer requiring the green levy to achieve revenue neutrality. So what we now have is the introduction of a new additional tax on vehicles that have some of the best fuel economy and segments equipped with the most advanced and comprehensive safety systems. The auto industry has consistently argued against the adoption of the so called “feebate” programs, such as the green levy, given the inability to meet the stated environmental objectives, not to mention suppressing new vehicle sales.

This view has been supported by the National Round Table on the Environment and the Economy and Natural Resources Canada. Second, as mentioned, the government implemented this past September much more stringent vehicle greenhouse gas regulations for the 2011 through 2016 model years, and further expressed its intention to regulate even more stringently for model years 2017 through 2025. This measure will drive significant improvements in new fuel efficiency and reduce greenhouse gas emissions of the fleet, as all vehicle segments will be required to improve performance and reduce emissions.

Underscoring the urgency of the elimination is the fact that under the green levy consumers will soon be paying even more tax, even though the vehicle's performance may have improved or remained unchanged. Natural Resources Canada actually intends to adopt new vehicle fuel consumption testing protocols and label values, which will determine how much tax is paid in order to facilitate testing of more advanced technologies and provide fuel consumption values that are actually more meaningful to consumers and world driving conditions.

This will have the effect of increasing the public's fuel consumption values and increase the tax. Recommendation three: Budget 2012 should introduce a consumer incentive for a defined period to encourage the purchase of advanced vehicle technologies with complementary incentives that promote the necessary refuelling and recharging infrastructure to support the introduction of a broad range of alternate renewable fuels and a greater electrification of the vehicle.

In closing, we understand you receive a wide range of policy proposals as part of the budget consultation process and we would suggest full economic studies and corresponding public consultations before implementing major policy shifts. One such example is the unilateral tariff reductions under the guise of harmonization with the United States, of which the impacts on local industries may be uncertain.

Given the importance of trade to Canada's economic health, the only time tariff reductions should be considered is in the context in negotiating bilateral or multilateral free trade agreements that result in new market export opportunities for Canadian-produced products.

(0835) Unilateral action would undermine Canada's current bilateral negotiations, which are intended to provide market access benefits to both of the involved parties under negotiated and mutually agreed upon terms, conditions, and timelines. Thanks very much, Mr. Chairman. The Vice-Chair (Mr. Hoang Mai) : Thank you, Mr. Nantais. Next is the Canada Company. [ Translation ] Mr. Blake Goldring (Chairman, Canada Company) : Thank you, Mr. Chairman. Good morning, everyone. [ English ] On behalf of Canada Company, with “many ways to serve”, I very much appreciate the opportunity to appear before you today.

My name is Blake Goldring. I'm the founder and chairman of Canada Company. Our organization was created in 2006 to bring business and community leaders from across Canada together to support our Canadian military and their families. Canada Company is apolitical, and we take no government money. Some of our initiatives that you might know include our camps for the children of deployed soldiers, and also the scholarship fund, which provides post-secondary school funding for children of military parents who have been killed serving on an active mission.

Today we're here to seek your support for a fair and effective compensation program for the employers of Canada's military reservists. We believe that such a program is necessary to recognize the sacrifices made by both reservists and their employers and to strengthen a relationship that is vital to Canada's safety and security. Most important, this program will send a strong signal about the importance of reservists' public service by sharing its true costs across society. The Canada Company submission is based on recommendations made by the C.D.

Howe Institute that were recently endorsed by the Pratt report and the Canadian Defence & Foreign Affairs Institute. This institute is supported by major employer groups, including the Canadian Chamber of Commerce, Canadian Council of Chief Executives, and the Canadian Federation of Independent Business. Whether serving in peacekeeping or nation-building efforts or in combat zones, military reservists are a growing component of Canada's security at home and abroad. Last year the C.D.

Howe Institute issued a report that showed that existing federal and provincial job laws created to protect jobs of deployed reservists actually dissuade employers from hiring reservists. We believe that the stick, as embodied by the current patchwork quilt of various employment legislation across provinces, must be accompanied by a carrot, our proposed compensation program. By that I mean that incentivizing employers and covering their true costs will improve overall conditions for reservists and signal to employers that their efforts and costs are important to our society.

The costs incurred by employers include recruiting and training a replacement, overtime costs to cover absences, productivity loss, and retraining costs of returning soldiers. These costs are particularly challenging for smaller businesses, which find them more difficult to absorb within their operations. That is why our proposal is tailored primarily for smaller companies. Reservists are also affected by the current system, sometimes choosing not to deploy in deference to employer opposition, hiding the reservist's status, and finding fewer employment opportunities. The conclusion of both the C.D.

Howe Institute and the Pratt report found that the system needs to be changed, or else the employer pool will be eroded and will further increase pressure on our military planners to recruit and retain reservists. Our proposal incorporates the best of the learning from the programs in the United Kingdom and Australia. Based on 2011 deployment levels, the C.D. Howe Institute projects that a fair and effective employer compensation program can be implemented at the per annum cost of $8 million.

This cost-effective program will more equitably distribute employee deployment costs across society rather upon than a small number of employers; second, it will ensure a vibrant pool of reservists by improving their reservist employment opportunities and working conditions; it will ease reservist deployment and transition back to civilian life; it will enable DND to make better personnel decisions and plan for the future; and most importantly, it will send a clear signal that the public service of a reservist is noble and a good thing to do.

In conclusion, the men and women who serve as military reservists make many sacrifices to protect Canadian values at home and abroad. We think the time has come to implement an employer compensation program that demonstrates our appreciation for this essential public service. Mr. Chair, we thank you and the committee members for your consideration of this important initiative and for your continued support for Canada's military. Thank you.

(0840) The Vice-Chair (Mr. Hoang Mai) : Thank you, Mr. Goldring. Now we have the Canadian Energy Pipeline Association. Ms. Brenda Kenny (President and Chief Executive Officer, Canadian Energy Pipeline Association) : Thank you. Good morning. I appreciate this opportunity to present to the committee and to share with you perspectives from the Canadian Energy Pipeline Association. We represent companies that transport 97% of all the oil and natural gas produced and used in Canada. Our membership currently operates more than 100,000 kilometres of pipelines in North America.

Pipelines are the only feasible and by far the safest means to transport large quantities of oil and natural gas over land. We know from many energy forecasts that we will need to deliver that energy for a long time to come. These energy highways are the means through which Canada achieves lucrative energy revenues and trade and energy security for its citizens. I'm here to speak to you about the 2012 budget, but just for some background I'd like to lay a brief foundation first.

The Canadian economy, during the recent period of uncertainty it has come through, and the 2011 budget have turned the federal government toward a more long-term outlook. Minister Flaherty has stated that our long-term focus is now shifting from protecting jobs and output to creating the right conditions for more long-term jobs and stronger growth. Canada is in a more favourable position than many countries, in part because of the government's having chosen a prudent approach. Economic recovery is a big part of that.

CEPA's proposals for the next budget will enable economic growth and job creation while representing the goal of fiscal restraint. Our recommendations fall into two main categories. The first is to continue reform of regulatory processes and laws to ensure that public interest decisions, including environmental protection, are achieved through timely, efficient, and predictable processes. The processes must focus on effectiveness and efficiency and guarantee the necessary capacity within government to move private sector projects through government decision making in a timely manner.

This will enable job creation and economic development to the benefit of all Canadians. The second recommendation category is that for existing pipelines we must ensure that the regulatory capacity and tools are in place to safeguard critical infrastructure, protect communities, and enable reliable energy security and trade as well as environmental protection. With that in mind, our first specific recommendation is to renew funding and the mandate of the Major Projects Management Office for a three-year period.

This is a critical function, which allows executives across government to continue their work on the whole-of-government approach to regulatory coordination and crown consultation. The funding is necessary to advance modern and efficient regulatory practices and enable reporting on results across departments and jurisdictions. I urge the government to maintain this commitment and to ensure that appropriate personnel are in place. A failure to adequately resource the MPMO and key regulators will undermine the timeliness of decisions, placing hundreds of millions of investment at risk.

We ourselves are forecasting close to $40 billion in projects for the next several years. The second recommendation is to focus environmental legislation to improve regulatory performance. Canada's existing laws related to energy and environment have been assembled over many years and are somewhat of a patchwork quilt. Some of those include the Canadian Environmental Assessment Act, the Fisheries Act, the Species at Risk Act, and the Migratory Birds Convention Act. They've each been developed and implemented one at a time to address specific issues.

Today we need an updated framework of legislation so that all of the individual decision components can make sense together. We believe that the reforms should include an integration of decision-making processes to pursue optimal environmental incomes, to support efficiency gains and timeliness within government, to direct resources where they have the greatest effect, and to ensure that crown consultation for aboriginal peoples is in place effectively. Third, we must protect that infrastructure.

In particular, we need the National Energy Board to have in place the enforcement tools and capacity to ensure that “call before you dig” is mandatory and that the right tools are there to encourage appropriate behaviour for excavators. Do I have one minute?

(0845) The Vice-Chair (Mr. Hoang Mai) : You have 40 seconds. Ms. Brenda Kenny : Ninety percent of the NEB's costs are recovered, so these are costs we're inviting for ourselves, and they're important for safety. In closing, as I mentioned, we are aware of a number of pipeline proposals, on the order of $40 billion. They are there to transport hundreds of billions of dollars of investment and revenue from the upstream sector to meet energy security downstream.

The recommendations we have put forward to focus on regulatory reform are critical to creating the jobs, and that level of investment is profoundly important as a privately funded stimulus package for Canada. Thank you. The Vice-Chair (Mr. Hoang Mai) : Thank you very much. Electric Mobility Canada, please. Mr. Michael Elwood (Chair of the Board of Directors and Vice-President, Marketing, Azure Dynamics, Electric Mobility Canada) : Thank you very much, Mr. Chair. Good morning, everybody, and thank you for having us here. I'm the chairman of Electric Mobility Canada.

I've been in this position for about six years now, and we've been advocating for the use of electric traction as an alternative to fossil fuel and as part of Canada's future for transportation. Over the past number of years electric traction has become very popular around the world. In fact, most G-8 countries around the world have adopted strategies and initiatives to put electric vehicles into everyday transportation use, both for consumers and commercial application.

However, we've not been in that position here in Canada, and today I'd like to just go through a few things: some environmental economic opportunities, and then four recommendations, as proposed. From an economic point of view, we've already heard that Canada has a very lucrative business in the development of OEM vehicles. We do know that very well. Our opportunity, and with electric traction as we go forward, is to continue to maintain those jobs and actually increase them.

In the last little bit, the Chevy Volt has come out, and 20 companies in Ontario participated in the development of the Chevrolet Volt by providing components and engineering to that vehicle. The Ford Transit Connect electric vehicle was developed in Vancouver. It has created jobs in Vancouver and it continues to create jobs in this country. A number of others have been announced. Toyota will be developing their RAV electric vehicle in Ontario. So we're really there as a player. We know we have the capabilities from a personnel point of view and our capabilities are great that way.

We need to continue on with that by supporting it. From an environmental point of view, electric vehicles, even in a province where we are not purely hydro, still produce a 30% improvement to the actual tailpipe. There are four provinces in the country where hydro-electricity is used. In that case we see a 95% improvement at the tailpipe.

So from an environmental point of view, considering that transportation is about 28%, I believe, of gross GHGs, if we really want to make an impact, for sake of a better term, it's low-hanging fruit for us to really look at transportation as an area where we can make an impact today. As far as the electric grid goes, back in 2009, with the grace of Industry Canada and Natural Resources Canada, we were championed to put together Canada's electric vehicle technology road map, which we delivered in 2010 and handed off to the Deputy Minister of Natural Resources.

In that, we called for an aggressive target of 500,000 plug-in vehicles on the road in Canada by 2018, and this both in consumer and commercial application. If that were the case, we consulted with all of the utilities across the board, and there would be absolutely no need for any additional supply. What we would need is distribution. We need charging infrastructure and we need infrastructure, but we don't need to develop anything additional right now to get us to our early target. As we go down the road, yes, there will be a need for more. What we would like to see there is more renewable energy use.

The Government of Canada has been effective. They've worked with us on things, and we're thrilled that they've been there. They've also introduced a couple of programs that have supported the electrification of vehicles. One other area is Canada's green highway. We're looking for Canada's green highway to go from coast to coast to coast and produce alternative fuel stations. These are our recommendations, very quickly: Number one is codes and standards. We need codes and standards and we need them quickly to get vehicles into the marketplace. Number two is charging infrastructure.

We would like to see a program put into place where home charging and commercial charging are supported by the federal government. Our third recommendation is really a simple one, and that is that the federal government lead by example. In other jurisdictions fleets in the federal governments have really been looking at plug-in electric, battery electric, or hybrid electric vehicles in the best category.

(0850) Last is the promotion of the green highway from coast to coast to coast, building alternative fuel stations. Thank you very much for your time. The Vice-Chair (Mr. Hoang Mai) : Thank you, Mr. Elwood. We will now hear from Spectra Energy. Mr. Tim Kennedy (Vice-President, Federal Government Affairs, Spectra Energy) : Mr. Chair and members of the committee, thanks very much for the opportunity to be with you this morning. I'd especially like to thank the clerk for scheduling us so early so I can get home to carve pumpkins this afternoon with my kids.

Spectra Energy is the leading North American natural gas delivery company. Headquarterd in Houston, we have deep roots in Canada. This year Union Gas, a Spectra Energy company that serves over 1.3 million customers and more than 400 communities in Ontario, is celebrating its centennial. Spectra Energy Transmission West, also known as Westcoast Energy, operating in British Columbia for over 50 years, is engaged in a $1.5 billion expansion. Maritimes and Northeast Pipeline, a Spectra Energy joint venture, continues to deliver natural gas to Atlantic Canada and the U.S. northeast.

In total, Spectra employs 3,400 people in Canada and pays close to $300 million in annual taxes in the country. We also have a unique perspective on North American energy issues, as our president and CEO, Greg Ebel, is a Canadian, who was once chief of staff to Deputy Prime Minister Don Mazankowski. For the 2012 budget, Spectra Energy has submitted a concise brief for the committee's consideration. We have asked for two things: first, that the committee support proposed changes to

part VI.1 of the Income Tax Act and other related provisions, specifically to address the disparity that now exists between the corporate tax rate and the tax treatment of dividends from certain preferred shares. Utilities, and Spectra Energy in particular, have large capital programs and often use preferred shares as part of the mix of debt and equity to finance that spend as well as their ongoing operations. Under

part VI.1 of the act, imposing taxes on certain preferred dividends paid by the company, to offset the cost of this tax companies are also entitled to a tax deduction. The original intent was that the value of the tax deduction should equal the value of the tax companies pay under

part VI.1. The rate of the

part VI.1 tax and the related deductions were set at a time when corporate tax rates averaged 40%. Since that time, corporate income tax rates obviously have come down, and the changes to the

part VI.1 tax and the related deduction have not kept up with these changes. This situation has been acknowledged over the years by various governments, and beginning in 2003 legislation was proposed to deal with this issue, but it has never been passed. Second, we ask that the committee support the flowing of investment tax credits to partners other than the general partner in a limited partnership under the SR and ED, the scientific research and experimental development program. We believe this proposed change can be addressed quite easily and will assist with increasing innovation in our sector.

The current SR and ED application system penalizes the limited partnership structure and unnecessarily restricts innovation investment. Generally, all taxable income, losses, or other tax attributes generated by a limited partnership are allocated to all partners. However, under the Income Tax Act, where a limited partnership carries out SR and ED activity, the corresponding investment tax credits flow only to the general partner, as do the SR and ED deductions when the limited partnership is in a loss position.

This condition can make it difficult or impossible for the general partner to use the investment tax credits, as usually a general partner's only source of income is the income allocation from the limited partnership. We, like many other companies, use the limited partnership model because Canada does not have consolidated tax filing. This issue likely would not be a problem if there were consolidated tax filing, and we urge the committee to continue to support Canada's moving in this direction.

There is one final issue we would like you to consider--and I'm going to echo my colleague Brenda Kenny--which is not in the pre-budget submission but which is a matter of urgency for you as policy-makers. With the U.S. domestic natural gas supply set to potentially displace traditional Canadian supplies—and we're looking at a pretty narrow window, in the next 10 to 15 years—Canada must find new international markets.

Unless Canada takes swift action in the face of intense international competition, thousands of jobs and billions of dollars in economic activity, in British Columbia in particular but in the rest of Canada as well, are threatened with being locked in. Substantial reform is needed for our project approvals process to help Canada compete. Such reform does not mean lowering our standards but only reducing unnecessary duplication now built into the system, which deters investment.

Spectra Energy's three proposed areas of improvement include requiring time limits on all large projects; having a single comprehensive crown consultation with first nations; and continuing jurisdictional departmental coordination to reach the one project, one assessment goal. We ask that each of you and each party support these recommendations in order to make Canada's regulatory system the best in the world. We are committed to being constructive partners in this process. Thanks for your service to Canada and your time today. I look forward to your questions.

(0855) The Vice-Chair (Mr. Hoang Mai) : Thank you, Mr. Kennedy. We'll now go to Financial Executives International Canada. Mr. Michael Conway (Chief Executive and National President, Financial Executives International Canada) : Good morning, Mr. Chairman and committee members. I'm Michael Conway, chief executive and national president of Financial Executives International Canada. FEI Canada is a voluntary membership association comprised of 2,000 chief financial officers and senior financial executives from across Canada.

The recommendations we present to you today are the result of the collective efforts of FEI Canada's tax committee, whose chair, Peter Effer, VP tax at Shoppers Drug Mart, is with me here today. FEI Canada understands the critical importance of maintaining stability while the government works to achieve its fiscal policy goals. We agree with the government's continued commitment to fiscal prudence. It is imperative that the government focus its resources to achieve maximum impact for its spending.

In order to be able to continue offering many of Canada's current social benefits, the escalating cost of which is driven by aging demographics, Canada needs to continually strive to get a better bang for its buck. In our written submission to you, we highlighted three initiatives that FEI Canada believes the government should adopt, as they will be critical to achieving an efficient tax environment. First, FEI Canada believes the government should encourage innovation.

FEI Canada agrees with the Jenkins report that innovation is the ultimate source of long-term competitiveness of business and quality of life of Canadians. There are various ways to encourage innovation through funding. Tax credits could be provided to angel investors who fund qualifying innovation expenditures. Help can be provided to companies that incur costs that lead to innovation. In this regard, one efficient way to encourage innovation would be to use a mechanism the government already has that works well, and that's the scientific research and experimental development program, or SR and ED.

But improvements need to be made to it, as the SR and ED credit is currently too complex and narrowly focused. It should be recognized that innovators need support beyond the early R and D stage, and that activities leading to product commercialization should be eligible for SR and ED claims. After all, it's commercialization of research that leads to economic activity. The current program discourages small private corporations from accessing public capital by reducing the available tax credit from 35% to 20% when a company becomes public.

FEI Canada recommends that public companies be entitled to the same tax credit entitlements as private companies. Finally, we like the Jenkins report recommendations to simplify the SR and ED program by basing the tax credit for small and medium-sized enterprises solely on labour-related costs. Mr. Chairman, that point makes a good segue into a request we made to the committee last year. For the benefit of both business and government, we need to reduce the complexity of the taxation system and its compliance requirements.

In my appearance before the committee last year, I compared Canada's first tax act to the rather hefty volume we have today. The government should do exactly what it did last year to review red tape in R and D spending--namely, a task force could be established to thoroughly review the federal Income Tax Act. Tax simplification will cut the administrative burden shouldered by both business and the government, which funds the CRA. Having more clarity will reduce the number and cost of tax disputes for both sides.

This will be particularly helpful for small and medium-sized businesses, and will help this key sector of the economy, which employs millions of Canadians and generates the majority of Canada's GDP. The best way to start simplifying the tax system would be for the government to continue work commenced last year on the taxation of corporate groups. As we stressed in our comments during the consultation process, a tax loss transfer system for corporate groups would make the system far more fair, as tax planning is generally not affordable to small business.

Allowing companies to file one consolidated tax return would further reduce the administrative burden for everyone involved--corporations and the tax department. In conclusion, we believe our recommendations will foster innovation, streamline government, and reduce time spent on compliance so we can focus on generating economic activity and job creation. Thank you.

(0900) The Vice-Chair (Mr. Hoang Mai) : Thank you, Mr. Conway. Now we'll go to members for questions. We'll start with Mr. Julian. Mr. Peter Julian (Burnaby—New Westminster, NDP) : Thank you very much, Mr. Chair. I would like to thank the committee members for their welcome this morning. This is my first meeting with the finance committee. I would also like to thank the witnesses for coming. Mr. Nantais, I appreciated your presentation on the automotive innovation fund. Of course the NDP were strong supporters in putting this proposal forward and putting in place the innovation fund.

I would like you to speak just a little bit more to what the impacts have been in terms of the automotive sector generally, including job creation and investment, as a result of the fund over the last few years. Mr. Mark Nantais : Mr. Julian, thank you for your question. Indeed, the AIF has been essential to new automotive investment in this country. Were it not for some of that investment fund being made available, some of the new investments in flexible manufacturing facilities and research and development activities in Canada would not have happened, pure and simple.

Now, as global companies, manufacturing incentives are probably more important now than ever in our history. Any country that either has an automotive industry now or wishes to have an automotive industry is providing huge incentives to attract new investment or maintain what they have. Just look south of the border in the United States. The most recent example is the Volkswagen plant in Tennessee. It got 57.7% of its total investment paid for. That is huge. If we want to be competitive and retain jobs and the spin-off benefits associated with an auto industry, we need to be competitive.

In fact, we need a competitive edge when it comes to manufacturing incentives. That is why we continue to recommend that the AIF be re-established, and that it be flexible and have sufficient capacity to compete with these other jurisdictions that are very successful, with the incentives they are providing. So the AIF, from our perspective, is essential for Canada's auto industry. Mr. Peter Julian : You talked about global investments of $7 billion with the multiplier effect. Do you have any sense of the impact on jobs? Mr.

Mark Nantais : From roughly 2002 through 2009, Chrysler, Ford, and General Motors invested almost $9 billion in new investment. So we were able to retain the roughly 35,000 direct jobs in this country for those three companies. Other incentives that went to Toyota primarily also generated new jobs at both the Cambridge plant and the Woodstock plant. These are all good things for all manufacturers. When you look at the seven-to-one job multiplier and the spin-off effects through our supply chain, jobs go on to be much greater than that.

(0905) Mr. Peter Julian : Thank you. I'm struck by the similarity between your presentation and the presentation of Mr. Elwood. He was speaking about an overall investment of about $79 million over a two-year period. In your presentation you talked about a competitive consumer incentive. Do you have any sense of what the fiscal impact would be of what you're proposing? Is it similar to what Mr. Elwood is proposing? Mr.

Mark Nantais : We haven't tallied it up per se, but if you took the incentive that is available to consumers in the United States of $7,500 and multiply it by the number of projected sales, it would give you a sense of what that would mean in total. Mr. Elwood could probably speak more to that issue. We're talking about incentives not just for the electrification of vehicles, but for various technologies that will be necessary to achieve the GHG reduction standards we are now facing.

That will include everything from ethanol from cellulosic processes to natural gas vehicles, but it will be inclusive of plug-in hybrids, as well as dedicated electric vehicles. That's what we will need to do to meet these new very stringent standards on a go-forward basis. Mr. Peter Julian : Thank you very much. Mr. Elwood, do you have a sense of the impact on jobs from that investment in electric vehicle capacity? Mr. Michael Elwood : Thank you for your question. It's a very good one. The Aspen Institute has put numbers down that for every 10,000 vehicles that go out on the road, there are 250 jobs.

So based on our road map, the 500,000 vehicles that would hit the streets of Canada would probably account for 125,000 direct jobs. We're not sure about indirect and downstream jobs, because it all depends on how much we assemble in the country and what work is done in the country. That's about the number. The Vice-Chair (Mr. Hoang Mai) : Thank you very much. Now we'll go to Mr. Adler. Mr. Mark Adler (York Centre, CPC) : Thank you, Chair. I'd like to begin by welcoming all of my colleagues to Toronto, home of the Stanley Cup-bound Toronto Maple Leafs this year.

The best thing about being in your hometown is you can sleep in your own bed and not in a hotel. I would like to make a comment that the great frustration with five minutes is that you have so much that you want to speak about to all of the witnesses, but it's not possible within the timeframe. I would like to begin by saying, Mr. Goldring, that what you're doing with the Canada Company is absolutely extraordinary. Over the weekend, with the death of another Canadian soldier and with Remembrance Day coming up next week, we saw how important the work you do is.

Our men and women in uniform are truly heroes, and because of what they do, we're allowed to do what we do here, so it's always important to keep that in mind. I would like to begin with Mr. Conway. Some have said, and we heard just this morning from Statistics Canada, that our economy grew by 0.3% in August, so it seems like we're on the right track. There is a lot of potential danger out there, in terms of what is happening in Europe—particularly in Greece and now with Italy, a G-8 country that could potentially also have issues. Some have said we should be raising taxes and going into deficit spending.

What is your opinion on that? Do you agree that this would be killing jobs, that it would be detrimental to our economy? Or do you think that is a road we shouldn't be going on and that we should maintain the track we are on in getting our deficit under control and balancing our budget by 2015–16?

(0910) Mr. Michael Conway : Thank you for that question. One of the things I mentioned in my discussion was the need to look at the spending, because for Canada's current social benefits that everybody treasures, there is an escalating cost driven by demographics. We're not getting any younger, I unfortunately have to note. When you go into the details of the fiscal accounts, you note that there are old age security benefits and health transfers and the like, escalating at a pace far faster than all other spending.

We certainly don't want to cut those, so in order to be able to continue to afford Canada's current social benefits we have to be prudent. The last recessionary cycle put Canada in good stead because it entered in a far better position than many other countries in the G-7. Well, cycles happen, and you could have all the economists in a room and probably they'd all have a different opinion as to when the next downturn is going to be. You correctly point to the dangers in Europe. Business doesn't like uncertainty—that could trigger something else.

It's a long way of saying that I think Canada has to maintain fiscal prudence so that it remains in the good position it had going into the last downturn. That's quite important. Mr. Mark Adler : You would agree, then, that our government is following the right economic policy at the current time vis-à-vis other countries? Mr. Michael Conway : Yes, we agree that there should be government's continued commitment to fiscal prudence. The Vice-Chair (Mr. Hoang Mai) : You have less than 30 seconds. Mr. Mark Adler : Ms.

Kenny, could you talk a bit about the Keystone XL Pipeline and how that would be of benefit to our country in terms of jobs? Ms. Brenda Kenny : In ten seconds, I will say that it would be very good for jobs in Canada and secure ongoing trading. Let's not forget the quantity of revenue derived from that trade for various governments across the country. That's very important. The Vice-Chair (Mr. Hoang Mai) : Thank you very much. We'll now go to Mr. Brison. Hon. Scott Brison (Kings—Hants, Lib.) : Thank you for appearing before us today and for your informative presentations.

Some of you have presented changes to the regulatory frameworks, which are incredibly important from a public policy perspective. But since this is a pre-budget consultation, I'm going to focus on more of the fiscal measures this morning. Mr. Goldring, you've done great service to Canada in your work with Canada Company. The Australian model was first introduced in 2001 and the U.K. model in 1997. You have proposed some combination of the two in terms of a specific public policy ask.

Can you provide us with the impacts of these programs in those countries, in order to help us fortify the case for the very specific, and I think very sensible, ask that you have put before the committee? Mr. Blake Goldring : Yes, and thank you for the very good question. Certainly our Commonwealth partners were ahead of us in dealing really with the redressment, making sure that all society bears some of the cost for our reservists when they serve our nation both here and abroad.

In the Australia case, they ended up building a program whereby they apparently gave a cash reimbursement to employers, where in some cases employers actually made money with reservists. In other words, they would actually try to encourage people to become soldiers and sign up, and employers made a profit. This is not the intent of what we propose. Our proposal is to basically scale it so that smaller employers receive the median wage in Canada.

So we take a look at between $50,000 and $60,000 and we say that we will pay a small employer 80% of that—so that the employer is still sharing some of the burden—and we scale down for a very large employer to receive, say, 40% of that median wage. In so doing we will avoid the problem the Australians had. The British have a far better reimbursement government-rebate-type program and that makes an awful lot of sense. What we are suggesting is that HRSDC perhaps administer this program. That's what we advocate. Thank you.

(0915) Hon. Scott Brison : Right, and if you could get back to us with the impact of those programs on those countries, recognizing there is a difference between the specific asks, that would be helpful. I appreciate very much your sensible proposal. I was saying earlier today to Ms. Kenny that over the weekend I was speaking with Hal Kvisle about pipeline issues. And one of the things he reminds us of is that 85% of GHGs are produced more on the consumer, household, and vehicle side and not in the production and processing of fuels.

So that bridges to the electric car discussion and the car discussion in general. I wasn't aware of the specific U.S. $7,500 incentive. And for both your industry and of course the electric car industry, it seems to everyone I'm speaking with that the internal combustion engine is not going to be the way we get about in 20 years or 30 years, and that the electric vehicle is the future. I was in Israel a few weeks ago in Tel Aviv at Shai Agassi's facility there. In addition to the $7,500 incentive you're proposing.... Is your organization seeking that specific proposal? Mr.

Michael Elwood : No, that's the U.S. proposal. The U.S. tax incentive is $7,500 across every state. We're proposing a really different type of.... We haven't really put out anything as far as an adoption piece per vehicle. What we've said is that the provinces have been looking after that and that we need to look at something more unified across the country. Hon. Scott Brison : Well, I know that Hydro-Québec is looking at....

The problem is that this is where we get into the situation in Canada where we have our energy systems balkanized across the country and it's very difficult from a federal perspective without deep involvement on the provincial side. I'd like to see a more specific federal financial ask that would help. And I think this is the challenge and an opportunity for both Mr. Nantais' group and your group, Mr. Elwood. It would be nice to have real guidance in terms of what we could put in the federal budget that would help make Canada a global leader in these vehicles of tomorrow. Mr.

Michael Elwood : In two provinces right now, Ontario and Quebec, there are programs for electric vehicles that actually lap the U.S. programs. In both provinces it depends on the battery size of the vehicle, but the maximum in Quebec is $8,000 and the maximum in Ontario is $8,500. We would be happy to submit something. The Vice-Chair (Mr. Hoang Mai) : Thank you. We will now have Mr. Jean. Mr. Brian Jean (Fort McMurray—Athabasca, CPC) : Thank you, Mr. Chair. Thanks to the witnesses for coming today.

On that particular line of questioning, I understand that you were actually the lead in the electric mobility roadway consultation for Canada. Thank you for your service on that. I know it was non-profit, at least for yourself. Now, how do we compare to other jurisdictions internationally with our technology, after you had that little jaunt across the country looking at our technology? Mr. Michael Elwood : Thank you very much. It's a great question.

I address this light-heartedly, but the reality is, as you're well aware, that doing a technology road map is an onerous undertaking, and we spent a little bit more than a year and a half doing so. When we submitted it in 2009, it was prior to the American reinvestment act and the stimulus act, and Canada was in a very good position. As companies, technology leaders, we were in a really strong position globally. In fact, I went to Brazil and I spoke at a conference in Brazil, and the Brazilians, along with about four or five other countries, came to me saying that they applauded us on our road map.

They asked us how we were doing on the implementation side of it, which embarrassed me a little bit, but I thanked them very kindly. And the only things the Brazilians did was they added cane sugar and copied. They knocked off our road map. So what we should have done, from a business point of view, is licensed it. So we really made an impact globally on the road map, but we haven't really implemented it as such in our own country.

(0920) Mr. Brian Jean : I understand that, and that goes on to my next question then. I'd like to focus a little bit on Canada Company, and also on the pipeline, because of course I'm from Fort McMurray, and we do have this resource up there called oil. I'm particularly interested in the Keystone pipeline, but also in the comments made in regard to the aboriginal conservation process. I agree 100% with you that we have to streamline that process for both parties involved, for the people of Canada, as well as for the aboriginals and bands involved.

It's a bit of a mess right now, and I think we are working on something like that. But in particular, how safe is the Keystone pipeline project? We hear rumours, we hear speculation. Look at what's going on in Nigeria, with rivers flowing full of oil, and at conflict after conflict in Russia, where I think 10% to 15% of the oil actually hits the ground before it gets anywhere in the pipes. Do we have these problems in North America? How safe is the oil? How safe is the environment? What are our standards compared to the rest of the world, and compared to 15 or 20 years ago in Canada? Ms.

Brenda Kenny : The results are good news for Canadians. We have a pipeline system here that is among the safest in the world. The statistics over the last 20 years have borne that out. It's very, very safe, whether you measure it per kilometre or total number of major incidents, and the safest in the world. As far as the Keystone, it is compounded by the application of current technologies and very, very advanced protection techniques, so it will be even safer than a normal pipeline. And we have advanced technologies for internal inspection that are helping us continue to make those better over time. Mr.

Brian Jean : Now, on that—just so people understand—this isn't just a pipe in the ground that sits there and flows oil from some source back and forth. Could you give us an indication of some of the advanced technologies you're talking about? Ms. Brenda Kenny : Well, they're similar to what you've all experienced with medical technologies that give you a chance to get an early detection before there's a problem. Those are the sorts of things we apply inside pipelines today, and we do advance maintenance and integrity programs.

We have been able to bring down the number of incidents quite dramatically by doing that. I want to talk specifically about your question with regard to the oil from Fort McMurray. There have been some allegations by American NGOs. For some reason, they believe bitumen to be dangerous in pipelines, which is patently false. All of their results point in the opposite direction, and the track record of pipelines carrying bitumen shows it is in fact extremely safe. So we've got to be very careful in pipeline safety, and recognize that there are facts and then there are allegations for some hidden cause.

The other thing I would just state for the record is to keep in mind that many of our companies are themselves investing in renewables, and advancing alternatives beyond oil and gas. Any of the long-term energy forecasts point to an active use of those fuels for a long time to come. And certainly, even in terms of this table today, I would personally support many of the requests for incentives. It's this industry that's actually generating hundreds of thousands of jobs and tens of billions in revenue. Mr.

Brian Jean : I was going to ask the Canada Company just how we get more people to Fort McMurray to work after they've been in the military. That would be my next question. A voice: Good question. Mr. Brian Jean: It's a great program. The Vice-Chair (Mr. Hoang Mai) : Thank you. Mr. Marston. Mr. Wayne Marston (Hamilton East—Stoney Creek, NDP) : Thank you. Mr. Goldring, I really appreciate your choice of ties. It gets my attention right away. I was in the military in the sixties. When I came out in 1965, I was a reservist for a time. I had to give it up because of complications with my employer.

So you're right on the mark with that one. I'm not going to ask you a question. I just had to acknowledge that tie. Mr. Elwood, I had a person come in to my office recently. He wanted to set up charging stations in Hamilton. He had nowhere to go and nobody to talk to. Are we finally getting organized on putting together a plan nationally?

(0925) Mr. Michael Elwood : Yes, we are. The road map that we've spoken about addressed strengths, weaknesses, opportunities. Mr. Wayne Marston : Is there a place for this person to go to now? Mr. Michael Elwood : Absolutely: Electric Mobility Canada. The person can go to our website. It's all there. Mr. Wayne Marston : Okay, that's great. Thank you. Mr. Conway, I love to get a person here who has the connection with the CEOs of our country that you have. I've been working on a couple of things. One of them is Bill C-331. It addresses the status of pensions during CCAA and bankruptcy and insolvency.

Under the current legislation, pensions have no standing whatsoever. And we're trying to move them up the line. We had Bill C-506 in before, which was asking for super-priority. This current one is not. It's putting us at the top of the unsecured debt, which would protect workers. We saw the Nortel situation, where they lost 37% of their pensions when the company had $2 billion in cash and $4 billion in other assets, not to mention the patents that sold later. I was wondering what your reaction would be.

Under the previous edition of this, there were concerns about companies being able to get investment if this were the law. Mr. Michael Conway : Thank you, Mr. Marston. Pensions are a complicated topic. There needs to be review of many of the elements of pensions to make them equitable on both sides, from the point of view of who pays for the deficit in the plan, if there is one, and who gets to keep the surplus, if there is one. Mr. Wayne Marston : More specifically, we're talking about a company that's going into CCAA or bankruptcy, one or the other, which is a little further down the line in that process. Mr.

Michael Conway : The establishment of a plan has to start upstream, with equitable rules for employers and employees through the piece. We've made previous representations related to the funding of pension plans and the current imbalance in some of the use of the surplus entitlements. Mr. Wayne Marston : One of the problems is that there's a difference of philosophy. For workers, these are deferred wages that are put aside for them. Sometimes the way they're treated by some companies is that it's just another pool of money to pay creditors off. I'd like to take us a little bit further, though.

We've talked about a phased-in doubling of the Canada Pension Plan, primarily because over 60% of working Canadians today have no savings and no pension plan. Now the government has put in the RPP, which is a voluntary program. Our concern is that we need to have something mandatory. We see the Canada Pension Plan, which is portable, is in every province, and is owned by Canadians, as the best vehicle for doing that. The cost to an employer would be 2.5% after the phase-in period.

That's going to be harped on as being another tax, but if we don't take care of Canadians going forward, in 30 or 35 years they're going to hit a wall where we'll wind up paying anyway. Under our proposal, at least the workers will be able to put something in and carry some of their own responsibilities. I'd like your reaction to that. Mr. Michael Conway : I agree. It is a shared responsibility. It shouldn't be a one-way plan. Anything that incents Canadians to make their appropriate savings, so that we won't have a problem as that demographic curve extends, is helpful. The Vice-Chair (Mr.

Hoang Mai) : Thank you very much. Ms. McLeod.

(0930) Mrs. Cathy McLeod (Kamloops—Thompson—Cariboo, CPC) : Thank you, Mr. Chair. First of all, I'll start with a practical question. Being from British Columbia—in particular, on the island—we seem to have all these imports of right-hand-drive cars. Mr. Nantais, do you have any comments on that? Obviously it's people buying cars locally, but I wonder about the hazards. It's a funny question, but an important one too. Mr. Mark Nantais : It is an important one, certainly from a safety aspect.

When we start importing used vehicles from other jurisdictions—especially something unusual like that, a right-hand vehicle—it creates many problems. If you look at large-scale importation of used vehicles, it can actually be very disruptive to the domestic auto industry. We saw that when the New Zealand industry basically dissipated as a result of Japanese vehicles entering that market. In this particular case, we're seeing more of this happening. Provincial jurisdictions, particularly in British Columbia, have been very concerned about the safety elements of this.

It's really a question of what we will or will not accept in terms of trade on used vehicles. Mrs. Cathy McLeod : Certainly, in terms of the safety aspect, I have huge concerns. Do you have any recommendations there? Mr. Mark Nantais : We haven't made any specific recommendations, but I know the dealers associations have made recommendations against the continuation of allowing such vehicles into the country, simply because of safety and potential environmental issues as well.

When you look at the number of vehicles that come in that don't meet our standards, it could be equivalent to environmental dumping on a large scale. These are concerns that need to be addressed. Mrs. Cathy McLeod : Thank you. I had the opportunity a few weeks ago to attend some meetings, in terms of the LNG trucks and Westport and some of the trucking companies who have headed down that path. It sounds like there are some great opportunities in terms of costs and decreased emissions. Then I'm hearing about the electrical car—and I think I could guess where Mr. Elwood's thoughts are going.

If we had some sort of broad vision, in terms of what we'll look like in Canada 10 to 15 years down the road, is there going to be some sort of complement of electric and maybe LNG? Could we do a bit of pie-in-the-sky in terms of our whole transport system down the road? I'll ask anyone to jump in. Mr. Mark Nantais : Sure, and maybe I can start there. One of the key drivers here involves the new regulations for greenhouse gas reductions. They will apply not just to light-duty vehicles, but heavy-duty vehicles as well. Right now in Canada, we're in the process of finalizing the heavy-duty regulations as well.

In order to actually achieve some of these very stringent targets—and by the way, we're kind of the only industry right now that is being regulated in terms of greenhouse gas emissions--with personal transportation making up 12.5% of greenhouse gas emissions in Canada and total transportation being about 27%, the fact of the matter is we're going to need all technology, a full slate of technology. So you will see the NG being part of that. You will see clean diesel being part of that. You'll even see improved internal combustion engines being part of that as you move through 2016, 2017, and ultimately 2025.

Electrification of the vehicle will come along through that process as well. The question will be, where will that stand relative to all these other jurisdictions as we go forward—particularly when you look at diminishing reserves of oil, for instance? I say that's perhaps even more important on a global basis, when you look at developing countries and their thirst for oil. All these technologies will be absolutely necessary.

So you will see, from my perspective, I believe, a complement of different technologies, and they'll be applicable to both personal transportation as well as commercial transportation such as heavy trucks, as in the case of compressed natural gas. Mrs. Cathy McLeod : Ms. Kenny or Mr. Elwood? Ms. Brenda Kenny : Much like the results of the electric vehicle road map, there was also a natural gas vehicle road map completed last year with NRCan, and it could answer a few of your questions on that front. Mr. Michael Elwood : If we're going pie-in-the-sky, one of the things that we recommend is Canada's green highway.

Canada's green highway addresses exactly what you were saying and exactly what Mark was talking about, and that is building what we call alternative energy stations where you would pull in, whether it's from coast to coast along our main arteries or within cities. It would have a full offering of electrons, biodiesels, liquid natural gas, and fossil fuels, because they all are part of the solution. It's going to take us a long time, especially where vehicles are going. Vehicles are becoming very, very efficient. The Vice-Chair (Mr. Hoang Mai) : Thank you very much. Monsieur Giguère. [ Translation ] Mr.

Alain Giguère (Marc-Aurèle-Fortin, NDP) : Good morning, Mr. Chairman. I want to thank all the speakers. My first question is for Michael Conway. Canada's current tax legislation is very complex. There are what are called tax avoidance and abusive tax planning schemes. These two relatively legal practices are common among tax experts, as a result of which a person who has earned $250,000 in Canada over a period of 30 years may have paid the same amount of tax as another who has earned only $50,000. This situation indicates a weakness in the act, a certain excessive complexity.

And I would say that encourages tax unfairness. At the present time, does the act really need to be exhaustively reformed or does it merely require some superficial corrections?

(0935) Mr. Michael Conway : Thank you, Mr. Giguère. [ English ] It's certain that it's been a long time since our tax act has undertaken a comprehensive review. It's been decades. Subsequent governments have put in various incentives for a particular point in time, but there hasn't been a comprehensive review of whether all portions of the tax act are providing the incentives they were originally planned for, whether they're still needed--basically, from a business form, whether the business case still makes sense. There are sections in the tax act that conflict with each other.

There's a need for a comprehensive review of the tax act, one that has not occurred—as you know, as a fiscaliste —for a very long time. This would also address what Mr. Adler talked about. I talked about the need for maintaining fiscal prudence, and I talked about the need for a better bang for our buck. There are savings. There is a capability for simplifying the tax act that would reduce the administrative burden.

The type of administrative spinning of wheels that occurs between taxpayers and the government on CRA discussions because the underlying tax act is unclear and it takes armies of tax auditors and tax specialists to figure it out is not really useful for Canadian productivity. I think that undertaking such a review would have a capability of eliminating a lot of waste and turn around some of that savings into more productive use of the moneys. [ Translation ] Mr. Alain Giguère : My question is for the Canada Energy Pipeline Association.

Currently in Quebec, we have a serious problem regarding Portland-Montreal Pipe Line. They want to reverse the traffic in order to export Canadian oil to the Atlantic market. Questions are being raised about old pipelines. Is the Canadian pipeline industry dealing with infrastructure problems? Is there a risk of a break, given the age of the infrastructure and its lack of maintenance? Is there an imminent threat? Is there a chance or a major risk of a natural disaster? [ English ] Ms. Brenda Kenny : Thank you for that question.

The Canadian pipeline systems are among the safest in the world, and safer, by far, than other means of moving liquid or gaseous fuel. We also routinely inspect the inside of those pipelines, which is a standard above regulation, to look for any defect and replace them proactively before there is a problem. I cannot guarantee that there will never ever be a break, just like when we fly in an airplane, I cannot guarantee there will never be a crash. But I can tell you we are deploying state-of-the-art technologies above and beyond regulations.

We pursue the advancement of those, as well as encouragement for continued improvement on standards, each and every day, and the results are very positive. (0940) [ Translation ] The Vice-Chair (Mr. Hoang Mai) : Thank you, Mr. Giguère. [ English ] We'll go to Mr. Hoback. Mr. Randy Hoback (Prince Albert, CPC) : Thank you, Chair. Welcome to everybody here this morning. It's great to be out on a Monday morning in Toronto. It's always great to be here in my colleague Mr. Adler's riding and area.

He does such a great job on the finance committee, and I just want to make sure that you guys understand that he's doing a really good job for us and for you. There are so many questions I'd like to ask. I wouldn't mind going into corporate governance with Mr. Conway. There are things I'd like to go into with Mr. Goldring, but we have only five minutes, unfortunately. So that will be another day, hopefully. But I want to commend you both on the work you're doing. I'm going to kind of tee off on Alain's question about the gas line.

Where my farm is in Saskatchewan, there's actually a gas line that crosses our farm. It's a line that goes from Beacon Hill to Prince Albert. I think it was put in during the late sixties or early seventies. Just about four years ago we had them put a pig in the line. Is that the right terminology? On my farmland they actually dug up about four or five areas where they inspected and rewrapped the line and made sure that everything was proper. So I can attest that I've witnessed what you guys do. Again, nothing is ever 100%, but I commend you for that kind of work. Nobody wants to see our environment ruined.

Nobody wants to see those types of impacts or those leaks or anything like that. Again, we want to make sure that we have the proper regulatory framework for any new projects that go forward. In the same breath, we don't want to overdo it. We don't want to let the system become politicized, which I think is what's happened in the States. That's the danger in any project. Politicians get their fingers involved and make decisions based on politics, not necessarily on sound science or the facts placed before them. Ms. Kenny and Mr. Kennedy, I'll let you both talk to this.

From the National Energy Board and the process they go through to approve a new pipeline, up to the regulatory process you go through--you talked about the framework--what are all the different hoops you have to step through, whether it's the Department of Fisheries and Oceans or Environment Canada? Can you tell us what impact the Supreme Court decision on the Red Chris Mine, in Terrace, B.C., has had? How is that going? I guess I'm looking for recommendations. Is there a way we could still have the same results and maybe make it a more efficient process? Ms.

Brenda Kenny : Well, as you said, we could have a full day on just this, but let me try to be very brief. First of all, Canada lived through politicization of pipeline projects, and it led to the fall of a government in the House of Commons in the 1950s. That resulted in the creation of the National Energy Board Act. Since that time, we in Canada have used a very rigorous, fact-based, quasi-judicial process to engage public participation and to hear evidence from all parties.

Last year this government enabled the National Energy Board to include public funding for intervenors for the first time, and our industry was supportive of that. They now can fully duplicate what is done by the Canadian Environmental Assessment Act in a fact-based way. Canada's best defence against slippage is to safeguard that evidence-based process and to make sure that it's open to the public.

That said, the permitting that follows can unintentionally trigger a whole other round of environmental assessment and crown consultation and can lead to expensive delays and even more uncertainty, in terms of investment. It's those components put together. We need good environmental assessment in early planning. We need facts. We need transparency. We need timeliness. We need concrete decision-making, and, as you said, we need to keep it away from being a political decision and rely on good science and facts. Mr. Randy Hoback : Mr.

Kennedy, you talked about liquefied natural gas and the importance to the Canadian economy of seeing that being shipped out. I assume that you're talking about the pipeline to Kitimat. Just give us an idea of what you see as far as the safeguards we're putting in place to make sure that a pipeline is absolutely safe. Mr. Tim Kennedy : Sure. I think all companies are aware of the public interest in any pipeline built now. There's clearly a lot of attention on the Keystone Pipeline and the Northern Gateway Pipelines project, which is Enbridge. Those are oil pipelines.

There's been less attention given to LNG, although I think attention will be given, because natural gas has a different nature if there are any issues with the pipelines. Spectra itself has spent a lot of money in the last four years. Spectra actually became known as Spectra in 2007. Before that it was Duke Energy and Westcoast Energy, as I said. Lots and lots of resources are put into safety. We've spent over $260 million a year over the last four years on the safety and integrity of our pipeline system.

As Brenda has said, we really do focus on the best technology we can put into it to make sure that there's integrity in the system.

(0945) The Vice-Chair (Mr. Hoang Mai) : Thank you very much. Mr. Julian. Mr. Peter Julian : Thank you, Mr. Chair. I appreciate the witnesses coming forward today. Many of you are speaking about investments in the next budget, and that puts you on the same wavelength as the official opposition. We've been saying that because of the economic slowdown that's anticipated over the next few months, this budget has to be a budget that looks to investment in a number of key sectors in order to push a jobs agenda. I want to come back to Mr. Conway and Mr.

Kennedy, because both of you have spoken about the scientific research and experimental development program that exists. As you know, according to the Jenkins report, we've seen a real failure in research and development. Canada is the last among industrialized countries in direct investment in R and D. We're last among industrialized countries in the development of PhDs, and we're among the last industrialized countries in patent development. So there's been a real failure in R and D, there is no doubt. And if we want to have an innovation economy, we need to make significant changes.

I'd like you to speak to the changes you are proposing for the SR and ED program. Number one, what would the fiscal impact be? And number two, I'd like you to speak to the government's failure around the development of PhDs and the development of higher education and access to higher education as well as the fact that we're last among industrialized countries for direct investment in R and D.

We've had a number of presentations that have obviously called for more direct investment in R and D by the federal government, but to what extent do you think the federal government should be investing directly in R and D so that we can stimulate that innovation economy? That's directed to Mr. Kennedy and Mr. Conway. Mr. Michael Conway : Thank you, Mr. Julian. There are lots of ways the spend can go better, and can go smarter.

The Jenkins report did mention--and it dovetails with our other recommendation about simplification--that it's a whole lot simpler for small businesses to base the SR and ED credit on labour-related costs than to do the plethora of record-tracking based on the proportionate use of their machinery and the like. So that just makes sense. If it's simpler, it costs them less to track it, it costs them less to have high-priced advisors to fill in the claims, and it gets the money to the people who need it to continue the innovation. On the innovation front, the current spend stops too early.

When you look at the term of scientific research and experimental development, it really is experimental. If there is a certainty of outcome, then the funding is denied. The vision is of smoking beakers and lab coats, but in actuality it's commercialization that drives jobs. It's taking that idea and making it into a product that gets sold to employ more people. That's what produces jobs. The last point we made was that small private companies certainly have the most difficulty finding funding.

We do an annual survey on credit availability, and it just confirms that there are no big surprises, that the smaller companies have more difficulty finding funding. And if they're looking for a longer-term type of funding, that's even more difficult to get. So getting seed capital for a small company is really tough. Mr. Peter Julian : I'm sorry, I have only a few seconds left, so I'd like to refer the question to Mr. Kennedy as well. Thank you, Mr. Conway. Mr. Tim Kennedy : I hate to do this, but I'm going to ask Dennis Hebert, who is our tax guy, to come forward and give you a quick answer, because R and D....

Do we have time for that, Mr. Chairman?

(0950) The Vice-Chair (Mr. Hoang Mai) : No. Mr. Tim Kennedy : Okay. Mr. Peter Julian : We don't? Mr. Tim Kennedy : That's it. We can talk about it afterwards. Mr. Peter Julian : What a tough chair. The Vice-Chair (Mr. Hoang Mai) : Mr. Van Kesteren, go ahead, please. Mr. Dave Van Kesteren (Chatham-Kent—Essex, CPC) : Thank you, Mr. Chair. Thank you all for coming. Mr. Brison, who has left the room, was commenting about the fact that the internal combustion engine is on the way out. I don't know.

It reminds me of Mark Twain and the report that he had died; he said that the rumours of his demise were greatly exaggerated. I think the same thing may be true of the internal combustion engine. I get excited about some of the developments in electricity. I keep seeing things like the $7,500 incentive in the United States. I don't know if we're going to have time, because I'm going to redirect my question in a minute, but looking at the cost of that and the cost of that per job would make an excellent submission to this committee. Mr. Kennedy, you've stated that natural gas has a very interesting history.

We have managed to extract gas by fracking. As a result of that, at this point, how many years' supply would you say is in North America? Mr. Tim Kennedy : On the estimates for shale gas--which many are saying is a game changer for the energy sector in North America--we're looking now at what we know after four years of increasing understanding. Even four years ago we were talking about importing LNG terminals to North America because we didn't have enough gas. Now we have a huge amount.

We're looking at over a hundred years' supply, and for the next 10 to 15 years we're looking at very stable prices because of that huge supply. So it has really been changed. Mr. Dave Van Kesteren : Talk to me about price. We've seen it spike to about $9 a gigajoule. What is it today? Mr. Tim Kennedy : It's certainly under $4 now, and we're looking at a stable price. All the outlooks are showing about $4 to $6 over the next 10 to 15 years. Mr. Dave Van Kesteren : So you expect that to be somewhat constant. Mr. Tim Kennedy : We do. Mr. Dave Van Kesteren : Mr.

Adler, I don't want to pour water on your parade, because I think there are some exciting new developments in electricity, but in the natural gas trucking alliance there are some astounding results. We heard about a company in Vancouver that's a leader in natural gas engines. They made a submission last year for something along the same lines for natural gas filling stations. We were proposing something from Quebec City.... That was rejected, but an interesting thing has happened. The private sector has come forward and has started to install these things.

As a matter of fact, Shell Canada has announced that they're going to invest $250 billion in natural gas. From that, I'm reading that there seem to be some real possibilities in natural gas. Mark, what are you hearing from your industry? I know that the trucking industry.... I might add that there are no tax incentives to buy these. I think they're $60,000 more for a unit. What's happening in the auto industry? Are we seeing some movement toward natural gas? Mr. Mark Nantais : We've certainly been there already. The technology is widely available. We know how to do it.

One of the stumbling blocks so far has been a readily available refuelling infrastructure. That's what's needed for these types of fuels. Whether they're electricity recharging centres or natural gas refuelling centres, they must be coincidental in the market to be successful. When that hasn't happened, progress on fuel for transportation has slowed or actually gone away in some cases. So we've missed opportunities. As you've pointed out, whether they're commercial vehicles, large transportation vehicles, or even personal transportation vehicles, they will be part of the slate of technologies going forward.

We cannot get around it, and we have a readily available source of fuel. It's a very good fuel. It will undoubtedly be part of the mix as we go forward. I agree with you that the internal combustion engine is not dead yet. There are still opportunities for much greater improvement in that type of technology.

(0955) Mr. Dave Van Kesteren : Mr. Kennedy, you must be looking at some of these developments with interest. Obviously there are many more opportunities. Are you looking at other opportunities--locomotives and ships, for instance? Mr. Tim Kennedy : Yes, we're looking at them. The Vice-Chair (Mr. Hoang Mai) : Ms. Glover, please. Mrs. Shelly Glover (Saint Boniface, CPC) : Thank you, Mr. Chair. I want to thank the witnesses for being here today. I would like to start with Mr. Elwood. You said you liked some of the programs the government has put forward. I'd like you to name them and tell us the benefits. Mr.

Michael Elwood : The most recent one is the eco-energy program that's been implemented by Natural Resources Canada. It has identified electrification as one of the opportunities. So we have made submissions there. It has broadened the landscape. Prior to that, as far as electrification went, we had to go through a number of different programs, but in kind of an obscure, abstract way. One in particular was Technology Partnerships Canada.

It was an outstanding program and really helped in the initial stages of bringing on a number of companies--and not just in electrification, but it allowed for advanced transportation. There are a couple of really good programs there. We'd like to see more of them, and more dedicated to the commercialization and development of vehicles. Mrs. Shelly Glover : Very good. Thank you. Mr. Chair, I'd also like to make a suggestion, because I'm going to want to dispute some of the facts put forward by Mr. Julian.

I'd like him to submit to the committee proof that we are last in R and D, because they're going to need that, obviously, to write this report. Based on the OECD main science and technology indicators, we actually rank first among the G-7 countries in terms of expenditures in research and development, especially in the higher education sector, as a share of the economy. We have to be careful not to compare apples to oranges. We have a population of 33 million, and not a billion, as some other countries have. I want to turn my attention to Mr. Conway for just a moment. I liked what you said in response to Mr.

Marston about incentivizing people to actually save. I want your opinion on the PRPP, the pooled registered pension plan, because I think it is an incentive for people to save for the future. I think it addresses some of the things Mr. Marston was addressing. How do you feel about the PRPP? Mr. Michael Conway : The big advantage of the PRPP is you get economy of scale. It gives individuals with really small pension plans the opportunity to group lots of pension plans together, and they get the scale advantages that very broad pension plans have. So we're in favour of that. Mrs.

Shelly Glover : When you compare it to doubling of the CPP, what do you think? Mr. Michael Conway : The difficulty is that there is always a trade-off in things, and one of the trade-offs on the CPP side is that the employer portion is effectively a tax, and corporations have only so many dollars to put around. If they put millions on this side, they won't have millions to invest on the other side. So that's a little bit of a trade-off that we're torn by.

Consequently, if we are encouraging Canadians to look at the variety of ways to save, some of them are incentives by the government, and for some of them, it's really the responsibility of the individual to make appropriate arrangements. Mrs. Shelly Glover : All right. I'm going to turn my attention briefly to Mrs. Kenny. You talked a little bit about harmonization of regulations. I want you to tell me how you think that's going to promote trade with our biggest customer. Ms. Brenda Kenny : We need to get more deliberate in Canada in making timely decisions on major investments.

The Mackenzie Valley pipeline would be a good example of a second round of a major hearing that took six years and ended up with a decision that trailed the economic window. We are dealing with a very competitive global environment in trade, and we can't be complacent about taking our time and fussing about trying to line up large trade deals. Timeliness is important. That in no way means rushing through and being second best in environmental protection, but it means being smart about how we plan for projects, assess them, get to go or no-go decisions.

And intentionally, after you've hit a go or no-go, if you say yes, this is in the public interest, then make sure it happens. Don't let a permit slide for two years on something that is worth $100 billion in total trade value.

(1000) The Vice-Chair (Mr. Hoang Mai) : Okay. Thank you very much. Thank you, witnesses. We'll suspend for a few minutes. (1000) (1005) [ Translation ] The Vice-Chair (Mr. Hoang Mai) : Welcome, ladies and gentlemen. We will now hear from the representatives of the Canadian Foundation for Climate and Atmospheric Sciences, Festivals and Major Events, Deloitte & Touche, the Canadian Trucking Alliance, the Investment Funds Institute of Canada, the Vaughan Chamber of Commerce and the Canadian Home Care Association. Every witness will have five minutes. Then we will move on to questions by committee members.

We will begin with the Canadian Foundation for Climate and Atmospheric Sciences. [ English ] Mr. John Mills (Member, Board of Trustees, Canadian Foundation for Climate and Atmospheric Sciences) : Thank you, Mr. Chairman, for the opportunity to speak to the committee. I'm a member of the board of trustees of the foundation, and I'll be speaking to the brief we provided to you earlier. I'll just highlight a couple of items in that. First of all, I want to identify that we had an error that slipped into that piece, which talked about the value of weather-dependent industries and businesses in Canada.

I think it identified in excess of $1 billion, and that should have been in excess of $100 billion annually for the Canadian economy. Weather and climate are very much economic issues that affect the basic needs for food, water, safety, and security. I think all Canadians know that the weather patterns have changed in the past, and they will continue to do so. So far Canada has been somewhat fortunate, in that it hasn't seen some of the more devastating impacts of weather change, like the flood that's currently going on in Thailand. But it hasn't escaped all of that.

In 2010 major weather events caused over $2 billion in disaster management and clean-up costs, not to mention the impacts on lives and livelihoods. In 2010 Hurricane Igor, on the east coast, cost $185 million. The forest fires in B.C. and Alberta cost something in the order of $230 million. And in July, a 30-minute thunderstorm in Calgary cost $400 million. In addition, I think the costs of inaction are substantial. A recent report by the national round table indicated that the cost to Canada from climate change could escalate to $5 billion in 2020, and between $21 billion and $43 billion by the year 2050.

Climate change is presently a growing and long-term economic burden to Canada. Weather and climate will continue to change and will escalate. In that regard, we must not only understand that, but we must adapt to those changes to ensure that businesses and government have the tools they need for informed policy and operational and strategic decisions. In that regard, we need knowledge. We need knowledge on the speed and severity of the changes of the conditions and their impacts on the Canadian economy.

This requires targeted research by teams of experts from a multi-disciplinary approach, in universities, government labs, industry, and institutes—work that the foundation has been supporting up to now. We also need to share that information, that data and knowledge, for the development of sound policies and practices. In our brief the foundation has put forward its summation of what we need. We need targeted research to provide business and government and individuals with the tools they need to adapt to changing conditions, foster increased reliance, and the development of new business opportunities.

It will save money by warning of new trends, reducing uncertainty, and justifying new policies, including updating building codes. It encourages technological advances, training, and marketing of Canadian development, all of which makes us more competitive internationally. The foundation is recommending a proposal for a sustaining federal investment fund of some $50 million per year, over 10 years.

In addition, it recommends the establishment of a policy forum to allow for the knowledge transfer, the collection of that research, and the translation of that into information that policy-makers and decision-makers can use in their day-to-day businesses to make those policy and business decisions. The last point I would make is that we certainly have information and research right now, which is absolutely necessary, but it is not sufficient to meet future needs. Thank you very much.

(1010) The Vice-Chair (Mr. Hoang Mai) : Thank you, Mr. Mills We’ll hear from Festivals and Major Events. Ms. Janice Price (Chief Executive Officer, Luminato, Toronto Festivals of Arts and Creativity, Festivals and Major Events) : Thank you. Good morning. [ Translation ] I would like to thank you for inviting us here this morning. [ English ] On behalf of Festivals and Major Events Canada, I'd like to thank the committee for the opportunity to add our voice to your national consultation on budgetary priorities.

FAME is a member-funded advocacy organization bringing together the knowledge and experience of Canada’s major world-class festivals and events to speak with one voice and to advance the economic and societal importance of our sector. Formed in 2010 as the Canadian Festivals Coalition, we recently changed our name to be inclusive of the importance of our major international events. Our submission contains three recommendations, including a request to review Canada's aviation cost structure and the funding model for the Canadian Tourism Commission.

These items were presented to you in detail last week by the National Roundtable on Travel and Tourism, and I will focus my remarks today on recommendation one, related to investment in Canada's festivals and events. Canada's major festivals and events are internationally recognized for world-class programming and the excitement that we generate, but we are so much more. Many associate our events with good memories, community engagement, and iconic Canadian moments, whether it's great theatre at the Stratford Festival, movie stars at the Toronto International Film Festival, or Bonhomme at Carnaval de Québec.

Today we're asking you to look deeper and associate us with economic growth, job creation, international competition, and export revenue. It is our hope that this presentation will help you to recognize our sector as a key driver of Canada's knowledge-based economy. We have provided committee members with a copy of our 2010 economic impact study, which estimates that 15 of Canada's largest festivals attract 12,600,000 attendees annually, contribute $650 million in GDP to their local economies, and support the equivalent of 15,600 full-year jobs nationwide.

I know you are presented with a lot of numbers at these events, but I will highlight that our presentation uses a methodology directed by Industry Canada and reviewed by the Auditor General. This substantial economic impact is derived from both operational and tourism spending estimated at $1.1 billion per year. The analysis also estimated that tourism and operational spending related to these events generates approximately $260 million in tax revenue for all three levels of government.

I'll remind you that these statistics reflect only 15 of Canada's larger festivals, and they are greatly amplified when taken within the broader festival ecology of regional events. FAME recommends that the federal government create a new, permanent $50-million annual investment fund for the economic development opportunities in Canada’s major festivals and events sector. The new program would be developed in consultation with the industry and administered through Industry Canada.

We believe that this new program of matching public and private funds will have a catalytic effect on sectoral growth and generate a significant financial return to Canadians. An ideal funding program would invest $30 million annually in Canada’s major international festivals and events, to be allocated by merit-based economic criteria and not subjected to regional quotas or limitations. It would also allocate $20 million annually to emerging and regional festivals and events that play an important role in their communities across the country.

And it would provide for multi-year project funding to maximize opportunities for product development and return on investment. Thank you. The most recent federal initiative was funded through Industry Canada's marquee tourism events program, a two-year stimulus program ending in 2010. These recent stimulus investments enabled our sector to leverage additional partnerships, broaden marketing reach, and augment programming that attracted larger crowds and extended visits.

The results were higher attendance, increased local business levels, and additional tax revenues for all levels of government, even during this recent time of global recession. We are a growth sector with world-class product, operating in a highly competitive international market. We're not looking for government funds to subsidize our existing budgets. We're seeking a form of public sector venture capital to leverage earned revenue and increase private sector partnerships. This will facilitate incremental growth by augmenting spectacular programming and enhancing promotional events for visitors. Thank you.

(1015) The Vice-Chair (Mr. Hoang Mai) : Thank you very much. We will now go to Deloitte & Touche. Mr. Andrew Dunn (Managing Partner, Tax, Deloitte & Touche) : Thank you very much, Mr. Chairman and representatives. My name is Andrew Dunn and I'm the managing partner for tax at Deloitte in Toronto. Canadians are blessed with a high standard of living relative to the residents of most countries. Forbes recently ranked Canada number one for doing business, and a key part of that ranking was the competitive and stable corporate tax regime.

However, a key element of prosperity is productivity and Canada lags behind other major trading partners on that measure. In particular, the most recent ranking by the OECD put Canada at only 86% of the U.S. output per worker. At Deloitte, our view is that we must close this productivity gap in order to stimulate prosperity in the future. For that reason we produced the study “The Future of Productivity: An eight-step game plan for Canada”. I won't go through all eight of our recommendations, but the three elements of that study in which tax policy plays the major role are innovation, incubation, and population.

I'll just go very quickly through each of those key elements. On innovation, the government has demonstrated a commitment to reinvigorating the R and D regime as a key core element of innovation in Canada. We applaud the recent decision to appoint the Jenkins panel. It made a number of recommendations. One recommendation was to increase the availability of funds for start-up and later-stage companies. I'm going to come back to that when I talk about incubation, but in general, the limiting factor, the ground rules for the Jenkins report, was a cost-neutral approach.

We point out that 11 of the top 24 economies enhanced their R and D incentives over the last three years. Australia, China, Ireland, Italy, Japan, Russia, and Singapore increased their credit percentages. France, Ireland, and Japan increased their carry back and carry forward mechanisms. France, Australia, and Ireland introduced refundable credits. Some countries introduced patent boxes, and in fact there are two additional countries that are contemplating introducing a credit regime—they are Germany and Sweden.

They are jurisdictions that are frequently mentioned as being grant-based in their support of innovation. We believe in a mosaic, but we also believe that there is a value and a need for Canada to remain competitive in stimulating innovation. One element in particular that we would suggest is the expansion of refundability for R and D tax credits. Just as a very quick example of why that is an important thing, first of all, it provides cash flow to early-stage organizations and organizations struggling to innovate.

But I would also point out that a U.S. multinational by virtue of its tax regime is in a position only to get tax deferral, not tax savings, as a result of lack of refundability. If a U.S. multinational repatriates earnings on which there has been a tax credit, in effect the way the U.S. tax regime works is that the multinational pays the difference of the tax credit back in U.S. taxes upon repatriation, and that situation changes qualitatively when the credits are refundable.

When they are refundable, it simply reduces the expenditure, and in effect, the U.S. multinational that repatriates a refundable credit gets to keep substantially all of the credit, and that stimulates the U.S. multinational to conduct R and D activities in Canada. We think that's an important difference. We also think that, regardless of when a U.S. multinational repatriates, the accounting treatment reflects whether it is a permanent difference or a timing difference and so it has an immediate effect on earnings.

We can make Canada a more attractive jurisdiction for innovation simply by making tax credits refundable on a broader scale. One of the things I wanted to talk about briefly is the importance of early-stage financing for innovation. Currently Canada has less than half of the funding proportionately of the U.S. We like the angel tax credit approach that the British Columbia government introduced a few years ago with a 30% credit for up to $200,000 annually. I do want to give a quick example of a Quebec-based company that we spoke to, a life sciences company that is in second-stage financing.

In order to get to third stage financing it needs to raise more capital. In order to raise more capital it can only find investors in the U.S. not in Canada—angel-stage investors are not around. Yet if it does raise money in the U.S. that will jeopardize its Canadian-controlled private company status and its refundable R and D credits. Last, just very quickly, is the importance of population. A key element of improving Canada's gross domestic product is in fact to have more workers, and not just more workers but more highly educated, more highly skilled entrepreneurial workers.

(1020) A key part of that is immigration policy. But part of it is also tax policy, having a competitive jurisdiction, and having as competitive a situation on the personal tax scale as we have created on the business tax front. And we believe this could be done by simply indicating a point on the horizon, a 10-year to 15-year window in which we articulate a reduction in personal tax savings. And that can be done with little or no cost in the current term. Thank you. The Vice-Chair (Mr. Hoang Mai) : Thank you, Mr. Dunn. Now we'll go to the Canadian Trucking Alliance. Mr.

Stephen Laskowski (Senior Vice-President, Canadian Trucking Alliance) : Thank you, Mr. Chair. By way of background, we represent about 4,500 carriers from across Canada. Our membership, those who pay our dues, are the ownership and CEOs of the companies. Our industry remains the largest employer of Canadian males, so we continue to be an incredibly important industry in this country. We still haul the bulk of the freight, whether it's east-west or north-south. As the trucking industry goes, the economy goes.

If you want to know how the economy is going you don't need to read The Globe and Mail , just count the trucks on the 400 Highway or wherever you are. When the count is high, you'll know we're doing all right, and when the count starts dropping, we have some problems. Understanding that we're in challenging times as an economy and that dollars are tight, I want to present an opportunity for the committee to put forward a recommendation that we believe will bring benefits on a number of fronts--the environmental front, the technological front, and the labour front.

I'm talking about an opportunity to develop Canadian technology and to grow Canadian manufacturing jobs by working with the trucking industry on the environment. Trucking remains the only freight mode in Canada that's regulated from both an air quality perspective and a GHG perspective. The GHG regulation will be introduced next. Starting in 2004, 2007, and 2010, trucks underwent a huge technology investment from the industry to virtually eliminate NOx and particulate matter. Those emissions result in smog as well as lung and respiratory issues. Beginning in 2010, we eliminated that. How did we get there?

With a heck of a lot of money. The other issue was that to get there we lost fuel efficiency. We don't have a lot of time to go into this, but to reduce emissions on the NOx and PM side, we actually had to create more GHG emissions. So what are we going to do? Well, we're going to introduce another rule to address that. That rule will come into effect in Environment Canada in 2012. It will come into force in 2014-18 and be basically harmonized with the U.S. regulations. What would the Trucking Alliance like to do? There is a big difference between the rule I explained to you and 2004 and 2010.

There was no choice. You as a trucker went out and had to buy a certain engine. You could buy different kinds of engines, but the emission output would be the same. The GHG regulation will not work like that. There will be loaded consumer choice. There will be a regulation but a lot of choice, so the consumer is going to make decisions and those decisions will be based on a whole bunch of issues, including cost, return on investment, and the belief that the technology that is put on the truck will actually work.

In a GHG environment, if you reduce GHGs and improve your fuel efficiency, you get a return on your investment. The carrier, as a business person, will decide if that up-front additional cost is worth his return on investment. So what is the alliance saying? We're saying you should work with us to introduce aggressive CCA rates--just as is done in manufacturing--to attract the trucking industry to tractors that are more GHG-compliant. The other issue is the retrofitting. The GHG will work, in a nutshell, through aerodynamic devices. Aerodynamic devices will be added to the tractor.

There will also be opportunities on the engine side, such as liquefied natural gas and hybrids. These are extremely expensive. There is a method to do this, just as there is in manufacturing—with incentives. As for aerodynamics, we would like to point out that this is a growing sector. There are a number of leading small firms throughout Canada that make these devices. By providing incentives to our industry, you will grow an industry in Canada. The last

part I'd like to add for the committee is that there will be an additional regulation on the GHG side beginning in 2018. It will deal with the trailers. These aerodynamic devices are growing in Canada, and if we can get ahead with some small investments on the tax side, we can grow an industry while reducing emissions. My final point is an example. Back in the early 2000s, there was a program to reduce emissions from trucking. On the tax side, the federal government spent $6 million. It leveraged an additional $31 million from our industry.

(1025) So we're not looking with our hands out. We're ready to come to the table with money. We're just looking for a little up-front cash to help make this happen. Thank you, Mr. Chair. The Vice-Chair (Mr. Hoang Mai) : Thank you, Mr. Laskowski. We'll go now to the Investment Funds Institute of Canada, please. Ms. Debbie Pearl-Weinberg (General Tax Counsel, Canadian Imperial Bank of Commerce, Investment Funds Institute of Canada) : Thank you very much. My name is Debbie Pearl-Weinberg. I'm general tax counsel at CIBC.

I'm also chair of the taxation working group at the Investment Funds Institute of Canada, commonly known as IFIC. I'm here today representing IFIC. My comments today don't necessarily reflect the views of my employer, CIBC. To give you a little bit about IFIC, it is the national association of the investment funds industry. Canadians own approximately $749 billion in mutual funds, with almost 80% of those held in registered plans. Almost 50% of tax-deferred wealth is held in mutual funds. Now, because of this, ensuring adequate retirement savings for Canadians is a very important issue to IFIC members.

My remarks today will be centred around two distinct themes. First is fairness in taxation around investment options, and the second is fairness in retirement funding options. With regard to fairness in GST or HST among investment options, an inequity exists in the application of GST or HST to mutual funds when you contrast that with the application of GST and HST to other investment options. The structure of a mutual fund is such that it is a separate legal entity distinct from the manager. It is either a trust or a corporation. The mutual fund has no employees.

It pays its manager or third parties for all services provided to it, including asset management services. GST or HST applies to those services because it is levied on the management fee charged to the mutual fund. Now, if you look at other financial investment options, most services are provided by employees of the issuer. The GST or HST does not apply to salaries paid to employees. It only applies in limited circumstances where an external service provider is used by the issuer of the product. When the financial product is offered to the public, most fees charged are exempt from GST or HST.

Because of this difference in structure and because of the resulting difference of the application of GST and HST, mutual funds are subject to GST or HST in a disproportionate manner. The labour input to the offering of mutual funds is subject to GST or HST, and the labour input to other financial products is not subject to GST or HST. This, in the end, will reduce the return to mutual fund investors, including the high number of RRSP and RRIF investors. This inequity always existed once the GST was implemented, but where HST now applies, the issue becomes much worse.

In order to alleviate this inequity and achieve more fairness in the taxation of investment options, IFIC recommends that there is a review; that the unfair and non-neutral application of GST and HST is changed; and that an equitable rate of sales tax is applied to management, advisory, and administrative services provided to funds. This would be consistent with the treatment of other investment products. The second area I'd like to address is fairness in retirement funding options. There I want to talk a little bit about pooled retirement pension plans and RRIF income.

First, on pooled retirement pension plans, or PRPPs, IFIC wants to say that we very much support the initiative of creating PRPPs and the goal of providing accessible and straightforward retirement options to assist more Canadians to save for retirement. IFIC recommends that the investment of PRPPs should not be restricted to passive investment strategies, but much broader. IFIC recommends that group RRSPs remain a true alternative to PRPPs. For instance, IFIC agrees that payroll taxes should not apply to any contributions to a PRPP.

Consistent with this, IFIC recommends that payroll taxes no longer apply to contributions to group RRSPs to keep them on equal footing with PRPPs. Finally, I'd like to address RRIF income. Canadians receiving income from RRIFs are not eligible for the pension credit, nor can they split RRIF income with a spouse until they reach age 65. This includes those individuals where their RRIF income comes from funds that were originally transferred from a registered pension plan. This can reduce the after-tax retirement income to those aged 55 through 64.

(1030) In contrast, those Canadians receiving income from pension plans are eligible for the pension credit, and pension income can be split with a spouse at age 55. This inequity is frequently brought up to our members by investors and investment advisors. In order to alleviate this inequity, IFIC recommends that the pension credit also be available commencing at age 55 with respect to RRIF income, and that income splitting also be available at age 55 for RRIF income. Thank you very much. The Vice-Chair (Mr. Hoang Mai) : Thank you very much. Now the Vaughan Chamber of Commerce, please. Ms.

Lynne Wallace (Chair, Policy Committee, Vaughan Chamber of Commerce) : Good morning, and thank you for the opportunity to present, Mr. Chair. My name is Lynne Wallace and I am a volunteer chair of the policy committee of the Vaughan Chamber of Commerce. This morning I'm accompanied by the chair of the Vaughan chamber, who's in the back row. This is a consequence of a group of volunteers getting together with as many expert stakeholders as we could pull together to brainstorm around an issue that mattered a great deal to us in Vaughan: jobs of the future.

When we started we didn't know where we would end up, but the remarkable thing that happened from a group of stakeholders that included academics, contractors, and manufacturers was that we ended up with a consensus recommendation, and that's what I'm going to read to you this morning. The impact of the changing world economic reality has had a profound impact upon industry in Vaughan, as it has across this country. The loss of manufacturing jobs within Vaughan alone has seen a decline from 49,833 in 2006 to 39,415 in 2010.

In a city with a population of a little over 300,000, the loss of over 10,000 jobs in only four years has had a profound impact. Fortunately, the directed economic development efforts of the City of Vaughan have continued to attract new business. One of the emerging success stories from these new businesses is the growth of companies on the leading edge of the green energy industry, with a particular emphasis on solar. Within the region of York, we have gone from about 10 companies to 100 within two years--very rapid, to say the least. A significant number of these new businesses are in the city of Vaughan.

In attracting these businesses, Vaughan has competed against other business clusters, both within and outside of Canada. For the past several years, the combination of economic incentives and business opportunity has made Canada an attractive venue in which to build a global business that serves the enormous potential of the solar industry. Recent initiatives of government at all levels have given great encouragement to the usage of green energy sources within this country.

This potential for growth here can support the development of innovative research and development initiatives and sophisticated manufacturing operations to serve this market, as well as worldwide markets. With continued attention and nurturing of research opportunities, we can lead in innovation. With focused attention on implementation, we can prove and demonstrate our evolving technological accomplishments for the world market. We have a good foundation for the future, one with a thriving fledgling industry that needs to overcome a number of barriers in order to succeed.

That is where our concern lies for the solar industry. We require a body that can pull together diverse players and set the standard for the future so that the rapid growth does not become uncontrolled and uncontrollable. We see several issues that are creating barriers to the maturing of this industry. They include: -- The need for more support for coordinated research programs that bring industry and universities together to drive the future of the innovation-driven competitiveness for this industry. -- The need for standards and certification for the implementation and installation of solar projects.

Today, everyone from electricians to general contractors claims to have the capability to install solar projects. The user cannot rely upon a standard of implementation that brings confidence in a substantial investment. --The need to develop qualified engineers, technologists, service technicians and installers is not being met by our college system with a standardized curriculum. --The consumer does not have ready access to information that can educate. -- Feed-in-tariff programs that were intended to motivate small users have not met with great support from many utilities.

We believe that Canada will be well served by the funding and establishment of an industry association that serves the following objectives: 1. Recognize the opportunity for Canada to be a world leader in the solar industry. 2. Promote multiple business opportunities associated with the solar industry. 3. Mobilize and consolidate the resources for a successful solar industry by (

a) coordinating academic research and development funding in support of innovation; (

b) by stimulating college curricula that will develop knowledge workers for this industry. 4. Develop accreditation standards for production, installation, and maintenance of solar products in order to coordinate industry input to the development of standards with both the Canadian Standards Association and other standards organizations, and ensure the adequate certification of trades. 5. Explore opportunities for public and private sector partnerships to further the solar industry. 6. Provide consumer education throughout the industry.

(1035) This industry association could evolve from existing organizations or, more appropriately, be established as a new entity charged with the future of Canada's solar businesses. We believe that successfully overcoming the challenges that exist within this young industry, through the association described above, is good for Vaughan, is good for Canada, and is a worthy investment for the Government of Canada. Thank you. The Vice-Chair (Mr. Hoang Mai) : Thank you, Ms. Wallace. I note that the Canadian Home Care Association is not present. It will be sitting at the next panel. We'll start with the questions. Mr.

Julian, go ahead for five minutes. Mr. Peter Julian : Thank you very much, Mr. Chair. And thank you to each of the witnesses for coming forward today. You've given us very detailed briefs. I appreciate, as well, the stress on investments. We, as the official opposition, believe that the next federal budget has to be an investment budget, given that we are starting to move into an economic slowdown, as the Governor of the Bank of Canada has said. I'd like to start with you, Mr. Mills. I have lots of questions. I'll try to get them all in. First off, I just wanted to clarify something from your brief.

You said: The 2011 federal Budget included $35 million over 5 years...half the amount previously provided through the Canadian Foundation for Climate and Atmospheric Sciences. So what was the amount provided prior to the budget, on an annual basis? Mr. John Mills : Thank you. There were actually two investments by the government over a 10-year period, one of $60 million, which was a grant, and the other of $50 million. So it was, in effect, just a little over $10 million per year. Mr.

Peter Julian : So we went from $10 million a year to $7 million a year for 2011, so there was a substantial cut in those investments. Anecdotally, you've raised a number of issues around the hail storm in Calgary and the costs of it, the 2011 floods in Manitoba, and of course the forest fires we've seen across British Columbia. Do you have a sense, globally, of the impact of climate change? I realize it's difficult to pinpoint, but roughly what do you think the cost of the continuing impacts of climate change--which are growing--has been to Canadians and to the Canadian economy? Mr.

John Mills : Thank you very much for the question. I don't have the detailed numbers of that, although I think recently the national round table came out and indicated that for the year 2020, weather and weather-related events will cost the Canadian economy about $2 billion.

(1040) Mr. Peter Julian : That's on an annual basis? Mr. John Mills : That's on an annual basis. Mr. Peter Julian : So that will be a cost of $2 billion to the Canadian economy, and we've seen the government actually cutting back on investments aimed at getting a handle on the impacts of climate change. That's an important point. You also raised the issue of the continuing uncertainty surrounding PEARL, the Polar Environment Atmospheric Research Laboratory up on Ellesmere Island, which provides fundamental and very important Arctic research. I think that's an important point to stress.

Can you tell us, then, if we don't look to that investment of $50 million a year, given the global costs that the Canadian economy and Canadians will experience, what the cost will be of not making those investments and of continuing this process of cutting back and slashing funding for research into climate change? Mr. John Mills : Thank you very much for the question. I honestly don't have those numbers, the exact costs. But the escalating costs of inaction, as I indicated earlier, run from $2 billion in 2020, up to $40 billion in 2080. So that will be the cost of inaction.

To say we are not doing anything is not correct. There are investments going on. The foundation believes that investment, however, is not sufficient to enable the Canadian economy to react properly. Mr. Peter Julian : Thank you very much. I'd like to move on to Ms. Price. Your brief was very good as well. Thank you very much. You're talking about a global investment—again, this is something that is very important for job creation—of what looks like $50 million annually: $30 million to larger festivals and $20 million for emerging and regional festivals.

You also talked about the cutbacks that have taken place in federal support for festivals and events over the last few years. Can you give us a sense of what the impacts have been? I'm talking about the final paragraph of page 3, where you talked about Industry Canada's marquee tourism events program, which ended in 2010, the program that formerly provided federal support for festival events. What has been the impact of those programs not being there, and what is the impact, in terms of jobs, of providing these investments of $50 million as per your recommendation? Ms. Janice Price : Thank you.

We are very grateful for MTEP, the marquee tourism events program, because it did help to educate us about the power we can have as a singular sector. And it was a tremendous driver in getting us together and forming the former Canadian Festivals Coalition, now FAME, Festivals and Major Events, so we can speak with one voice about the very positive impact. We very much respected and appreciated the opportunity to work for two years with Industry Canada on what was rolled out as a stimulus program. We always knew it was a term-limited two-year program. We understood that, and respected that it had a sunset on it.

But our learnings from that and the aggregated research you've seen here have allowed us to very confidently state, as we did in meetings with parliamentarians from all parties last week in Ottawa, that we as a sector would guarantee in a new program a return on investment at a minimum of $5 of additional annual tax revenue for every dollar of the $50 million that is invested.

Sadly, we heard, particularly from our colleagues in Stratford last week at those meetings in Ottawa, that they have had a significant decrease in tourist visits as a result of not having the extra marketing and programming clout they had from MTEP to help attract those visitors. The Vice-Chair (Mr. Hoang Mai) : Thank you very much. Mr. Adler. Mr. Mark Adler : Thank you, Mr. Chair. Thank you, witnesses, for appearing here today. I'd like to focus my questions on the Investment Funds Institute of Canada. Ms.

Pearl-Weinberg, we all know that Canada holds the dubious distinction of being the only country without a common or national securities regulator, and our government has been working very hard with the provinces to institute one. Given all the market turmoil that's occurring in the world, the economic uncertainty that is occurring in other countries--and I know this is something your organization has a strong interest in--could you comment on how a national securities regulator would better protect investors, enhance enforcement of regulation, and attract new international investment?

(1045) Ms. Debbie Pearl-Weinberg : Unfortunately, I'm going to have to get back to you on that. That would be another group within IFIC. We do have a group that can address that, and I will get something back to you in writing on that. Mr. Mark Adler : Okay. Thank you. In that case, I'll move on to Mr. Dunn. Our government has been very active in lowering taxes to individuals and lowering corporate taxes. As a result, we're seeing that corporate tax revenues are up for the government.

We saw this morning that StatsCan said our economy grew by 0.3% in the month of August, and that Canada, as you had indicated, is considered by Forbes magazine to be the best place to be doing business in the world. We see in today's Financial Post that Canada has been named a hot spot for entrepreneurs. Clearly Canada is doing something right, contrary to what a lot of others are saying, particularly the opposition, which is that we should be raising taxes and spending more. Could you comment on how that approach would not be beneficial to the Canadian economy at present? Mr.

Andrew Dunn : I'll see what I can do to comment on a few of the things you've mentioned. For sure it's true that Canada is an open economy. One of the reasons the reduction of corporate tax rates has resulted in some increase in corporate tax revenue is simply by virtue of the fact that we made it more attractive for corporations to carry on business in Canada. A multinational, in choosing where to locate and where to operate, is more attracted to Canada than it has been historically. And that's generally helpful to Canada's growth.

We do believe--and it's one of the points we tried to articulate in our submission--it's important not to look only at the corporate side of the tax system. It is absolutely true that making Canada more attractive for businesses improves employment. But ultimately, what has the highest effect on productivity is having more people come to Canada. So in that circumstance we need to devote the same degree of attention to the personal tax regime that we've devoted to the business tax case. I would point out that when we reduced corporate tax rates we didn't do it suddenly. We didn't do it overnight.

It was done over more than a decade. Simply selecting a point on the horizon and saying that is our target, that we want to move to combine federal and provincial rates of 25%.... In fact that was what was said, the last poin