STANDING COMMITTEE ON FINANCE
COMITÉ PERMANENT DES FINANCES
[Recorded by Electronic Apparatus]
Monday, November 8, 1999
The Chair (Mr. Maurizio Bevilacqua
(Vaughan—King—Aurora, Lib.): I'd like to call the
meeting to order and welcome everyone here this
We will hear from the Canadian Association
for Community Living, the Alzheimer Society of Canada,
the Ontario Coalition for Better Child Care Network,
and Citizens for Public Justice. We have some
individuals who will be appearing, as well as the
Advisory Committee on Homeless and Socially
Many of you have already appeared in front of the
finance committee, so you know how this works. You
have approximately five minutes to make your
presentation. Thereafter, we'll engage you in a
question and answer session.
We'll begin with the Canadian Association for
Community Living, Cheryl Gulliver, president, and
Connie Laurin-Bowie, director of policy and programs.
Ms. Cheryl Gulliver (President, Canadian
Association for Community Living): Thank you very
much, Mr. Chair. As you've said, I'm Cheryl Gulliver,
and I hail from Mississauga. It's always a pleasure to
have Paul Szabo, with his interest in families, and
Albina, from Mississauga, on a committee.
Mr. Paul Szabo (Mississauga South, Lib.): You can
have whatever you want.
Ms. Cheryl Gulliver: Thank you, Paul.
The Chair: Do you still want to make your
Ms. Cheryl Gulliver: Yes. I'll tell you exactly;
I'll give you specifics.
Albina Guarnieri has also has
been very supportive of us and knows our issues very
well. It's really nice to be here—and Ms. Bennett
I want to talk to you a little bit about myself and my
daughter, but mostly I want to talk about families who
have children with disabilities and what we face.
There are the additional costs and the stress, as a
result of out-of-pocket expenses; the foregone income
and the difficulty in finding good and appropriate
I am fortunate that my daughter is 27 now, and we were
there when the money was flowing as fast as it possibly
could to make things better for us. But now we face a
reality. Understanding that, Mr. Chair, you have
to know that we chose as a family for me not to work
outside the home because of the many operations and
the things Margot needed support with.
That's something that should be recognized by other
One of the things we found is you extended the
parental leave for a year after the birth, and we
believe parents should have a maximum of four more
weeks—or it should be flexible—around things that
happen with their child that are totally
disability related. There are the operations, the
extra doctor's appointments, getting therapists, and
doing all the advocacy and work we need, just to
maintain our children and us, as a family.
I can't express enough how hard it is sometimes, when
two parents are working and you have the constant
strain of something sitting at the back of your head
that you know could blow up. You know you will have to
be somewhere, and you're doing the dance between your
family member and your job. We mostly have skills that
are very valuable to the workforce. We think it's
something you should consider. Parents still want to
have an identity of their own and contribute to the
economy of Canada and to society.
We have three items we'd like to leave you with.
First, the CACL recommends an enhancement of
extended parental leave to include an additional four
weeks a year for the first five years for families
with children who have disabilities. That's basically
when they're learning and developing, and a lot goes on
in those first five years.
Second, as part of the long-term tax reform
initiative, CACL recommends the enhancement of the
child care deduction for families who have children
with disabilities by increasing the deduction and
extending the age limit to 18. As it is now, people
can only claim a child until they're 12, but a lot of
times children with disabilities and young adults need
support until they're 18.
Third, we would like a review of trusts and savings
plans for families who have children with disabilities,
because we're very limited in how we can support and
leave money to our children, which would hopefully one
day either enhance or share the cost of their support
when we're gone.
Thank you, Mr. Chair.
The Chair: Thank you very much.
We will now hear from the Alzheimer Society of Canada,
Mr. Steve Rudin and Dale Goldhawk. Welcome.
Mr. Stephen E. Rudin (Executive Director, Alzheimer
Society of Canada): Thank you very much, Mr. Chair.
Let me thank you for the opportunity to participate in
this important process. I'm pleased to have Dale
Goldhawk with me. Dale is a volunteer with the
Alzheimer Society of Canada. He is the chair of our
public policy committee and, more importantly, a former
Today we speak on behalf of over 300,000 Canadians who
suffer from Alzheimer's disease and related dementias.
Based on that statistic alone, I'm speaking on behalf
of perhaps 1,000 people who could be suffering from
Alzheimer's disease in each of your ridings.
As grim as this may be, I speak on behalf of some of
us in this room who will inevitably be affected by
Alzheimer's disease, because if we do nothing, the
300,000 people will become 750,000 within 25 years.
Canadians who struggle with Alzheimer's disease should
be heard, and we support the committee's efforts to
Alzheimer's disease in an important health concern. We
believe the federal government has a number of
opportunities to contribute positively to provide help
and hope for those affected by Alzheimer's disease.
A cure for Alzheimer's disease is possible, but finding
a cure at the expense of those who provide care is
unfair. We must do both, and that's why my comments
reflect the two goals of our organization.
The first goal is to provide help through programs
and services. The second is to provide hope through
research that will hopefully end Alzheimer's disease
What can the government's budget do for those affected
by Alzheimer's disease? We suggest three things.
First, it can enhance the caregiver tax credit it
introduced two years ago. Second, it can follow up on
the recommendations of the national health forum and
take the necessary steps to ensure Canadians have a
national home care program. Third, it can ensure that
funding is dedicated to Alzheimer's research, to help
those currently affected by Alzheimer's disease and
bring hope to those who will be affected by the
I believe these three initiatives are consistent with
the framework set forth by the chair of the finance
Dale will now give some more specifics on
these three initiatives.
Mr. Dale Goldhawk (Board Member and Chair, Public
Policy Committee, Alzheimer Society of Canada): Thank
you, Stephen. Thank you, Mr. Chairman.
On the issue of tax relief, the first of those three
points, we truly believe the government should target
caregivers for tax relief. A disturbingly large number
of people are forced to give up their incomes, their
employment, and all of their savings to care for loved
ones who are affected by Alzheimer's disease. This is
something we see every day at the Alzheimer Society,
and I see every day in the work I do. In fact, we have
a case underway right now involving hundreds of
thousands of dollars of a family's money that has been
given to look after a person suffering for the past
five years with Alzheimer's disease.
The government took the initiative, in
response to Paul Szabo's private member's bill two
years ago, when it implemented some limited tax
relief to help caregivers. The initiative has been
applauded as a good start, but we believe it is just
that—a start. The government needs to do more. It
needs to enhance the tax relief provided to caregivers,
not simply for financial reasons, but also for
Just last week, Statistics Canada released a study
that looked at the impact of care on caregivers. About
2.1 million Canadians spend between three and five
hours a week caring for someone in their home. That
would be like adding somewhere between four and seven
more work weeks to the average employee's job, each and
every year. That kind of workload adds stress and
impacts on things such as work and family life.
Stats Canada also pointed out that while their
caregiving was obviously rewarding at one level, it did
not come without costs. I quote from that report:
Those caregivers who spent the most time providing
care experienced the highest levels of psychological
and emotional burden and personal consequences, such as
extra expenses and postponed job opportunities.
Enhancing the caregiver tax credits is certainly a
On the second point, a national home care program,
enhancing Canada's social infrastructure, Canada is a
caring nation. We do not ignore our responsibilities
and obligations. Caring for those affected by
Alzheimer's disease should be a national responsibility
that strengthens that social infrastructure.
The federal government has an important leadership
opportunity in this regard. Through the budget, it can
signal the importance and the priority it places on
caring for those affected by Alzheimer's disease.
The throne speech reiterated the government's
commitment to modernizing Canada's medicare system,
with an investment of $11.5 billion. That
modernization should include a national home care
A national home care program is the most important and
effective means of improving the care provided to those
suffering from Alzheimer's disease today. It's a
tangible approach to enhancing Canada's social
infrastructure. Today, half of those affected by
Alzheimer's disease are in their homes. The current
patchwork of home care programs will not withstand the
increasing demands Alzheimer's disease will put on the
system in the next few years.
The federal government should put a national home care
program on the political agenda. The National Forum on
Health recommended that the federal government
take on a leadership role in the creation of a truly
national home care program. We strongly support that
recommendation because it will truly benefit those
affected by Alzheimer's disease, but it will also
enhance Canada. It will be one more example, we
believe, of Canada caring.
understand that there are a number of constitutional and
political considerations that must be weighed in the
development of such a program. I understand that it is
vital that there be a clear consensus among the levels
of government about who does what. I think we also
understand that the lives of those affected by
Alzheimer's disease are going to be much better the day
those considerations give way to a home care program
that is truly national and truly effective in the
delivery of care. When those considerations give way
to a truly national home care program, our social
infrastructure will be tremendously enhanced.
Productivity: Alzheimer's disease threatens the
standard of living of not only those with Alzheimer's
disease but inevitably those who care for those with
the disease. A significant number of caregivers are
family members. The process of caring absorbs time and
energy—time and energy that in many cases would have
been directed toward expanding the economy through
employment. As I mentioned, according to Statistics
Canada the typical caregiver takes four to seven weeks every
year to dedicate to care. When you multiply that number by
the number of caregivers that will be required to
support not only those who suffer from Alzheimer's
disease today but the explosive number that is
expected as the baby boom ages, it becomes fairly easy
to see the total impact on productivity.
In purely economic terms, finding the cure is only
going to stem from basic research. Therefore, it makes
sense from an economic perspective to invest in the cure
for Alzheimer's disease. Make Alzheimer's research a
higher priority. In this regard, biomedical and
psychosocial research is critical. Biomedical research
will ultimately uncover the cause and the cure of
Alzheimer's disease. Psychosocial research improves
methods for diagnosing, caregiving, and delivering
Each form of research needs more funding. More funding
can come from the federal government putting more
emphasis on Alzheimer's disease as a research priority.
Finding causes for Alzheimer's disease is the first
step to finding a cure. The Alzheimer Society of
Canada has played a leading role in funding seminal
research that has resulted in identifying a number of
potential causes such as genetics and proteins. Our
involvement has paid off. Canada is truly one of the
world's leaders when it comes to Alzheimer's disease
research. We need to do more to enhance our leadership
The Canadian Institutes for Health Research, whose
enabling legislation was introduced last week by Health
Minister Rock, is a very important step forward. The
government should enhance its commitment to the
institutes and in doing so ensure that Alzheimer's
disease, its cure, and the process of caring for those with
the disease are well researched by the most appropriate
institute. The government already has demonstrated
leadership by creating the Canadian Institutes of
Health Research. This is a major step forward, but more
needs to be done. Within the federally funded research
institutes we need to ensure that Alzheimer's disease
is—I am saying it again, I can't say it enough—a
In conclusion, Canada is a caring nation. Canadians
care deeply about their families, their friends, and
their country. Travelling across the country, both
Steve and I have seen disturbingly large numbers of
Canadians gripped either directly or indirectly by a terrible
disease known as Alzheimer's disease. I can tell
you personally that Alzheimer's disease a number of
years ago killed my father. The stress it put on my
mother in caring for this man in his final years also
killed her. I lost both my parents to this terrible
As members of Parliament and members of the finance
committee, I think you're privileged in a number of
ways. You've been entrusted by Canadians to represent
them in the development of the laws that help make this
nation the best in the world, and in that context you
are equally privileged to have the opportunity to make
changes that will provide help and hope for those with
By enhancing the tax relief to caregivers, you can
help relieve some of the significant financial and
psychological stress associated with care. By supporting
initiatives to develop a national home care program you
can enhance the care available to Canadians affected by
Finally, by supporting efforts to increase the level
of research into both caring for and curing those
affected by Alzheimer's disease, you'll bring both
health and hope to those affected by the disease today
and all of those tomorrows that we will have to look
Thank you very much, Mr. Chair.
The Chair: Thank you, Mr. Goldhawk, Mr.
Now we will hear from the Ontario Coalition for Better
Child Care Network, Ms. Mary-Anne Bédard.
Ms. Mary-Anne Bédard (Executive Director, Ontario
Coalition for Better Child Care Network): Thank you
very much for the opportunity to speak to you this
The Ontario Coalition for Better Child Care has been
around since 1981. We include a large variety of
people from all walks of life and institutions. We're
also a public awareness organization that brings the
benefits of early childhood education to the attention
of the public and to policy-makers. After many
years of advocating for children, we have come to
appreciate that what families need to support them
through the parenting cycle is a judicious mix of
benefits and services—if you like, a holistic
approach to providing support during the early years,
because as we know, the child is within the family, who
is within society.
Although parents may be able to access paid maternity
leave during the valuable first months of life, they
are often left scrambling, desperately trying to access
limited scattered services that may or may not be
available to them, regardless of whether they're returning
to the workforce or not. As they face this
dilemma, they are weighing the costs, assessing the
available services, and the whole time worrying about
the welfare of their child.
This untenable situation remains unchanged for five
years until they eventually enter the school system.
As we know today from the volumes of research
available to us, the early years are too important to
waste on this patchwork of disjointed services. I'm
here today to specifically ask you to invest in and
develop a comprehensive system of early childhood
development services that includes child care for all
Canadian children in the next budget.
Why do we need a system of early childhood development
services? It supports healthy child development, and we
recognize that regardless of the parents' employment
status, early childhood development opportunities
benefit all children and help them realize their full
potential at every stage of life.
It fosters economic growth. Early childhood
development services enable parents to work or enter
training so they can access employment. Flexible,
reliable, affordable services help parents to maintain
It reduces child poverty. Affordable early childhood
development services allow parents to participate in
the labour force and earn resources to support their
own families. It invests in the future workforce,
because high-quality, accessible early childhood
services provide children with the best start in life
so that they can become skilled, competent workers.
It is far more cost-effective for governments to
invest in these high-quality services now than to pay for
the results later on of not having these services
Currently the federal government has no plans for
children zero to five. They have no policy directive
and they have no money for services. They are,
embarking on negotiation of a national children's
agenda with the provinces, who do fund and have
jurisdiction over these services. I would argue
that in order for the federal government to play a role
in these negotiations and to have input on a framework
or the setting of national standards, you need to have
A recent University of Toronto study of the costs
and benefits of good child care concluded that for
every dollar you invest in early childhood education
services, there's a two-dollar benefit to society
through labour productivity and decreased social costs.
The cost benefit was derived as one dollar for early
childhood development to help children and one dollar
for parental support.
This cost benefit only exists if you offer
child care simultaneously with early childhood
development programs. You cannot do one without the
other, and I can't stress that enough.
So we believe a commitment to the following proposals in
the next budget would signal progress toward a
meaningful children's agenda—to create a national
infrastucture fund for early childhood development
services that include child care; to extend the system
of paid maternity leave for a year; and to implement
the third instalment of the national child tax benefit
and extend those benefits to low, modest, and
middle-income families, including those who rely on
Our proposals fall within the guidelines laid out by
the Prime Minister to allocate budget surplus equally
to debt reduction, tax measures, and new program
funding, because after years of neglect it's time for
the families to claim their share.
I'd like to end
on this thought: If you don't know where you're
going, it doesn't matter what road you take. I
would argue that we know where we're going and we know the
road we need to take. And we need to go down that
road together. Thank you.
The Chair: Thank you very much, Ms. Bédard.
We will now hear from the Citizens for Public Justice,
Mr. Greg Maggetti-deGroot, socio-economic concerns
coordinator; Gabrielle Mandell, national social action
committee, and Wahida Valiante, vice-president,
Canadian Islamic Congress. Welcome.
Mr. Greg Maggetti-deGroot (Socio-economic Concerns
Coordinator, Citizens for Public Justice): Thank you,
Mr. Chair. We're pleased to be here today. As a
point of clarification, Gabrielle is the coordinator
for the social action committee of the Canadian Council
for Reform Judaism. Citizens for Public Justice is a
national organization of members committed to promoting
justice in Canadian public affairs, and predominately
our membership is Christian and ecumenical.
The three groups represented here today worked
together producing the multi-faith kits you've
received today called “Keeping Our Promise to
Children: Realizing the Promise of Each Child”.
When the finance minister made his presentation of
the fiscal and economic update, he said the debate
about how to use the surplus is an important debate
and that it should go to the heart of our country's
values. In our presentation we'll emphasize the
values that underlie our recommendations. Just quickly,
in the notes that you've received, the five core
recommendations we have to make are benchmarks of
First is the commitment to reduce the rate and depth of
child poverty by 50% over five years and phase in a
national strategy for the full elimination of child
poverty—basically to reconfirm the commitment that was
made 10 years ago to try to eliminate child poverty in
Second is the commitment to focus the benefits of tax
reforms on low-, modest-, and middle-income families
with children, including those on social assistance.
Third is the commitment to develop a national fund for
early childhood learning and development, and to invest
in community programs that enhance the health and
well-being of all children and their families.
Fourth is the commitment to invest in the construction of
affordable housing units required to eliminate
homelessness in Canada.
Fifth is the commitment to establish with the provinces
and territories a national commission of inquiry on
strategies to improve the availability of good jobs
with living wages.
Now I'll ask Wahida to read some comments.
Ms. Wahida Valiante (Vice-President, Canadian
Islamic Congress): Thank you. The distribution of
wealth and income to the poor, orphans, and the needy on
welfare who are denied goods including education,
shelter, food, and medical care has been a central issue
in the Koranic discourse on justice and equity.
According to the Koran, the socio-economic welfare of
the individual in society depends upon the degree of
justice and equity in the distribution pattern of
income and wealth. Therefore, to realize its ultimate
goal of creating a socially and economically just
society, Islam ensures social justice by applying the
principle of the equality of all individuals in the
eyes of the law and by providing equal opportunity for
all, without discrimination.
However, the Koran maintains that social justice alone
is not sufficient. There must also be economic
justice. Therefore, we believe that the poor have a
right in the wealth of the nation and the community,
that social justice is meaningless without economic
justice and equity, and that eradication of extreme
inequalities in personal income and wealth is necessary
for achieving human development. Every dollar spent by
the public on a child's education is a dollar spent
toward the social and economic well-being of the
society and the country.
The substantial retreat of governments from the field
of child welfare will result in social and economic
decay. Children need financial security to develop
psychologically, emotionally, physically, and socially
balanced personalities. Family as a social system plays a
very important role in the life of a child. It must be
allowed to flourish and be nourished economically,
morally, and spiritually.
God is the real owner of wealth, and humanity has been
entrusted with looking after it as a test. In Islam
the poor and the needy have the right to share in the
wealth of the nation and communities. Therefore Islam
emphasizes that sharing wealth should be on the basis
of love of God, and not as a favour to the poor. We
feed you for Allah's pleasure only. We desire from you
neither reward nor thanks.
Our public policies must be driven by pragmatism and
by our core religious and social values. That in the
past has served our families' children and our country
well in times of hardship and in times of plenty.
As a family counsellor, I can attest to the fact that
it is very difficult for parents to raise their
children without proper financial resources. It takes
healthy families and financial resources to educate and
raise well-adjusted, morally and ethically balanced,
productive, and responsible citizens for a civil
Therefore, we need a comprehensive policy
that addresses the core
issue of child poverty, which is multi-factorial. The
short-term solutions of food banks, shelters,
individual efforts of the faith communities, and
individual charity on their own will not and have not
produced the desired long-term solution.
Although the federal government has recently proposed
some positive changes in the areas of day care, child
taxation, and maternity leave, they don't offer any
long-term solutions and in reality will benefit only
some families. This will leave out those who are truly
in need, including parents who may choose to stay home
to raise their children, working-poor families,
single-parent families, families with special-needs
children, and the homeless, to name just a few.
According to Islamic world view, humanity is created
of a single soul with the best of human qualities to be
vicegerent of God, and is endowed with
sufficient faculties and resources, within divinely
ordained constraints. Therefore, the state, as a symbol
of God's vicegerency and the people's representative, is given
special rights and authority over the taxes and the
surplus wealth of the nation to ensure that no one is
denied their fair share in order to meet their genuine
The Canadian Islamic Congress has also been involved
in Let's Invest in Canada's Children.
Mr. Greg Maggetti-deGroot: This is Gabrielle
Ms. Gabrielle Mandell (Spokesperson, National Social Action
Committee, Citizens for Public Justice): Thank you for
the opportunity to address this committee and to talk
about some of the values that give us our perspective
on social policy.
In Jewish tradition, the pursuit of social justice is
the responsibility of every person and of the social
institutions and government structures that we develop
as part of living in a community. Helping those in need
is not a matter of choice, but a matter of justice. To
give voluntarily to funds for the poor and
disadvantaged is a personal decision of charity, but
Jewish tradition has framed such giving as part of a
more compulsory and structured system of communal
The public sector has a key role in promoting economic
justice and must do justice by just means. We contend
that the good of the community is the responsibility of
all its members. The disadvantaged and vulnerable
members of society must be protected and assisted.
Every person must contribute to the welfare of the
community according to his or her capacity and
capabilities. Human dignity must be respected and must
pervade all forms of communal service and actions. And
individuals must be provided with the tools necessary
for progress toward self-sufficiency.
These statements express some of our fundamental
tenets. They are premised on the recognition that
fiscal policy has a moral dimension. They also
represent some basic criteria for how we can view
social policy initiatives and how they seek to address
the fulfilment of human needs.
We are here today because as a society we have
failed to live up to our responsibilities and
commitments to Canada's children and their families.
We cannot stand by while one in five children in Canada
lives in poverty, while their families go without the
necessities of ensuring the healthy development of the
next generation. We are bound to respond, but to
respond in a way that is sensitive, respects human
dignity, and helps to develop human potential.
Like other faith communities, the members of the
reformed Jewish movement take part
in many initiatives in the front line of the fight
against hunger and homelessness—for example, food
collections, affordable housing projects, shelters, and
meals. But we know that providing for the future is
not something that can be done through food banks and
shelters, important as these efforts are in the short
term. We join so many other faith communities and
community groups in supporting the need for a national,
coordinated governmental plan, or in Finance Minister
Martin's words, a great national effort to alleviate
child poverty and improve the life chances of Canadian
From a Jewish perspective, to invest in children is to
make a statement about faith in the future, to say
that positive change is possible and that we cannot
give up on the future or give in to despair. Where
children suffer, the whole of society is at risk. To
ensure a healthy start for today's children is to
invest not only in this generation, but to plan for the
well-being of generations to come. But investing means
more than merely meeting basic needs; it means creating
the conditions and providing the resources to help
families reach their potential.
Our Canadian social policies should reflect our shared
values and vision of a just and caring society. As
Canadians and as Jews, we believe that social
well-being, and the services and programs that seek to
ensure that well-being, is an essential part of a just
society. The moral test of a social policy and the way
a nation is judged is by how it treats its most
vulnerable, those most in need. We hope you will
provide leadership in articulating these values.
The Chair: Thank you very much. Now we'll hear
from Alexandra Humphrey. Welcome.
Ms. Alexandra Humphrey (Individual Presentation):
Hello. Honourable members and fellow
presenters, I thank you for making my contribution
today a possibility.
I would like to raise these issues that have an impact
on families across Canada, as well as on my own
personal life. I will give them to you in point form:
affordable housing; universally accessible, quality,
affordable child care; support services for youth at
risk of dropping out of school; equitable access to
post-secondary education; economic support; and
adequate wage and job security.
Recent enthusiasm from the federal government in the
area of early childhood is to be commended. It's one
step in the right direction. However, today's
families' ability to provide a positive and nurturing
environment for their children of all ages has been
severely impaired by financial cuts and restraints.
It's time to reverse this cutting trend and to become
active in promoting healthy family environments.
People and families need support, not cuts that create
People need to have access to housing that does not
require the majority of their monthly income. People
need an accessible, regulated, quality, affordable
child care system to facilitate positive early
childhood experiences, as well as enabling them to
attend training and job opportunities. People need
supportive resources for their children of all ages,
including services that encourage youth to stay in
school to finish their education. People need to have
the opportunity to access post-secondary education to
upgrade their skills and to form their careers. Access
should be made attainable and not be restricted only
to those who can afford it. People need to be eligible
for a greater portion of the social safety net
programs, such as child care cuts, child tax credits,
and child care subsidies, so that they do not get
clawed back by every penny that is earned, nor by every
qualifying program. And people on social programs
should not be penalized by the programs of every level
Finally, jobs should be made available in every
sector—jobs that pay a decent wage, that have
comprehensive benefits, that will not disappear, and
that have future possibilities. Therefore, I'll
share the recommendations I have for you today.
The federal government should financially support
housing projects and actively develop and pursue an
“affordable housing for everyone” agenda.
The federal government should make good on their
promise to our children by actively engaging in
formulating a national child care policy so that
families all over Canada have access to regulated,
quality, and affordable child care services.
The federal government should provide leadership in
the area of preventative measures services so as to
advocate for and support every youth in attaining his
or her educational goals. The federal government
should facilitate access to post-secondary education
for all people by offering a grant system instead of
simply loans and by creating an equitable loans and
loans repayment system.
The federal government needs to establish an economic
comfort zone and make sure that the levels of differing
benefits aren't affected in such a way as to counteract
one benefit by another.
And the federal government needs to be able to create
jobs that pay adequately, that provide supportive
benefits, and that have a future for the people and
families of Canada.
The Chair: Thank you very much, Ms. Humphrey.
We'll now hear from Mr. Joseph Polito.
Mr. Joseph Polito (Individual Presentation):
Thank you. First, Mr. Chairman, I would
like to thank everyone associated with both your
department and my own, Mr. Allan Rock's group,
especially Tom Allison, for facilitating my
Mr. Chairman, I'm here to propose two measures that I
hope will help to meet these very worthy requests that
have been made today. One is to replicate the Dutch
miracle. The Dutch have a 3.2% unemployment rate and a
3% poverty rate, as compared to about 18% in the United
States and Canada.
The other measure is a tax strategy that would make a
far greater impact on the priorities of Canadians than a
cut to personal income taxes—and many of those are
priorities that were mentioned here. This cut would be
a national millennium gift from our national government
to all workers and employers. It would provide relief
to cash-strapped hospitals, universities, school
boards, and municipalities.
This cut would be a fiscal
paradigm shift adopted throughout the world, and we
would be its leaders.
Measure one: remove the impediment to replicating the
Dutch miracle. In his update to the committee, Paul
Martin cautioned our expectations and said “nor can anyone
predict precisely when an economic downturn will hit, how
deep it will be or how long it will last”.
Mr. Martin described the devastating impact of the
last two recessions. He reminded us that largely
because of those two recessions we currently pay $42
billion per year in interest payments, which he said
“cannot go to reducing taxes or investing in
education, the environment, health care or child
Another crushing depression, precipitated perhaps by
Y2K, would eliminate the anticipated surpluses. Worse,
the deficit would explode and annual interest payments
would balloon to $52 billion annually. Such
devastation can be radically diminished by adopting the
Dutch strategy of redistributing work rather than income.
In economic downturns the Dutch preserve low
unemployment while hundreds of thousands of Canadians
lose their jobs. The Dutch avoid enormous budgetary
burdens of unemployment, which experts estimate cost
Canadian taxpayers between $30 billion and $90 billion
per year. By
radically reducing such costs, the Dutch are not forced
to strangle health and education or increase taxes, as
we have done. The Dutch have accomplished Mr. Martin's
primary goal: “First, we must build a foundation for
economic growth by providing sound financial
Two federal reports made recommendations that would
replicate the Dutch miracle in Canada, the Donner
Report and the Collective Reflection on
the Changing Workplace. Why are these remarkable
reports still sitting on a
shelf? The reports' authors tell us Canada's
payroll tax structure is an impediment to the
recommendations and to changing federal and provincial
employment standards acts.
The key to removing the payroll tax impediment is
expressed in the influential business publication
Barron's. I like to think of myself as a social
activist, an idealist, but this is coming from the
business world as well:
Eliminate the payroll tax on
the first $10,000 of wages. Since this levy falls
especially hard on the working poor, it's the cruelest
of all, and cutting it...would put several hundred extra
dollars into paychecks that need it most.
This result matches Paul Martin's first criterion for
tax relief: “First it must benefit those who need it
most—middle- and low-income earners, especially
families with children.”
The employers' share of the payroll exemption would
create a financial incentive to pursue the strategies
of the two shelved reports. Employers would reduce
their payroll tax expenses by granting job sharing and
leaves, a major factor in the Dutch success. Employers
would reduce the costs more in downturns by retaining
employees and reducing their hours rather than laying
them off. We should all note that during the last two
recessions, child poverty skyrocketed as young parents
lost their jobs.
Measure two: a tax cut that meets Mr. Martin's
second primary goal. We must promote economic growth
and a better quality of life by reducing taxes. The
famous MIT economist, Lester Thurow, in his newest
book on economic growth, Building Wealth, advocates the
elimination of payroll taxes. Those business groups
appearing before this very committee should too.
Instead they demand personal income tax cuts, which
benefit the successful. Why?
The U.S. tax cuts in the early 1980s did not prevent
deficits in the 1980s. Productivity in the 1980s did
not improve. The cuts were partially reversed by Bush
and Clinton to address the deficits from high
unemployment recession. In fact, the recent seven-year
U.S. boom began when Clinton raised taxes and Alan
Greenspan lowered interest rates.
A large payroll tax exemption now would be the
foundation of permanent future income tax cuts and
faster economic growth, while meeting Mr. Martin's
third priority, making our economy more competitive and
innovative, and here's how.
The payroll tax exemption would reduce employment
costs, which increase global competitiveness. It would
reduce unemployment, which increases the reliance on
productivity-improving capital investment. It would
increase research and development, with federal budget
savings associated with lower unemployment. And it
would reduce interest rates, since the Bank of Canada
would see lower prices from lower costs.
We should all note that the free trade negotiator, a
tough negotiator, Mickey Kantor, credits the U.S.
boom and rising productivity to very low real interest
rates through 1992-1995 in the U.S., which increased
capital investment and then led finally to
The payroll tax exemption would address other Canadian
priorities. It would improve health, education,
transportation, medical research, and housing with the
savings of the employer's share of payroll taxes. It
would protect the environment, increase capital
investment, increase the use of fuel-efficient,
environmentally friendly technology. It would reduce
the brain drain. Appendix A shows that the real cause
of the brain drain is unemployment, not high taxes.
It would unify the nation, reversing past errors with
distinct communities. High unemployment exacerbates
the plight of aboriginals and reduces the tolerance of
French Canadians to the slow pace of meeting their
It would reduce sales taxes. A payroll tax exemption
would be the equivalent to a sales tax reduction. The
employer's savings would be passed on at the retail
Finally, it would alleviate the skyrocketing tuition
students face. With their education expenses, students
have no taxable income and will not benefit from
personal income tax reductions. They will benefit from
a payroll exemption.
I have two recommendations. One is to restructure the
payroll taxes to implement the Donner report and the
other report. You can do that by raising the rate back
to $3.07 and applying the approximately $6 billion in
reduction to a payroll tax exemption and applying any
future reductions to that same approach—an exemption,
The second recommendation is to make the payroll tax
exemption the primary focus of future tax cuts
initially, and then you will be able to make permanent
income tax cuts after that.
Thank you very much.
The Chair: Thank you very much, Mr. Polito.
Now we'll hear from the Advisory Committee on Homeless
and Socially Isolated Persons, represented by Alison
Kemper, co-chair, and Sharole Gabriel.
Ms. Alison Kemper (Co-Chair, Advisory Committee on
Homeless and Socially Isolated Persons): Hi.
I'm not going to pretend I'm an expert and that none
of you have any knowledge of homelessness. We all know
homelessness exists across the country. I see we have
folks from Alberta, folks from Nova Scotia, and lots of
folks in between. We all know it exists in every
single riding in this country.
In Toronto in 1995-96, the then Metro council put
together an advisory committee, because we saw how much
worse homelessness was suddenly getting in our city.
Our members—and Sharole Gabriel is one of
members—include individuals who are currently homeless
or have in the past experienced homelessness, city
councillors, and front-line workers. We meet on a
monthly basis to provide input into city policy-making
from individuals who have some direct experience with
In Toronto homelessness is growing at the rate of
11.6% a year right now and has been since 1996.
Occupancy in our hostel system—and you probably know
this, you Toronto folks—is 1,716 families with
children, 408 youth, and 1,790 single adults. Families
with children are the fastest-growing population within
the shelter system.
So the kinds of things you're hearing from all of us
along here are pretty constant. It's families with
children who are becoming the most vulnerable people in
City emergency hostels are operating at over 100%
capacity all the time now. The city is opening a new
hostel on almost a monthly basis. Two people every
week are probably the victims of the health-related
problems of living on the street.
Why is homelessness growing? There are two issues:
affordable housing—we don't have any; and poverty—we
have too much.
I urge the opposition as well as the government
members of this committee to recognize that the
withdrawal of federal leadership and funding for
assisted housing has contributed to the collapse of
affordable housing development in Canada. In 1992,
the last year of federal participation in the housing
program, over 19,000 units were developed. In 1998 it
was a tenth of that; it was 2,000 units.
You should all know that the cuts to income support
programs—and this was on the front page of many of the
Toronto papers recently—as well as eligibility and
payment levels have impoverished tens of thousands of
Torontonians. In Toronto alone, it's estimated that
changes in employment insurance have resulted in over a
$0.5 billion annual reduction in payments to unemployed
workers within our city.
That's not just in Toronto. Unemployed workers in
every single riding in this country will be losing
income they were once eligible for under EI. They're
not meeting their rents. They're becoming homeless in
your riding and here in Toronto—well, they're in
Toronto; we're in Mississauga.
What needs to be done to reverse this trend? We need
to go back to 20,000 units a year, which was
what we had in 1992. The Federation of Canadian
Municipalities has lots of good information on that.
You'll know as well the number of people who call your
offices panicking because they're about to lose their
housing. They're living in small apartments, they're
paying more than 50% of their income for rent, and
they're all about to become homeless. We need federal
programs that target those households so that they're
not just one of your constituency problems, but we've
addressed the issue before folks end up with a sheriff
at their door, before they're calling you in a panic
saying, “I have to be out of my house in 24 hours.
Help!” We need the federal government to prevent
this. Then you can get on with some other work, right?
Lots of people have done great homework on the federal
role. The Advisory Committee has looked to two
organizations for great reports; one is the Federation
of Canadian Municipalities and the other is the Toronto
Disaster Relief Committee. The TDRC has recommended 1%
of Canada's budget be allocated to housing, and we urge
you to adopt the 1% solution. I think they'll be here
tomorrow doing the same.
We'd like the Government of Canada—and I would count
on support from the opposition to move them this
way—to assume leadership in establishing a new
national housing program, working with the provinces
and municipalities to achieve 20,000 new affordable
units per year. We'd like you to get the folks in the
various bureaucracies working hard to negotiate with
the provinces to provide funding for a national shelter
allowance program for those 833,000 families at risk of
Finally, we'd like you to adjust the eligibility for
EI sick leave benefits until the people who have become
unemployed because of health reasons can be assessed
for Canada pension. Right now there's a long period
in between, and the federal government needs to protect
that little bit of safety net—restore it.
The reason to do all this quite clearly is, as the
folks from Citizens for Public Justice said, we are a
country that believes in this kind of stuff. But also,
if you don't believe in it, you're going to reduce all
your other investments if you can just get people into
housing. It costs a lot less to run Canada if you're
not paying people like me to run programs for people
who are already homeless.
It costs my agency $8 to feed somebody breakfast and
lunch every Sunday. If people had houses with
refrigerators, they'd spend a lot less public money
feeding themselves and housing themselves. They'd
spend a lot less public money trying to stay sane in
the midst of a very tough world.
However you do it or why you do it, it needs to be
done, and we at the Advisory Committee in Toronto urge
you to do it in this budget.
The Chair: Thank you very much.
Now we'll proceed to the question and answer session,
with five-minute rounds. We'll begin with Mr. Epp,
followed by Mr. McKay, then we'll go to Mr. Brison, and
then Mr. Cullen.
Mr. Ken Epp (Elk Island, Ref.): Thank you, Mr.
Thank you all for your presentations. I like it when
the chairman says we're going to have a
question and answer session, because in the House of
Commons we have a question period. I don't know if
you noticed what's missing.
An hon. member: We have a statement period.
Mr. Ken Epp: I would like to ask several of you
How much time did you say I had?
The Chair: Five minutes, but usually we go over
time, so maybe seven.
Mr. Ken Epp: Okay, I'll go a little over.
I'll jump right ahead to the Alzheimer Society and the
There are a lot of Canadians who have illnesses
besides Alzheimer's disease. I have several friends
who have premature Parkinson's disease. There are many
of these. So I'm sure that what you're saying here for
people whose family members or friends have Alzheimer's
disease would be probably equally applicable to others
as well. Would that be a fair statement?
Mr. Stephen Rudin: Yes, sir. I would assume, not
speaking on behalf of the other organizations, that the
situations are very similar and that people suffering
from other diseases would be similarly impacted.
Mr. Ken Epp: I was intrigued with your statement
that about half of the victims of Alzheimer's disease
are still in their own homes, usually being
cared for by spouses as long as that's possible. That
would probably be the most common scenario.
You're suggesting, and others have said this too, that
we should have a national home care system. Do you
envision that being administered through the
provincial government, the Department of Health and the
different provincial health departments, or are you
actually thinking there should be a federally
initiated program that extends across the country and
sort of bypasses the health system?
Mr. Stephen Rudin: We're suggesting
that there be a nationally mandated program of home
care, but like all the other programs, it would
certainly be administered provincially.
There are a number of programs throughout the
country that are unbalanced. There are some
excellent examples of programs that currently exist, and
there are also some deficits of programs in other
jurisdictions. I think what we're really talking about
is levelling the playing field.
In response to the first part of your question, the
numbers we use are generated by the
Canadian Study on Health and Aging, which indicated
that 50% of the people who were suffering from
Alzheimer's disease were in the community, so we believe
it's particularly important to provide support for
them in their homes in a universal and uniform way.
Mr. Ken Epp: Of course, you might as well
know that I grew up in a family with a little sister
who had cerebral palsy. She still does. She is 55
years old now; how time flies. She has never been
able to speak or look after herself, so I and my
family are very grateful that in Canada we have a
support system. My sister has been in an institution
for a number of years. We felt that was best
I think obviously—and probably you'd agree with this,
Ms. Gulliver—there should be a choice on the part of
the families on how to look after their needy family
members. Would that be true, that you'd be in favour
of a choice as to home care or institutional care,
whichever fits best?
Mr. Stephen Rudin: There's no question that with
Alzheimer's disease, like many other conditions, there
are very personal situations, and certainly we would
support choice by the person with the disease as well
as their caregiver. There are times when a solution
of facility placement would be best, and there are other
times when remaining in the home with the support and
care of family would be best.
I think Dale
probably has some perspective.
Mr. Dale Goldhawk: My perspective is that the
unique situation with Alzheimer's disease is that it
has various stages. Of course, as we know, those early
stages where they can be cared for at home by a spouse
or other family member are quite separate from the
later stages where that person has to be in a special
intensive care home or perhaps a hospital. It's an
intensely personal thing for the families themselves to
decide at what point a different kind of care would
I alluded earlier to a case involving hundreds of
thousands of dollars for the care of an Alzheimer
patient. Part of the problem in this particular
province is the fact that there is no home care help at
all. There just isn't any, and this is how this
particular family, while openly grieving the decline of
their breadwinner, is also forced to deplete all of
their limited family wealth to look after that person.
Mr. Ken Epp: Yes, it's a big problem.
I have a bit of a problem seeing how the federal
government is going to be involved beyond funding. When
I hear talk of a national home care system, somehow I
see the federal government coming up with a whole bunch
of rules and regulations, so you'll get the money
if you do this, but not if you do that, and all that
stuff. I really think that begs the question, because
not only is this an individual problem with respect to
families, but also with respect to individual
governments. We handle things differently, and I would
hope getting federal government involvement would
not cause us a whole bunch of administrative problems.
Mr. Dale Goldhawk: I can only say from our point
of view that we would be happy to have the federal
government as involved as it wants to be as long as the
system works and as long as there is equitable care
across the country.
Mr. Ken Epp: Yes, right.
Next I want to talk to the Citizens for Public
Justice. I really was intrigued with your
presentations and your points of view—
The Chair: Excuse me. Do you want to
interject for a minute?
Ms. Cheryl Gulliver: Yes. We would like to answer
a little bit on what you were just talking about.
I'll let Connie go first.
Ms. Connie Laurin-Bowie (Director, Policy and
Programs, Canadian Association for Community Living):
I'd like to make the distinction that I think the
issues that were raised by the Alzheimer Society are
critically important for our membership as well, as
you've alluded to, and I think the solutions they're
proposing make good sense for a number of communities.
However, I think the distinction that's critical is
that there's a difference between disability and
disease, and in Alzheimer's disease, the
strategy that's being put forward by the association is
to prevent the disease.
For people who have a disability, and particularly an
intellectual disability, I think the solutions are much
more community-based—well, not much more—and in
addition there are community-based decisions.
On the issue of choice regarding institutions, I guess
there are two issues. One is that there is a falsehood
of choice for most of our members and their families.
That you're choosing an institution is in fact not a
choice for most families; it's the only option for
many, and that's because of the poverty of community
support in most communities across the country. There
is no alternative for many families.
As a movement, we've tried very hard to build those
alternatives, but we still see children going into
institutions. That's mainly because families are under
the kind of pressure that many people here have talked
about, and they are not given any kinds of support in
the community, which, by the way, are less expensive
kinds of support.
Ms. Cheryl Gulliver: If I could add to that, one
of the things that families usually want to do is share
the responsibility and ask for help or support when
they need it. They don't want it to be an either/or,
and most of our work involves a family looking for what
they need to keep them together as a family.
My mother also had—I don't like to use the word
“enjoyed”—Alzheimer's disease, and we were in the
very fortunate position where we could deal with it.
The emotional cost was terrible, and yet we were
able financially and so on to deal with that, with my
sister and I not working outside of the home.
It's exactly the same thing for children with
disabilities. Sometimes they need to answer what
they want, particularly when they become adults, and we
have to give them informed choices of what it's like to
live in society. We need families to live with
dignity and not feel guilty all the time because they
can't be super people.
Mr. Ken Epp: Perhaps someone else wants to add
something to this discussion too.
Mr. Stephen Rudin: What we're
really talking about here is a continuum. Oftentimes
a disease becomes a disability or a disability becomes
a disease, and at that particular point the element of
choice is withdrawn. The numbers we present
are really numbers with some of the tears wiped
Oftentimes as we talk about people who
are the caregivers, there is a problem where they don't
have the benefit of being able to continue. So the
choice is really a forced one if it's the caregiver's
spouse who has a stroke or breaks a hip or some
physical situation like that. Then the person
they're caring for really has no choice except to be
placed in a facility.
not talking about issues that are really mutually
exclusive, but that move along, unfortunately, on a
continuum of sometimes rapid decline.
Ms. Cheryl Gulliver: To support that, my father
had a stroke a number of years ago, and he's very
vulnerable himself. We struggled. He used to say
he was the voice and mother was his legs, so
between the two of them they got pretty much what they
needed, until she became super vulnerable.
Mr. Ken Epp: Those are issues that I think deserve
the maximum amount of attention from Canadians. As
you've all said, we live in a country where we do care
for each other, and having been a recipient of that big
time in our family, I support that very much.
I'd like to talk to the Citizens for Public Justice.
Also, I'm very interested in this whole issue of child
poverty. I have a couple of grandkids who live in a
family whose income right now is about minus-$20,000 a
year because our son is in school. He want back to
school and they're living in a tough situation, and yet
I don't view my grandchildren as living in poverty,
because they have all of their basic needs met. They
have adequate food and clothing and there will be
enough heat in winter when it gets cold.
I would like to get from you some sense of how many
children in Canada—the real number—are
actually not getting enough food, who are really,
literally, hungry. To put this into perspective,
my same son, who I was just telling you about, spent
about 10 years working in Christian relief
organizations around the world. I remember when he
communicated to us from southern Sudan on one occasion.
He said they were having 150 children a day die of
starvation, and they were very successful
because they reduced it to 60. Then he put in
brackets, of course, to Sherwood Park standards—that's
a town near where we live—“We
haven't yet reached the goal”. I cannot imagine 60 children
dying of starvation every day. That is extreme
poverty. Of course, we have poverty in this country
as well, but I, frankly, have not yet heard
of anyone literally starving to death in Canada, except by some
other pile-up of circumstances.
Do you know of some? I don't want to only go
that far. We're talking of hunger as opposed to
starvation. I don't think it's right for
children to be hungry. They should be nourished, they
should be educated, and they should of course have these
other rights. But how pervasive is that problem in
Mr. Greg Maggetti-deGroot: Perhaps it's not very
helpful for us to compare the situation in Canada to
the third world. Maybe what you said about the
situation in countries in Africa and Latin America
should underline the point that Canada as a nation, through
the many NGO organizations we have in
Canada, needs to recommit to supporting the development
efforts to relieve the destitution that exists abroad.
In Canada, we know we have a measure of low
income. What that indicates is families and
households that are experiencing economic stress and
vulnerability. We know that of rental households across
the country, 25% are paying 50% or more of their income
for housing. So when we look at the picture, we have
to consider the low income in conjunction with the lack
of affordable housing. When you don't have a roof
over your head in Canada, that's poverty, right?
One of the things we have not really discussed very
much this afternoon—and we've heard a discussion about
the problem of housing, the problem of homelessness,
the problems of hunger—is that food bank use in Canada
continues to rise. Our churches, our synagogues, and our
mosques are providing breakfast programs for children
because their families don't have enough food to feed
them breakfast. The food bank use in Canada has
doubled over the past 10 years. Food banks are
having trouble, even in Waterloo region, where I live, a
very prosperous region, keeping up with demand. And
this is during a time of prosperity.
Remember, 20 years ago there were no food banks in
Canada. We need to look beyond the numbers. When we
say that 19.8% of children are living in families with
low incomes, we need to look beyond this and see the
trends that are happening. The family living in a motel
is not in a safe, secure environment for a child to be
growing up in, nor is moving around from one shelter
to another, or having to rely on food banks or going
to school hungry, or, as in many cases, mothers
are going hungry so that the children have enough to eat.
We know, when we look at the national longitudinal
survey of children and youth, that in a family of
that has an income below the low-income cut-off, the
children have a greater risk of experiencing physical
illness, different kinds of illness, and we know it
carries on throughout a lifetime if you suffer
illness as a child. Can we paint the same kind of
portrait that exists in Africa? No, of course not. But
we also need to look at what we want for our
country. What do we want? Do we want just the bare
minimum of making sure each child is not starving,
or do we want to create the conditions so that all of
our children can thrive? That's another way to look at
it. Maybe we need to set our sights for what we really
want to achieve and not just to minimize the cost that
children and families have to face.
Ms. Wahida Valiante: Could I add something?
The Chair: Yes.
Ms. Wahida Valiante: I can give you something from
my own personal experience, since I work on the front
line. We can look at poverty as a deficiency
in any area of any individual child's development. I
think one of the key things I found is that with the
lack of affordable housing for parents, for young
mothers and their children, there really is a
major deficiency in terms of having peace of mind and
security, a place where they can go, where it's their
permanent house. Children need some permanency in
their life. You can't have them go into one shelter for
four months and then look for other housing. I find
the hardest thing is to find suitable housing that
is affordable so that the children can walk to school.
I think we can look at the issue of comprehensive
policy around housing. Maybe we should look at
that, at reducing the deficiency in the child's life in
terms of developing a sense of security, in terms of
performance, whatever you like, because then it
permeates right through their entire functioning.
In terms of your point of looking at poverty
internationally, I think it's something Greg has said,
and I certainly agree. We cannot measure
this in accordance with the society we have
developed and in which we live. We need to look at what
the end product or end result should be.
Mr. Greg Maggetti-deGroot: If I could make
another comment, you talk about the situation of your
son and his family. My own family—I have three
young children—lives, strictly speaking, below
the low-income cut-off. Are we poor? No. Are we going
There are two things we have to keep
in mind. One is income, the flow of money that comes
in on a regular basis. Yes, we're in a
situation where if a paycheque didn't come, if we
missed a couple of paycheques, we'd be in some trouble.
The other thing is assets. They come in a variety of
forms. There are financial assets that can be built up.
There are educational assets. My wife and I both have
the privilege of having post-graduate degrees so that
we have a very good chance of being able to find work
if we need to find work. But there are other assets.
We have assets of families of support, a community of
support. I don't think we've bought, in any year, more
than $100 worth of clothing for our children, because we
have people give us the clothes that their kids
have grown out of. We talked the other day, while we
were doing dishes together, of what would it be like if we
actually had to go out and buy new clothes for our
kids. We have the asset of a community of support.
This is another reason why it's so important to invest
in the early childhood education and development fund,
because that also creates community assets that we can
draw on. We've benefited from that in our community.
I've seen my son's preschool—we have him in a co-op
pre-school program. And this is not for low-income
people, because we had to commit time and money to be able to
be in this. But I can remember at the end of the year,
some of the parents saying to the pre-school
teacher—she's an excellent pre-school teacher—“Thank
you, Sandy. I've learned so much about parenting just
from watching you work.”
These kinds of community assets, this array of
assets, makes us a very rich country, and it can really
provide the best for our children. It's a worthwhile
The Chair: Thank you, Mr. Epp.
Mr. Ken Epp: I would really love to have more
time, but I concede.
Mr. Greg Maggetti-deGroot: We'd be happy to chat
Mr. John McKay (Scarborough East, Lib.): Mr.
Chairman, is this an opposition question or is this a
The Chair: We'll have to hear the contents
first. I haven't heard the question.
Mr. John McKay: Maybe I can double it up.
First of all, I have a question for Ms. Kemper
concerning the homeless issue. As you know, my riding
is Scarborough East, and of your 1,700 families with
children, about half of them are in my riding on any
given night. So I'm very cognizant of the problem.
One of the things that drives me absolutely insane is
that you ask for national leadership and yet it's
perfectly obvious to me that the third leg of the table
is never there at the table to deal with this national
leadership. Clearly the municipality of Toronto is
interested and fascinated by the issue. Clearly the
national government is seized of the issue and has
enormous caucus support. But the provincial government in
this part of the world has absolutely no interest
We put $3.5 billion into health in the last CHST
transfer and not one red cent has arrived on the homeless
issue. Arguably, a lot of the folks who are in the
homeless situation have difficulties. We gave them
another billion dollars on the CHST last March and not
one red cent has arrived in terms of solutions to the
So I'd be interested in your comments as to how to get
the province to the table. Clearly you're
asking for leadership. Clearly the federal government
is willing to provide the leadership, and I'm
anticipating good things in the next month or so from
Minister Bradshaw. But how are we going to deal with
Ms. Alison Kemper: I am no expert in
federal-provincial relations. I could be described as
a federalist. I basically think it's a country;
it has a lot of power. It needs to get with the
program and figure out how to deal with a province that
doesn't want to deal with the problem.
We went off to fight for Canada's dignity at the UN
last fall, and people made deputations there showing
what kinds of impact the Province of Ontario and the
federal policies have had on poverty. The UN
basically said, “We don't care who Mike Harris is—it
doesn't matter to us. What you do to poor people in
Canada is an international shame.”
I think federal-provincial relations are
a big issue; they're a
big problem. I don't have any solution to that. I am
telling you that the poor people of Toronto cannot wait
while those things get ironed out. They're dying on
the streets. Children are living in your riding in
motels—and you know the conditions there; they're not
I don't care what kind of legislative end
run needs to happen, but folks need help and they need
it now. I know in regard to the CHST that there
were a whole lot of people who told you not to do it,
that CAP works better, and you guys did it anyhow.
So I can't solve that one for you. I'd say go back to
CAP. But I'm not real sophisticated; I just run a
front-line agency. I tell you, just as you know,
it isn't nice. You have a lot of real smart
people in Ottawa, right?
An hon. member: Which side of the table do you want to be
Ms. Alison Kemper: I don't care. The
bureaucrats know federal-provincial stuff.
When we've seen a federal-provincial conference on something
for the last I don't know how many years, folks in the
streets, folks who work in front-line agencies, cringed,
because what it always means is one less kick at
the can for the average Canadian who needs a program.
Every time you guys go into negotiations we lose
So I can't solve that for you. I'd go to
the meeting with you and tell the provinces what I
thought, but I don't think it will help a lot.
Mr. Joseph Polito: I would make the payroll tax
exemption to the provincial governments conditional on
certain expenditures. I'd make conditions that they
would have to leave those hospitals with their funding,
so that extra money they saved on the payroll tax
exemption was spent by the hospitals and the school
boards and the municipalities, and the provincial
government itself would spend that money on housing.
In other words, a payroll tax exemption for the
provinces is tantamount to an increase in the federal
Mr. John McKay: Do you know offhand how much the
provincial government pays in payroll taxes to the
federal government? It's a substantial amount of
money, I believe.
Mr. Joseph Polito: I believe the national amount
is close to $40 billion. Divide that by a third and
then divide that by... It's a couple of billion, I would
Ms. Alison Kemper: I just want to say something
Mr. John McKay: I wasn't facetious.
Ms. Alison Kemper: His wasn't, but mine was.
I've spoken to Anne Hertz,
who's in charge of housing programs for the city of
Toronto. She's been trying to get stuff negotiated
with the feds. I know that in our neighbourhood
both Caroline and Bill
Graham have been working very hard on
preserving co-op housing, which we nearly lost.
are all kinds of ways that the federal government can
put together capital investment things to get housing
built. I'm not a bureaucrat. I don't know all this
stuff. The FCM has lots of great ideas. Ask them.
Mr. John McKay: We have, actually.
Mr. Greg Maggetti-deGroot: Perhaps I could just
draw your attention to the Canadian Housing & Renewal
Association. They developed a proposal for creating
a national housing foundation, and I think that could
serve as a framework for the federal government to get
involved again in construction of new
affordable housing. Municipalities, we know, are on
I share your frustration. In the Kitchener-Waterloo
area we've held town hall meetings where we've brought
together people from all levels of government, and
Karen Redman and Lynn Myers have both been
very supportive and helpful around this. In the
several that we've had it's been quite frustrating; we
haven't had any of our MPPs there.
But perhaps something like this foundation could be a
way for the federal government to get back, in a very
constructive way, to supporting construction of
affordable housing, because there are players who are
ready to work inside the province.
Mr. John McKay: I'm interested in the
unanimity of views—there's an interesting view over
there—with respect to direct dealing and what it boils
down to, either through an agency process or some
other process, but certainly not through the CHST
The Chair: We'll give you the final comment and then
we'll move to Mr. Brison.
Ms. Sharole Gabriel (Spokesperson, Advisory Committee on Homeless
and Socially Isolated Persons): I just want to make
a couple of comments regarding the housing situation.
I'm a recovered alcoholic, drug addict, and prostitute,
and if it weren't for the fact that there were social
services available to provide me with a place to live,
with food, and a little bit for clothes and enough to
squeeze by with miscellaneous items, I would have died
a long time ago. Without a home, there's no safety.
You don't feel safe, no matter where you are, because
you're constantly saying, oh my God... It's about
survival and where am I going to get my next meal,
etc. I just can't emphasize enough how important
Canada signed the
UN declaration of human rights. It's a basic human
we're breaking that.
I call on the integrity and the responsibility of the
federal government to take charge, to take some leadership
here. I don't understand about provincial-federal
relationships. I don't know, and I really don't need to
know. What I do know is that folks deserve basic
rights; they deserve to have basic needs met. We
have lots of money in
this country. No one can tell me that we don't have
money for housing—affordable housing—for folks.
There's no need for all these welfare cuts to make
things so much more difficult for folks. It's evil to
increase the suffering of the poor, and that's what's
This government is accountable, morally,
ethically, and to God Almighty. Whether you believe
in Him or not, honey, He's watching everything that's
going on down here.
I call on our leaders to show
some leadership. You could step out and be front
runners worldwide in terms of caring for the poor.
Let's see some action.
The Chair: Thank you.
Mr. Scott Brison (Kings—Hants, PC): Thank you
You're a hard act to follow, Ms. Gabriel. Thank
you for your impassioned plea.
I think all of you have made
very important cases for public policy
initiatives at the federal level. I think there is
frustration relative to the degree to which there does
not seem to be enough federal-provincial—in
some cases it needs provincial leadership as
well—political will to make a difference.
I have a quick question for Mr. Polito. I guess you
could say we're going to go Dutch for a moment.
On the labour market issue, you're suggesting
eliminating the EI premiums for those under $10,000 in
Mr. Joseph Polito: Yes. This would be a phased-in
program. The gentleman from Barron's suggested $10,000,
which by the way is $15,000 Canadian.
Mr. Scott Brison: The basic personal exemption in
the U.S. is, I think, $11,000 Canadian, so that would
make sense. So you're saying about $15,000 Canadian.
Mr. Joseph Polito: For the payroll tax exemption,
yes. We pay $40 billion in payroll taxes in this
country, and $15,000 would represent about $15 billion
to $20 billion, so that's something that would have to
be phased in. What I am suggesting is that a payroll
tax exemption is the thing we should consider first,
and future permanent income tax cuts would be made
possible because we are smart about the system.
I remember in business school they gave us the
example of two men laying bricks, and an expert watched
them for several days. They both mixed their own
cement, climbed the ladder, brought up their bricks,
and laid the bricks. The expert found that simply by
having one man mix the cement and carry things up
and down the ladder alone and the other man
exclusively laying bricks, they increased their productivity
In other words, there are smart taxes. In this
country we've already reduced EI premiums by $6
billion. If we did it in a different way, by contributing
that to an exemption, it would make other things
happen, such as making Arthur Donner and others
possible, whereas if we leave things the way they are
right now, it won't happen.
William Scarth, a professor from McMaster
University, wrote a paper for the C. D. Howe Institute.
The title is “A Job-Creation Strategy for
Governments with No Money”. This was several years ago when the
debt-deficit was still a problem. He simply wanted to
restructure the payroll taxes first, and that's what my
first recommendation was about. The second
recommendation is to increase that exemption, which
would be where further tax cuts would go.
Mr. Scott Brison: The progressivity issue is
important because the EI premium side and our payroll tax
in Canada are very regressive, because they top at
$39,000. So somebody making $200,000 a year pays the
exact same amount into employment insurance or payroll
taxes as someone making $39,000 or less, which is
wrong. I'm interested in discussing this further with you
afterwards. I agree with you that with payroll
taxes increasing the cost of the labour input, it can't be
avoided that there would be a negative impact on
employment. There's no way to get around that
Mr. Joseph Polito: And global competitiveness.
Mr. Scott Brison: Yes.
Thank you very much, and thank you all for your
The Chair: We'll next turn to Mr. Cullen, followed
by Mr. Szabo.
Mr. Roy Cullen (Etobicoke North, Lib.): Thank you,
Mr. Chairman. Thank you, panellists.
I have a question with regard to affordable housing
and the homeless and then one for Mr. Polito. I'll put
them out there and, given the limited time, if there's
not enough time to answer, maybe we could discuss it
later, or you could provide something to the committee.
On the question of affordable housing and the
homeless, I think there's agreement among many of
the MPs from Ontario that affordable housing and
homelessness are related but that affordable housing is
not the whole problem.
Perhaps we could accept a certain number of premises,
such as the federal government is getting out of the
delivery of social housing and that some cities have an
affordable housing problem and some don't. For
example, Toronto clearly has an affordable housing
problem, but I gather that Montreal doesn't. If you
wanted to create some incentive through tax policy, how
would you target the tax incentives in order to deal
with affordable housing and also to deal with those
cities that really need it?
Mr. Polito, thank you for your very thoughtful paper.
As someone who lives close by, I will be reading it very
I have a question for you. I was very interested in
the Dutch situation with their low unemployment. There was a
large labour-management-government coalition that
looked at job sharing and other incentives. If I look
at the province of Ontario during its famous Ray days,
it didn't seem to go down that well.
I don't have the
numbers for Holland, but in relation to the G-7, Canada
is the lowest in terms of payroll and social security
taxes. That's lower than the U.K. the U.S., Japan,
Italy, Germany, and France.
So on the notion of dealing with payroll taxes
first, how does that stack up with that sort of data,
that we have low payroll taxes right now?
I don't know if the affordable housing people want to
start. How much time do we have, Mr. Chairman?
The Chair: We'll keep going.
Mr. Roy Cullen: That's it for my questions. Do
you want to start with the affordable housing?
Ms. Alison Kemper: I'll speak quickly. The first
thing you need to know is there's no way most
low-income families can ever afford market rents. So
you can put in tax incentives—for instance, taking off
the GST on building materials for low-income
housing—but that won't supply enough affordable
housing. You can't cut the amount it costs to build
housing enough to make it affordable without having
back in place the kind of capital stuff that the
federal government used to put in.
I think there's a whole lot of folks in Canada who
don't yet accept the axiom that you proposed first,
which is that the feds are getting out of the social
housing business. A whole lot of people say, no, you
can't; we're going to have a whole lot of people on a
whole lot of streets. We're seeing that already. The
consequences are already obvious.
Mr. Roy Cullen: You talk about getting the capital
cost down. There was an article in the Star a few
weeks ago. It described this architect's design of a
home that left out all the frills and really brought
the cost down to within reach. If you looked at some
tax incentives for developers, if you could package it
up, would it get it within reach of affordable housing
Ms. Alison Kemper: I think there is all kinds of
lower-cost housing that is feasible to build, so
there's a variety of incomes that can afford housing.
However, there is a large proportion of the Canadian
public that cannot afford the sort of stuff you're
referring to that was in the Star. We need
some interest and some commitment on the part of the
government to restore the kinds of programs that made
20,000 units happen every year, because that's the
number of people who are hitting our streets.
Mr. Roy Cullen: We know there has been some
discussion about social infrastructure within the
context of a new infrastructure program, but frankly,
beyond that, I don't know. Our government's intention
has been pretty clear, and we've been delivering on
In any case, why don't we go to Mr. Polito? Could
you comment on my question?
Mr. Joseph Polito: Mr. Martin charged this
committee with a priority. First, the tax relief must
benefit those who need it most. That's a pretty tough
Let's assume, for example, that a round number of $5
billion were given in some kind of tax relief to
Canadian workers. There are approximately 15 million
workers, so that comes to about $300 per worker.
That's not very much. It doesn't make a huge dent in
If we gave it through the U.S.-style approach or the
Mike Harris-style approach, it might mean that a
multi-millionaire would get millions back and the
low-income worker would get virtually nothing. So what
tax do we find to make an equal distribution, to share
the dividend of all the pain over the last decade? The
payroll tax exemption is the best way I have found, and
I think in the Economist and Barron's, he
did a lot of thinking about it,
and so has Mr. Thurow.
But you make a very good point. That is, our
payroll taxes in Canada are extremely low, so why
target those? Again, it was the only tax I could find
to move that way, and these experts have a lot more
expertise than I have.
But more importantly, it had so many other
repercussions. It helped to make the Donner report
and the Changing Workplace report possible. It was
a way of also helping the hospitals and municipalities
and the school boards, all those employers who were
paying payroll taxes. It would free up
cash for those cash-strapped organizations. It would
help lead to productivity. It would be a cut for
business; it would be a corporate tax cut that we need.
That's another thing Mr. Martin is looking at, some way
of reducing corporate taxes. It would
do that as well.
It had so many things going for it relative to all the
other options. I agree that it's not perfect, and the
point you make makes it less focused, but it's the
best thing I can find.
Mr. Roy Cullen: Thank you.
The Chair: The final questioner is Mr. Szabo.
Mr. Paul Szabo: Thank
you, Mr. Chairman.
I want to thank all the presenters. It certainly gives
us a lot to think about. I can tell you that I'm
particularly moved by the social conscience around the
When we studied productivity, we came down to the
lowest common denominator. The whole purpose of the
exercise was ultimately to improve the quality of life
of Canadians. What the panellists at large have brought
to us today is about improving the quality of life of
Canadians who are dealing with a social impediment or a
social poverty within our society.
I am a big fan of caregivers for families who
have to take care of a family member, whether it be a
child, a disabled person, an elderly person, or someone
otherwise infirm. We brought in a caregiver
benefit. It was $400, or a tax credit worth about $100
in your pocket. Quite frankly, Mr. Chairman, in my own
view, it's a tremendous success and a tremendous step
forward to get an issue on the dance floor. It's quite
another thing to move it to a level where it's as
meaningful as I think we want it to be. But in my own
view, I think the $400 is grossly inadequate, and I
would ask any of the panellists if they would like to
share their views with regard to the caregiver benefit.
What might we be able to do in terms of an equitable
change that would be commensurate with all the other
demands on the purses of the nation?
Ms. Connie Laurin-Bowie: We took pretty
seriously the questions Minister Martin brought to
the subcommittee on disability. The questions he
raised for us were: What can we do in the tax system?
What can we do that's solely federal? Beyond that,
what can we do in cooperation with the provinces? We
took those marching orders pretty seriously, and we
went back to the table and began working on a package
of tax reforms.
It seems to me that the federal government has a
series of policy options available to it—one, of
course, is tax—some of which we haven't addressed. I
think the employer tax credit is a fascinating idea,
but we also went back to the very specific provisions
that are already in the tax system.
On the subject of the caregiver, it's actually a part
of this package. It's still being developed, but in
terms of where we're going with that, we thought you
could actually take a couple of the dependent credits,
bits and pieces, and put them together. We thought you
could take the caregiver provisions and put them all
together to create a dependent adult deduction.
I'm not a tax policy expert; however, we are working
with tax policy experts, and what they're talking about
are some options. You could repeal wholly the
dependent person amount, the infirm dependant amount,
and the caregiver amount, and replace them with a
single deduction of $6,794—don't ask me how that
number came up—to recognize the cost of supporting
either an elderly dependant adult or a person with a
disability. It would be available to individuals to
support elderly or disabled adults regardless of their
relationship with the supporting individual, because we
know the relationships that people form are sometimes
parental. Sometimes families are formed in all kinds
of shapes and sizes, and we need to respect that.
So we think that might have a more direct impact. I
know that's putting it on the table, and there are
probably a few days' worth of slugging it out and
figuring what the implications are, but it's one of the
things we're working on as part of a larger tax
The Chair: Are there any other comments? Mr.
Mr. Greg Maggetti-deGroot: Speaking
specifically as a parent, and around the question of
caregiving to children, I think the government's
commitment to increase the child tax benefit could be a
very helpful way, especially if it's substantially
increased over a number of years. What's been put in
so far over the past few years has been very narrowly
targeted at low-income working households, which means
that modest- and middle-income households like my own
haven't really seen a benefit from that. If it were
extended, it would give greater recognition to all
parents, low-, modest- and middle-income, for the value
of parenting care.
I also wanted to pick up on the comments you made
about the question of values and speak on those
issues. For the past 20 years or so, public
policy-making in Canada, in the United States, and in
many parts of the world has been driven by the
rock-solid belief that if we do what it takes to create
economic growth, we'll have the means to solve the old
challenges, as Mr. Martin has said.
It's helpful to
remember that we've done that for the past 20
years. We've been told that governments need to be cut
back, that their role in the economy needs to be
scaled back, that they have to scale back support for
people, that this will stimulate growth, and that we'll
then be able to deal with these challenges. We've been
told that taxes, particularly progressive taxes that
require from the wealthy that they commit a greater
amount to the common good, are an impediment to growth.
So they have been cut back in Canada, as in other
What have been the consequences? Since 1979, real GNP
per capita in Canada has grown by 50%, but we know that
we now have food banks that can't keep up with hunger.
We know all these problems. We know that even though
there is growth in employment—in Kitchener-Waterloo,
our region, we have the lowest unemployment rate in the
country—food bank use continues to grow. So there's
another set of values here, and this is what we tried
to speak about. If we look to the demands of social
justice, to making sure the poor have what they need to
exist in society, to making sure the vulnerable can
fully participate, then we will experience prosperity
and security. It's a different set of values.
I know that to say growth shouldn't be a priority is
to invite ridicule in this country. But is it so
ridiculous, given our past experiences? I think if we
take up Mr. Martin's challenge to look at our core
values, then perhaps he won't be ridiculed when he
brings down a budget that makes a concerted effort to
reduce the gap between the rich and the poor. If we
recognize fully the value of the economy of care that
we have in the country, one that puts some of our
public resources into affordable housing and building
community assets to benefit all families with children,
then perhaps he won't be ridiculed and we can begin to
rethink, in a radical way, how we finance this country
and what we really want, the best that we want for our
The Chair: Thank you very much.
There are two further comments.
Ms. Wahida Valiante: Thank you.
If you look at the issue of growth, I'd like to say
that even growth can be driven by policies that have
values. Growth can be made when I go cheat someone in
making more and more money, or I can make it through
hard work, an honest day's work in terms of that. I
think that even when we're looking at social policies,
they must be driven by some values. Those values will
then bring equity in terms of distribution of wealth.
I like that you appreciate that, and I thank you.
The Chair: Mr. Rudin, a final comment.
Mr. Stephen Rudin: Just in support of your
comment, it's certainly not to sound ungrateful,
because we were very pleased to see the tax credit. As
we had said in our presentation, we believe it's really
very much a beginning. Not being an accountant, I
can't put a specific number on what it should be, but
we do know that it has to be meaningful to make it
worthwhile in a financial sense, for people to do this
at great risk of the psychological consequences, as
Dale said. At this particular time, if there is an
undertaking to look at it and allow further study to
determine what the number or what the formula is, then
we would consider that to be really quite good
The Chair: Yes, Mr. Szabo.
Mr. Paul Szabo: I want to thank the panel for
that. I think one of the things I would really like to
put on the record is that we have to remember that
Canadians don't all live in urban centres. Quality,
affordable, and accessible care that we need for
Canadians right across this country isn't necessarily
available. Sometimes there is no choice. I think
Canadians are, more and more, asking not for a handout
but for an opportunity to provide for needs that
benefit all Canadians.
The Chair: Well said.
Are there any further comments?
Ms. Cheryl Gulliver: Thank you, Mr.
One of the things I would like to say is that I think
it's really important that we take care of everybody.
It's very important that what this panel has not done
is compete. We have not competed. CACL doesn't
want something at the cost of Alzheimer's or poverty
and affordable housing. We believe all of us need to
make our future better, and children are our future. I
want them to be so darn healthy, because they have to
take care of me when I get old, okay? I'm looking to
you to do that, Mr. Chair.
The Chair: I think we can handle that.
On behalf of the committee, I want to thank you very
much. It's been a very interesting day thus far here
in Mississauga. What's been great is that all the
voices have been heard. Different people are here
representing different sectors. Nevertheless, the
common thread, which I think is self-evident, is that
we're all focused on improving the quality of life and
the standard of living of Canadians. Some trade-offs
will have to be made, of course. That's life.
Decisions are tough, particularly when you have a
surplus and unlimited individuals seeking part of that
surplus, but I think with a common-sense
approach—if I can use that just for one second; it's
the only time you'll ever hear me say that, but I
couldn't find another term, sorry—I think we can in
fact come up with some recommendations that the
minister will take seriously.
We're going to suspend for five minutes so that
we can set up the next panel.
The Chair: I call the meeting back to order, and I
welcome everyone here this afternoon for our second
We have the pleasure to have with us representatives
from the Chamber of Commerce of Kitchener and Waterloo,
the Direct Sellers Association, the Toronto Board of
Trade, the Canadian Restaurant and Foodservices
Association, the Construction Trades Council, and the
Canadian Pensioners Concerned Inc.
Of course, many of your groups always attend the
finance committee meetings, so you know how we operate.
As you know, for this session you have five minutes to
make your presentation. That will allow us more time
for the question and answer session.
We will begin with the Chamber of Commerce of
Kitchener and Waterloo.
Ms. Linda Korgemets.
Ms. Linda Korgemets (Chairperson, Taxation
Subcommittee, Federal and Provincial Affairs Committee,
Chamber of Commerce of Kitchener and Waterloo):
Thank you, panel members, for being here today and
giving us this opportunity as the Chamber of Commerce
of Kitchener and Waterloo.
Just so you know, in that town down the road where I
come from, we are the second largest chamber in
Ontario, so we're fairly significant, with over 1,600
Our submission this year is very similar to the
submission I brought before you last year. About
two times a year we survey our members. We send out a
one-page fax and ask them certain questions about how
they're feeling about things related to pre-budget
matters. We did our most recent survey in August 1999.
The items in our submission are items they have
commented on, items that we want to put forward to you.
There are six things we talk about in our submission.
One of those items I won't talk about here because it
has already been publicized: employment insurance
premiums will come down again this year. That was one
of the things we were asking for, so we're pleased to
see that. The other five items we want to talk about
are debt reduction, personal tax cuts, government
spending, health funding, and corporate tax cuts.
In regard to the debt, I made a point last year, and I
continue to make it, based on demographics. As we
create these surpluses, we're in a really good window
of opportunity to take some of that surplus and put it
against the debt.
Why should we be paying down our debt? Why don't we
just let the economy take care of itself and grow us
out of our debt level so the GDP-to-debt level gets
lower because of growth?
I feel we should be dealing with the debt level
because of the horrendous interest cost every year,
which is anywhere up to $45 billion a year, forecast.
We feel that if we could get this interest expense
reduced there would be so much more money to spend on
other worthwhile programs, the programs you've just
been hearing about from the people before me. We'd
love to see the interest cost to this government go
down—and go down quickly. I can't stress demographics
enough. We don't hear a lot about demographics any
more—I don't—but I think we should keep that in mind.
In regard to personal tax cuts, many of you will be
familiar with the Canadian Chamber of Commerce and what
they are proposing. This past July they did
presentations to the media and to politicians as to
what they would like to see. Our chamber basically is
in support of the Canadian chamber's position. Dealing
with the issue of bracket creep is what the Canadian
Chamber is trying to do. It's what we endorse.
Basically we're going to suggest an increase in the
level of income at which the graduated tax rate hits,
while the marginal tax rate itself decreases. That's
going to cost about $3 billion in year one and $4
billion in year two. In light of the surpluses that
are forecast, we think we can still deal with debt
repayment and initiate these personal tax cuts.
Why personal tax cuts? We think it's important that
families in Canada be given back more of their money so
they can choose how they want to spend their after-tax
income. We're looking at the issue, as I know you as a
committee have, of family tax fairness.
I read that report over the summer. I was absolutely
stunned. There was one thing in that report that
really troubled me greatly. Of course, you know what
it is: increasing the EI benefits up to 12 months.
When that actually saw the light of day and got out and
about—and this is not the Canadian chamber or the
Kitchener chamber—I thought, oh, of all the things to
come out, that thing has lived. I was really
We were in a town hall meeting in Kitchener-Waterloo.
Karen Redman is very good at getting us together to
talk about what's going on. Another member, from
labour, said they just wished the government would
leave EI alone.
I just want to put it before you today not to tinker
with EI. Give families enough money so that they can
live their lives in dignity and make choices about
parental care or day care or whatever, but don't tweak
little sidebars to get more money into the hands of
parents on this family tax fairness issue. Do a global
type of approach through personal tax cuts.
In regard to government spending, this chamber has
been on record as being against the 50-50 formula the
government has implemented. I'm getting a little
concerned because I never know how the formula is
applied. We have asked Karen to take this quite
seriously. We had a meeting with Karen, Janko Peric,
and Andrew Telegdi. We asked them to please tell us
how the formula is applied, because it's a moving
target and we can't get the 50-50 formula to work on
the numbers we see.
But I'm beginning to understand a little more about
that, because now I think the formula tends to be a
cumulative formula over the mandate of the government.
I think I'm beginning to learn how the formula is to be
applied. But it's a bit dangerous, because we could go
into an economic slump and then we wouldn't be able to
apply the formula correctly. Not that we're in favour
of the formula, but we're even less in favour of the
formula as a cumulative five-year formula.
We do believe that spending should be increased based
on inflation and population growth. We feel that if we
want to implement new programs, we really should be
putting old programs under the microscope, seeing if
they're effective, and taking funding out of
non-effective programs to put it into effective
programs. I know that's much easier to say than to
actually do, and I don't know how you would do it, but
that's something we would like to see done.
For health funding, again, what can I say? I just
want to reiterate what our chamber is doing in our
area. We are underserviced for general practitioners.
We're trying to raise funds in our own community, not
to give the doctors a bonus but to promote our
community in front of the medical community and the
medical schools in order to attract doctors or aspiring
doctors to our community.
Next, this is something we don't hear a lot about, but
the Kitchener-Waterloo chamber wants to be on record as
saying that in the medium term we have to look at
corporate tax cuts. The submission I've circulated has
a very lengthy appendix, which gives you a look at the
current tax rates of major OECD and European countries.
Canada's tax rate effectively is 44%; the average tax
rate in the OECD is 35%. Over the last three years,
Canada's rate hasn't budged, but those of a lot of
countries have come down.
It's such a globally competitive market that I'm
afraid for Canada if we don't get the right number mix.
We're going to look uncompetitive. I'm a corporate tax
consultant, and in the day-to-day work I do for a
living, as disloyal as this may seem, we advise major
corporations as to where the tax rates are more
conducive to carrying on business. We actually suggest
to companies that they set up in countries like Ireland
and Britain because of their tax structures.
That's happening more and more often. With the
advance of e-business, it's going to happen more.
Because of electronic business through computers,
companies will be able to set up wherever they want to.
I feel that Canada has to send a message to
corporations and say that it's looking at the corporate
tax rate structure in the medium term.
The Chair: Thank you very much.
We'll now hear from the Direct Sellers Association,
with Monsieur Paul Thériault.
Mr. Paul Thériault (President, Direct Sellers
Association): Thank you, Mr. Chair.
I'm the president of the Direct Sellers Association,
l'Association de ventes directes du Canada. Before
proceeding, I would like to introduce the other DSA
representatives present today: Mr. Murray Smith, chair
of the DSA; and Jack Millar, tax consultant to the DSA.
Mr. Chair, I am pleased to note that this is the sixth
appearance by the DSA before the finance committee. DSA
endorses the pre-budget consultation process and
appreciates the opportunity presented for Canadians to
make their views known on tax policy.
Mr. Chairman, the Direct Sellers Association of Canada, also
known as the DSA, was founded in 1954. It is the national
association of Canadian direct selling companies and their
independent sales contractors (ISCs). The mission of the DSA is to
further enhance thrust, confidence and growth in the Canadian
direct selling industry through self-regulation and ethical
The DSA and its 50 member companies are committed to high
industry standards through its Code of Ethics and Business
More than 1.5 million ISCs in Canada sold more than $1.6
billion of retail goods and services during the past year.
The direct selling companies and their ISCs market and
distribute a wide variety of products and services directly to the
consumer, usually but not exclusively in the consumer's home,
rather than in a retail establishment. It should be noted that 75%
of the ISCs are women and approximately 50% work part-time or have
no other occupation.
The products and services sold by these individuals are as
diverse as the individuals themselves—cosmetics and personal care
items, home appliances, houseware specialties, household cleaning
products, candles, natural health food products, toys, educational
products and telecommunication services, to mention just a few.
Generally, these products and services are sold in the context of
group presentations or on a personal consultation basis.
The strength of direct selling lies in its tradition of
independence, its simplicity, and its commitment to a free market
system, providing accessible business and career opportunities to
people whose entry is not restricted to gender, age, education or
previous experience. This opportunity in small business is
accessible to women and men everywhere in Canada, whether they live
in urban or rural communities. It is a significant fact that direct
selling is a manageable economic opportunity, which can further
family income with minimal disruption and minimal investment.
The DSA has shared its expertise with all levels of
government. For example, it has forged ties with consumer
protection agencies across the country, particularly in promoting
the harmonization of provincial direct selling legislation, and in
promoting the principles set out in the Competition Act by
interfacing with the Competition Bureau.
Internationally, the DSA has asked the Canadian representative
at the APEC Ministerial Forum for Small and Medium Enterprises to
support the Consumer Education and Protection Initiative aimed at
enhancing consumer protection across APEC economies. This
initiative was endorsed by APEC this year.
Mr. Chair, the DSA has three specific recommendations.
These are summarized on pages 2 and 3 of our
First is job creation and transitioning to
independence. Our first submission is that greater
transitional relief should be granted to individual
Canadians who wish to move from dependent unemployment
insurance and social assistance to independence in
their own small businesses.
The direct selling industry is a vital part of the
small business sector in Canada. We have a tremendous
capacity to generate self-employment and provide
accessible earning opportunities to a broad spectrum of
Canadian men and women. However, the current
employment insurance and welfare rules create a barrier
to entry into the direct selling industry and into
small businesses generally. We have detailed this
problem on pages 5 and 6 of our written
Essentially, our recommendation is that additional pro
rata relief be provided beyond the current allowance
maximum of 25%. Specifically, we recommend that once
an individual's earnings from their small business
surpass the 25% level, pro rata relief be provided by
only deducting 50% of additional earnings from EI
eligibility. The DSA believes this approach will
encourage, not discourage, Canadians to transition from
dependency on social programs into their own
independent small businesses.
Mr. Chair, the DSA has worked with Human Resources
Development Canada in the past and we will be pleased
to again work with HRDC in fine-tuning this important
Recommendation 2 is on retirement savings and
inflationary taxation. As indicated previously, over
1.5 million Canadians have their own direct selling
businesses. These individuals are self-employed and
many do not have corporate or government pension plans
to rely on for their own retirement income.
Accordingly, the DSA has two submissions to help
restore this confidence: first, that the RRSP
contribution limits be increased from the current
maximum of $13,500 to, as we recommend initially,
$15,500; second, that the income tax bracket be fully
indexed to inflation.
The third recommendation is on the GST and the direct
sellers mechanism and commissioned agents. Our third
recommendation is industry specific. The direct
sellers mechanism, or DSM, under the GST is a classic
example of government and business working together to
develop rules that have benefited both the government
and the direct selling companies and their ISCs.
Not only has the DSM removed the GST compliance burden
from a large number of ISC small businesses, but there
has also resulted a significant cashflow advantage to
the government as the GST is collected on the retail
price at the same time as the sale to the ISCs.
The problem, however, is that the DSM, as it's
currently structured, only applies to situations where
ISCs buy and resell goods. It does not apply to the
20% to 25% of the direct selling industry that operates
through commissioned agents. These companies and their
sales agents have indicated that they feel
discriminated against because the advantages of the DSM
have not been made available to them.
Extending the benefits of the DSM to the 20% to 25% of
the direct selling industry would allow the same GST
rules to apply throughout the industry; it would have
virtually no impact on government revenues; it would
remove GST paperwork from commissioned agents' small
businesses; and it would further reduce Revenue
Canada's administrative costs because the sales agents
would no longer be required to be GST registered.
Accordingly, the DSA recommends that the GST
legislation be amended to extend to direct sellers
mechanisms to accommodate the sales agents' direct
selling structure. As was done for the DSM in the
early 1990s, the DSA would be happy to assist the
Department of Finance in drafting these amendments.
In conclusion, Mr. Chair and members of the committee,
the DSA wishes to thank you all for this opportunity to
present our recommendations. We look forward to
participating in the round table discussion. Thank
you once again.
The Chair: Thank you very much, Mr. Thériault.
We will now hear from the Toronto Board of Trade, the
president and chief executive officer, Ms. Elyse Allan.
Ms. Elyse Allan (President and CEO, Toronto Board
of Trade): Thank you very much. It's a pleasure to be
I want to introduce Terri Lohnes, who is our chief
economist and staff person in charge of our federal and
provincial economic portfolios.
The Toronto Board of Trade is Toronto's local chamber
of commerce. We are the largest local chamber of
commerce in Canada. A lot of people think because
we're in downtown Toronto we tend to have large
corporate members, but about 60% of our members are
small and mid-size businesses and about 40% are what I
would call our larger head office corporations. So we
have quite a cross-section in terms of size of
membership, as well as the segmentation of the
membership—the manufacturing as well as financial
We certainly appreciate the opportunity
to present our priorities for the 2000 federal budget.
By now I hope you've all had a chance to review our
prebudget submission, which outlines in detail our
recommendations. I won't go through the specifics of
our positions, although we certainly look forward to
elaborating on them during the discussions later. But
I want to give you the reasons why we think they should
Simply put, our exceptional and internationally
recognized quality of life in Canada is at risk. Our
government must make wise decisions on how to
prioritize these many demands for money. We recognize
the very unique position our government is now in. The
federal finance minister unveiled to Canadians last
week a much heralded forecast of large and growing
budget surpluses. We are indeed entering a
long-awaited era of fiscal stability.
Many would characterize this era as unprecedented in
terms of the spending opportunities now available for
this government. But nothing could be further from the
truth. While this government has announced that
deficits are a thing of the past, we must also remember
that budget surpluses were also a thing of the past,
but through exorbitant government spending, challenging
economic times, and, to some extent, investment in
programs and projects where there was minimal or
negative economic impact, our government wiped out
surpluses and built up a formidable debt. This debt is
the legacy of past fiscal irresponsibility and must
serve as a strong caution to government and Canadians
that we must prioritize for the next century. We
cannot allow ourselves to go down this road yet again.
We are putting before you a challenge to be economic
leaders and set out a framework for the next budget
and beyond that can strengthen not only our economy
but also our quality of life.
The first and most important step is to recognize that
our surplus is not a true surplus. We still hold an
enormous amount of public debt in comparison to our
main competitors. All of us in this room still pay 27¢
out of every dollar collected by the government toward
interest payments. Our debt-to-GDP ratio continues to
exceed the minimum ratio for entrance into the EU, the
grouping of some of our major economic competitors.
Last week, the minister indicated that the contingency fund
set aside in each budget will continue to be applied
against the debt, but only if the moneys are not used
for any unforeseen expenditure.
While we strongly support using the fund to reduce the
debt, it does not represent an aggressive debt
reduction plan. It does not signal strong leadership.
We cannot rely solely on leftover emergency moneys that
we hope will not be needed elsewhere. We must commit a
set amount that will be applied to debt reduction each
Only when we make this commitment will we reduce our
debt obligations and send a strong signal globally that
we are and we want to be competitive. Once we do this,
we can begin to invest dollars that will benefit all
Canadians. That will be leadership.
We saw strong leadership signals from the government
last week on taxes. It was encouraging to see Minister
Martin speak so strongly on the need for tax relief.
As you are well aware, the board, along with numerous
other groups across the country, has advocated hard for
significant tax reduction. We deeply believe that
putting money back into the pockets of Canadians is one
of the best uses of the surplus. Canadian taxpayers
earned the government that surplus, and they deserve to
We have seen incredible erosion in the savings rate in
this country. We have seen personal debt levels
continue to rise. We have seen many Canadians leave
this country for higher-paying jobs and lower taxes
elsewhere. Taxes simply consume an unacceptably high
proportion of people's incomes. Our tax rates restrict
the ability of people to fully participate in the
economy, and in some circumstances it's driving them
completely out of our economy.
By reducing that financial restriction, Canadians will
be able to consume and invest more, and we hope they
will stay in Canada. That benefits everyone.
We saw a signal of leadership last week on tax reform.
We cannot emphasize how important it will be to make
tax relief a reality in February and bring down an
aggressive tax reform package, along the lines
advocated in our submission.
It's not just that the business community now expects
it; individuals and families across Canada deserve it.
I want to close by addressing the pressures you face
to increase government spending. The board acknowledges
that eliminating the deficit has not been an easy task.
Reigning in program spending was not a popular choice
with some Canadians, and we certainly applaud the work
that has been done to create this surplus situation.
But to abandon that policy now and revert to the
spending fiasco of the past is premature and will
erode all the hard work done by all Canadians.
We cannot state strongly enough the need to hold the
line on program spending. While the minister did not
announce any major spending initiatives last week, the
language certainly spoke of a desire to spend.
Now is not the time for new spending. The surplus
must be put back into the hands of Canadians through
Having sat and listened to the conversation of the
previous group, I also feel it would be remiss if I
didn't comment on another area where we ask for
leadership in our budget submission: infrastructure.
In our budget submission, we defined infrastructure in
two ways. One was physical infrastructure, but the
other was asking for leadership from the government in
the area of a national housing strategy. Given the
comments of the last group, I felt it was important to
note that while we may be working for and representing
different groups of people, we are very much connected
in one particular area.
Our priorities are clear in terms of debt reduction
and tax reform, and we hope they will be your
The Toronto Board of Trade is excited about the
opportunities available in this next budget. How those
opportunities are realized, however, will require this
government to make decisions based on a commitment to
We have told you about the decisions that we believe
represent such leadership, and we hope you will act
Thank you for the time today.
The Chair: Thank you very much, Ms. Allan.
We will now hear from the Canadian Restaurant and
Foodservices Association, Mr. Michael Ferrabee.
Mr. Michael Ferrabee (Vice-President, Government
Affairs, Canadian Restaurant and Foodservices
Association): Thank you, Mr. Chairman.
My name is Michael Ferrabee. I'm vice-president of
the Canadian Restaurant and Foodservices Association.
With me is Joyce Reynolds, CRFSA's senior director of
government affairs and our payroll tax expert.
Our submission details concerns we have with the tax
system and suggests a comprehensive review of the tax
system as it affects individuals and businesses.
It also suggests that specific targets be set and tax
relief be taken as seriously as the crusade in the past
to eliminate the deficit.
Joyce will spend much of our brief time talking about
payroll taxes, but I'd like to initially highlight the
important role personal disposable income plays in the
Canadian economy and in our industry sales.
Since 1989 we've seen a real decline of 5% in
disposable income in Canada. Over the 10-year period,
Canadians have become poorer, in large measure due to
the increasing tax grab by governments through the
In contrast, during this same period, our neighbours
to the south have seen their per capita disposable
income increase by 9%. This contrast is most evident
in our industry through the decline in the share of the
food dollar that has accompanied this decline in
personal disposable income.
In 1989 our industry captured 42¢ of every
dollar—the same as the Americans. Consider that 10
years later this figure in Canada is 39%, while it is
45% in the U.S. Discriminatory tax policies like the
GST can account for some of this decline, but the
biggest culprit is clearly the fact that Canadians have
fewer dollars in their pockets today to spend on
discretionary items like food service than they did
10 years ago.
There is one other item I want to raise, and that is
the credit card charges that are applied to the GST and
other sales taxes in this country. You may not be
aware, but our industry is charged a commission by
credit card companies each time someone uses a credit
card. The rate varies between 1% and 4% of the charge,
depending on the card. This commission is charged not
just on the meal, but also on the tax we are forced to
This is a huge windfall for the credit card companies
and an issue we'd like your committee to consider. Our
industry alone last year paid more than $10.5 million
to credit card companies for the privilege of
collecting GST and an estimated $8 million in
commissions on provincial sales taxes. That is a total
of more than $18 million that credit card companies
take in commissions because governments force
restaurants to collect sales taxes.
On payroll taxes, I'll turn it over briefly to Joyce.
Ms. Joyce Reynolds (Senior Director, Government
Affairs, Canadian Restaurant and Foodservices
We focus so much on payroll taxes because our 14,600
members representing 45,000 restaurants have indicated,
through member surveys, that this is a key issue they
would like to see government address. There are a
couple of reasons why they care so deeply about payroll
First is their very slim profit margins. Second is
the fact that 30¢ of every dollar they take in goes
directly to labour. Our research indicates that only
6% of the revenue operators take in is profit before
taxes. That might seem like an adequate return, but if
you look at the average restaurant, their net is
$386,000, and this means a return of less than $25,000
before taxes. Passing costs on to consumers is not an
option. As Michael already mentioned, we've lost
market share to the food-at-home market.
Since 1989 the payroll tax burden for the average
restaurant has increased by more than 50%. The small
incremental reductions we've seen in EI premiums since
1994 have been overtaken by sharp increases to CPP
premiums and legislated changes to the basic exemption
in both the EI program in 1996 and in the CPP program
in 1997. This year we will again face an increase in
payroll taxes. The 15¢ reduction that was announced
last week will result in employers paying another
21¢ per $100 of payroll, because of course CPP
premiums will be going up by 40¢ in January.
I won't go on today about the benefits of reducing
payroll taxes, as I have every time I've spoken to this
committee in the past, because we all know they're job
killers. We all know that they're regressive and
affect low-income earners and those lacking skills and
education the most.
I have to comment on the government's use of the EI
program for general tax revenue. The EI legislation
says that the EI program must be managed so there's
enough premium revenue to meet the needs of the program
and ensure stable premium rates over an economic cycle.
However, it has actually been converted to a general
tax collection program—one that low-wage earners and
labour-intensive industries and businesses pay into
To understand why this is so frustratingly unfair for
our industry, we have to look at who doesn't pay EI
premiums. Most people are surprised to find out who is
in that select group of society that doesn't pay
premiums. This group includes the Prime Minister,
members of Parliament, and self-employed individuals
like doctors, lawyers, accountants, and architects.
They make up 18% of the population.
[Editor's Note: Inaudible]
Mr. Paul Szabo: ...self-employed.
Ms. Joyce Reynolds: It includes retirees, who are
a segment of the society that includes some of the
richest Canadians. That's why we object to the
fact that $500 million a month more than what is needed
for the program is being taken in and going to general
revenue. We know that $25 billion accumulated surplus
doesn't really exist. That money has gone into general
accounts and been spent.
Our concern is that when we are faced with a real
economic recession, government is going to be forced to
raise premiums or borrow money, and this is going to
happen at the worst possible time. The EI chief actuary
and the Auditor General have been ringing alarm bells,
but this issue continues.
We have some ideas on what should be done that would
benefit not only our industry but young Canadians
needing entry-level job experience.
First, we would strongly encourage you to
get a further increase to the EI premium rate. We'd
like to see it doubled to offset the negative economic
ramifications of the CPP increase.
Second, we would encourage you to support restoring
inflation protection to the CPP—
Mr. Paul Szabo: Excuse me, did you say double the
rate or reduce the rate?
Ms. Joyce Reynolds: Instead of 15¢, make it at least
30¢, which would mean 42¢ from employers—
Mr. Paul Szabo: That's not what you said.
Mr. Ken Epp: That's what I heard her say, and I'm
listening to it.
Ms. Joyce Reynolds: Okay. Sorry.
Third, reintroduce inflation protection to the year's
basic exemption within the Canada Pension Plan. It's
very important to our sector because of the number of
part-time employees we have. The 1997 CPP accord
between the federal government and the provinces froze
it at $3,500. We have another statutory review
underway, and further cuts to the YBE have been brought
forward as an agenda item for the ministers of finance
This year, the Canadian Restaurant and Foodservices
Association commissioned a comprehensive
research report that clearly demonstrates how the food
service industry, but youth in general, are
disadvantaged by the freeze in the YBE. This
report recommends staged increases to the YBE, and
it provides a funding mechanism that doesn't impact on
benefits or premiums. That is to amend the Income Tax
Act to lift the 20% foreign property limit that applies
to pension funds, because this would actually increase
the rate of return of the CPP investment fund to the
extent that upward adjustments could be made to the
I'm going to table a copy of this report, as well as
the submission we provided to you earlier.
I have to also say that we were flabbergasted when it
was recently announced that parental benefits would be
extended from 25 weeks to 52 weeks, at a cost of $1.25
billion. While it's been difficult to get more than
niggly reductions in EI premiums, it came as a shock
that dollars of this magnitude could be committed from
the EI account without consultation with business or
even the EI Commission. It's clear that impacts on
businesses like ours haven't been taken into
For a large private sector employer or a government
bureaucracy, the disruption of not having an employee
for a year may be severe, but for a small restaurant it
could be absolutely devastating. If you have a
restaurant with only 10 employees and you lose your
chef for a year, that could be enough to put a
restaurant operator under.
There are many costs and employment ramifications that
have to be considered, and again I have to say how
dismayed we are at how skewed the employment insurance
system has become, compared to the commendable
objective when it was created, which was income support
for those involuntarily and temporarily out of work.
We have a system that has become disjointed.
For example, while the system is purely for the
benefit of employees, employers pay 60% of premiums. Of
the $18.5 billion of premiums collected this year, only
$13 billion has been paid out in actual benefits, and
of the $13 billion, only $8 billion is for true
unemployment benefits, under the original objectives of
We have a program that is extracting $18.5 billion
from the pockets of Canadian workers and employers,
while only 43% is going for unemployment benefits.
As one of Canada's largest employers, we think there
are better alternatives.
First, since the program is for the benefit of
Canadian workers, we believe they should pay 50% of the
cost, and government should look to moving to employer
contributions in line with employee contributions. The
timing seems right, as parental benefits are being
expanded. We think, however, that expansion of
parental benefits is a matter of social policy, similar
to the public funding of day care and school lunches,
and that programs like these should be funded from
consolidated revenue, not a payroll tax.
To conclude, payroll taxes are regressive, they're job
killers, and they're probably the worst kind of tax you
can impose on businesses if you're genuinely interested
The Chair: Thank you very much, Ms. Reynolds
and Mr. Ferrabee.
We'll now hear from the Construction Trades Council,
Mr. John Cartwright, business manager. Welcome.
Mr. John Cartwright (Business Manager, Construction
Trades Council): Thank you. This is the first time
our council has been in front of this committee, so
I'll just give you a bit of background. We represent
42,000 construction workers, men and women who build
our cities, towns, industries, and resource facilities
in the greater Toronto area. We're very concerned that
the dialogue is around money in this country right now,
because as we all know, money means politics.
We have a presentation that we've passed around to the
committee. I'm hoping people will take the chance to
look at that later. We want to talk to you about
getting the fundamentals right, but I think with
different definitions from what you've talked about
previously. For us, getting the fundamentals right
means four points: good jobs, a healthy environment,
decent housing for all, and the development of a truly
It's a pleasure to hear the Toronto Board of Trade
talking about at least two things that we can agree on.
One is that the federal government has to get back into
the business of new, affordable rental housing. The
other one is that debt reduction is an issue that has
to be addressed. We would say that before any general
tax cuts are introduced, the existing debt that's
sitting there has to be dealt with, because it's that
debt that was used as the excuse to slash and burn
social programs across this country.
The main thrust of our presentation is going to be on
using the fiscal and regulatory leverage of this
government to do some good stuff. And we're happy to
say that a lot of the good stuff has already been
developed by the Federation of Canadian Municipalities
in their quality-of-life infrastructure program.
They talk about the government investing in three
things: environmental infrastructure, transportation
infrastructure, and social infrastructure.
Our experience in the construction industry in greater
Toronto over the last number of years has been that
environmental processes and environmental technologies
are in fact a tremendous catalyst for the creation of
new jobs and business opportunities in every sector of
the economy. In the early 1990s we went through the
worst recession we've ever seen. We had unemployment
levels of 35% to 50% for skilled trades people for up
to six years. During that time nobody was building
high-rise buildings, and this was happening everywhere
east of the Rockies—it wasn't an Ontario or Toronto
We started linking up with some issues around how to
take the skills our members have and apply them in a
meaningful way. That means people have jobs and
there's still some economic activity. We discovered a
partnership with the environmental community and
environmental engineers that we think is something
that could be looked at and replicated all across this
country. It resulted in something in Toronto called
the Better Buildings Partnership. This is the document
that's put out by the city of Toronto on that
That came from an argument we made to the feds and the
city that part of the last federal-provincial-municipal
infrastructure program, which was introduced in 1993 by
the new Liberal government, should go to something
around environmental infrastructure and energy
retrofitted buildings, to take $12 million of that fund
and...not spend it, but use it as a securitization for
loans to involve both the private and public sectors in
doing energy retrofits in their buildings. The results
Since the Better Buildings Partnership started in
1996, there's been a reduction of 72,000 tonnes per
year in CO2 emissions; building costs have been
reduced by $6 million each year; 3,000 person-years of
employment were created, which is of course where we
come in at the self-interested point of view; and 155
buildings have been upgraded, in both
the public and private sectors.
It shows the potential in starting to think about
doing things right and getting the fundamentals right.
We have seen since that initiative has taken place
other sectors picking up the ball and running with it.
Recently CUPE, the Canadian Union of Public Employees,
has taken this document, a proposal for waste
management reduction, to the City of Toronto. It would
divert 72% of the waste trade, create 900 new jobs, and
save the taxpayers, over the next two decades, $600
million by putting on a green cap and bringing a
different point of view to how we do business and how
we carry out functions, both in the public and private
With all due respect to my business colleagues
here, what we're going to say to you is, differentiate
between smart and stupid business, and don't reward
stupid business with tax cuts and tax credits. Look at
activity, both private and public, that will involve
leveraging the tremendous opportunities that are
involved in environmental processes and reward them
through tax shifting, through grants, through
particular investments that you make as a government,
and through regulations that you're involved with.
In our brief we talked about a number of those kinds
of things. As I said, the Federation of Canadian
Municipalities has been able to put together an
extremely good program of a quality-of-life
infrastructure that talks about how you deal with solid
waste management, water and waste water, energy,
building retrofits, cleanup of contaminated sites, and
protection of ecologically sensitive lands and
It also talks about transportation and the need for
the development of commuter rail and public transit.
That's seen as a responsibility not just of
municipalities, where it's now being dropped thanks to
the downloading in this province, but of the federal
government, which has to take some responsibility.
Right now 30% of all CO2 emissions come from
vehicles, and 16,000 Canadians are dying prematurely
every year because of pollution and problems in the
So we are one of the only countries in the world that
doesn't have a federal role in the provision of public
In Toronto recently, the City of Toronto, or the TTC,
had to question whether or not it could afford to save
millions of dollars by putting in an order for
new buses, and there's going to be a debate on that
because there's no funding any more, since the
province has opted out.
The premier and the prime minister were in town last
week for a wonderful announcement about the mayor's
vision for the waterfront in greater Toronto, which
included rapid transit to the airport. Well, it takes
money to buy drinks, so if the feds are going to be
there saying that these things are good, you've got to
be there providing the money for those kinds of direct
In regard to housing, we're the only country in the
G-7 nations that doesn't have a serious federal role in
the provision of affordable rental housing, and we are
urging that this government get back into the
business—which it was in for 30 or 40 years—because
no matter how many carrots you throw out in front of
it, the private sector cannot provide affordable rental
housing for the poorest segment of our population.
While our people are skilled trades people making a
decent wage right now, a lot of them were looking at
welfare five and six years ago.
We don't want to take the position of saying we're
only looking after ourselves. We have a tremendous
contribution we can make to that issue, because of the
skills represented, and we want to make it. It
means the federal government has to be in place, and the
Province of Ontario has to be beaten about the head and
ears with a large stick to get it back into the issue
There are two other basics I want to touch on.
Employment insurance is a joke. Only a third of
Canadians who are unemployed right now can get benefits
from that system, yet it's still called a universal
social program, which it's clearly not.
Instead of taking the surplus and bringing about tax
cuts that will drain it away, what's required is to
rebuild that program in its entirety, so that benefit
levels and qualification levels are applicable as they
were pre-1990, when first the Conservative government
and then the Liberal government basically slashed this
program so that it doesn't exist as a universal social
The Canadian Labour Congress has called on a minimum
of 70% of unemployed to be covered by it as a standard.
We're saying that every unemployed Canadian should have
access to that program.
The other issue is around looking at developing a
reserve capital fund so that government can play a role
in offsetting the cyclical nature of the construction
industry. We don't want to see federal or provincial
or municipal projects being bid at top dollar during
the height of a building boom and then drying up the
next time there's a recession because there's no money
around. We want you to put some money in reserve and
use that to balance off the cycle.
This would keep people working, instead of losing
thousands of apprentices, as we lost the last time with
the recession. Young people were walking away from the
industry because there was no future.
Keep them in the industry so they can develop the
skills in a workforce that's supposed to be there. As
well, you'll get a better bang for the taxpayer's
dollar if you put out those tenders when there is a lot
of interest and very competitive bidding.
We have a summary that lists, then, seven points:
direct investment in fiscal tools to carry out the
FCM's quality of life infrastructure program; new,
affordable housing and rental housing, with which the
feds have to get involved; support for public transit,
including vehicle purchase and tax-free,
employer-supplied transit passes—an issue passed in
principle by the House about four months ago and one on
which our friends in the transit union have been
working very hard—along with a rapid transit
connection to Pearson airport; shift taxes to encourage
environmentally friendly economic activity; create a
national atmospheric fund, modelled on the highly
successful Toronto Atmospheric Fund, which can be
applied to both private and public sector; restore the
EI program to full pre-1990 levels of qualification and
benefits; and create a capital reserve fund to use
during the slow periods of the construction industry
That's a thumbnail sketch of what we'd like you to do.
The Chair: Thank you very much, Mr. Cartwright.
We'll now hear from Canadian Pensioners Concerned, Mae
Harman, past president, Ontario
division, and Ray McLeod, chair, pension committee.
Ms. Mae Harman (Past President, Canadian Pensioners
Concerned Inc.): Thank you, Mr. Chairman. I hope our
presentation will underline some of the issues so
eloquently expressed by the previous panel.
Canadian Pensioners Concerned has long been concerned
about the lack of funding and other resources for
health, social, and educational programs, and how
efforts to pay off the national debt have downsized the
importance of these human services. With this in mind,
and conscious of the strident messages on the part of
some groups that the most important issue for the next
national budget is cuts in taxes, we sent a letter to
the Hon. Paul Martin, Minister of Finance, on October
4, expressing our views.
Our presentation, which is made on behalf of our
national organization as well as our Ontario division,
reiterates the points made at that time.
Canadian Pensioners Concerned, founded in 1969, is a
membership-based, non-partisan advocacy organization of
mature Canadians committed to preserving and enhancing
a human-centred vision of life for all citizens of all
CPC has particular concern for the quality of life of
people in our society who, by virtue of age, illness,
physical or psychological impairment, and/or economic
needs are especially vulnerable in a society driven by
the marketplace and economically determined values,
often to the exclusion of other societal values that
sustain and enhance a fair, just, and inclusive social
order. Hence, we feel strongly that budget surpluses
must be put to resolving the drastic social and health
problems being experienced by so many Canadians before
consideration is given to income tax cuts.
We agree that it is important to pay down the debt,
but this should wait until the situation outlined has
Cutbacks in federal funding and in transfer payments
to the provinces over many years have resulted in
serious damage to our public health care system,
reaching near-crisis conditions in some areas. Erosion
of the public system has enabled pressures to become
more overt and strident from those wanting a
privatized, two-tiered system.
Despite all this, the vast majority of Canadians hold
their health care system dear, and insist that the
federal government live up to its responsibilities and
take a major position in defending and enhancing it.
Recent increases in federal funding, while welcome,
amount only to partial restoration and are nowhere
near the cuts by the Mulroney government and the even
more massive cuts in funding by the Liberals.
As our Minister of Health, the Hon. Allan Rock,
has recently emphasized, for many years it has been
well established and accepted that the determinants of
health include health care itself but also many other
social and economic factors, including adequate
housing, income security, education, and a sense of
control over our lives. Most sadly, under the mantra
of “the deficit”, needed social programs in all these
areas have been eroded or entirely dismantled.
Restoration is now an urgent need and has to be a major
In 1990 there was a recognition of the necessity of
federal support for housing when these statements
were made in the report of the task force chaired by
Mr. Martin and Mr. Fontana:
Housing is a fundamental human right. All Canadians
have the right to decent housing, in decent
surroundings, at affordable prices. Shelter is a
necessity of life and adequate shelter must be viewed
as both an individual and collective right for all
Canadians. Homelessness is only the most visible
manifestation of Canada's housing crisis. It is a
reality which is symptomatic of a broader crisis in the
supply of affordable housing.
The crisis in homelessness has increased considerably
since the Liberal Party task force report in 1990. A
further 1% of the total national budget should be spent
on housing. This is one of the recommendations of the
Toronto Disaster Relief Committee, and it has had wide
support across Canada.
The Mustard-McCain study highlights the importance of
early education in the development of children, who are
society's greatest asset and hope. Previous cuts in
federal transfers to the provinces for education have,
in this province of Ontario, been passed down to the
community as cuts in programs and services and a demand
for teachers to do more with less. Children with
special needs—for instance, learning, behaviour,
disability, or English-language—have been especially
neglected. An atmosphere has been created that negates
creative teaching and stimulative learning. Many
experienced teachers have opted for early retirement.
Others have been declared redundant.
In general, tuition fees for post-secondary education
are saddling young people with huge debt and turning
our colleges and universities into elitist institutions
that only the well-to-do can afford to attend.
Overall, there is a great need for training and
retraining of skills for jobs that are meaningful and
rewarding. The high rate of youth unemployment and the
large turnover of employees of all age groups whose
plants close or jobs become redundant speak loudly for
creative approaches at all levels to help all job
seekers both find fulfilment in their work and
contribute to the economy and the nation.
There are clear indications that the majority of
Canadians favour increased spending on resolving the
kinds of health and social problems referred to in
preference to the cutting of income taxes, which will
result in little benefit to any but those enjoying high
incomes. The disparity of incomes between the rich and
the poor is steadily growing.
Our organization favours a more progressive taxation
system with a greater number of levels of taxation,
with higher rates for higher levels of income. The tax
rate of 17% for the lowest tax bracket is excessive
and should be reduced to 7%. It should be noted that
lowering the tax rate to 7% for the lowest taxable
earners will have a modest lowering impact on all
higher incomes as well.
Corporations must be required to pay their full share
of taxation, and current loopholes should be withdrawn.
Back taxes should be recovered. It is reported that
some corporations pay no income tax whatever, even when
they're experiencing huge profits.
When the time comes that we can reduce taxes, we might
well begin with the GST, which is highly unpopular with
both the payers and those who must collect it. It
impacts on all Canadians, but it's probably harder on
those with low incomes.
The clawback of Old Age Security is an unjust special
tax on seniors, who pay the same regular taxes as other
Canadians. A special contribution from seniors is
inappropriate and unacceptable. It should be withdrawn
completely. An interim measure could be to partly
withdraw it by significantly raising the income level
at which it comes into effect.
Much has been made of income tax cuts as a means of
reducing the brain drain to the United States and as a
stimulus to the economy.
As Saturday's Toronto Star asserts, the U.S.
grass is not greener. Canada's tax rate, taking all
taxes together, compares well with other countries. In
addition, Americans pay all or part of their medical
insurance or costs, while we have universal coverage.
Our so-called brain drain is in large part because our
graduates are attracted to the U.S.A. by higher pay,
greater career opportunities, and better research
support. In addition, we have an unfortunate history
of selling off our Canadian companies to foreign
owners, who often then move headquarters and managerial
and technical staff to their own territory.
We welcome your questions.
The Chair: Thank you very much, Ms. Harman.
We'll now move to questions. This is going to be a
Mr. Ken Epp: Thank you, Mr. Chairman.
I thank you all for your presentations.
Since the chairman is cutting me back fantastically
here, I'm going to cut right to the chase. I want you
to talk to me a little bit about UIC.
One of you—and I don't remember exactly which
one—said you were very pleased that the government is
rolling it back. Then we had another presentation that
said the reduction should be at least twice what it is.
The chief actuary of the plan says it could be down as
low as $2.05 and be sustainable.
I had my assistant the other day add up all of the
money they've taken in since 1992, I think it was, and
how much they've paid out in benefits. The difference
now in those two numbers is $50 billion. That's what
has been taken out altogether.
To me, at least, this is an issue where legislatively
the requirement is that this be an EI fund and not
general revenue. Some of you have alluded to this. I
would like to know how great the consensus is that EI
premiums need to be cut, and need to be cut
As well, I'd like to know whether the rest of you,
besides the one who suggested it, the restaurant and
food association, concur that the employer and employee
contributions should be equal.
Ms. Linda Korgemets: I'll happily start, Mr.
The Kitchener-Waterloo chamber said they were pleased
with the current reduction announced last week. In
past years we've been more strident, and we have been
asking that quicker reductions be made. This year, as
we look to how important we feel personal tax cuts are,
we didn't feel we could sustain asking for cuts in both
places. We wanted to see a continued cut in payroll
We do agree with all the studies that we're familiar
with, and that other people around the table are
familiar with, that payroll taxes kill jobs. We're
obviously campaigning every year for reductions in EI,
until it gets down to what the plan actuary says is
We're not in favour of having general revenue funded
by the EI fund to the extent it has, but we feel that
over time, with these significant reductions we're
getting every year, we will get to where the fund will
be balanced and it will no longer be a contributor to
Ms. Terri Lohnes: I'd also like to
iterate that we would support that
position. As you noticed in our submission, we
balanced off personal income tax cuts with payroll tax
cuts, and we also called for corporate tax cuts. We
recognize that there's a prioritization, so we did
indeed call for a 15¢ reduction, which we did applaud
as well when the minister announced it last week. We
would have asked for more, but we also didn't want to
jeopardize the potential to make greater personal
income tax cuts this time around. We would hope the
trend in reductions in EI premiums will be a year over
year trend and that they will continue to go down to a
level that is recognized by the chief actuary.
On your comment on employer-employee equalization on
payments, we haven't made a specific recommendation on
that in our project presentation.
The Chair: Anyone else?
Mr. John Cartwright: Yes, I'm going to add
A recent study in Toronto found that almost 50% of the
homeless in Toronto are currently people who, if the
rules hadn't been changed to cut the benefits and the
eligibility for benefits, would be receiving
unemployment insurance or social insurance right now.
They would have a roof over their heads instead of
being homeless. The people who are chomping at the bit
to reduce the programs so that even fewer and fewer
unemployed Canadians access the system are barking up
the wrong tree.
Certainly we have no problem with saying that the
premiums should be reduced, because that's part of the
whole idea of shifting taxes away from things that you
want, like labour, and lots of things you don't want,
like polluting industries and the carbon economy. But
to keep driving this concept that you're going to cut
the system and not look at who's paying for it... You
talk about the surplus and where it has come from. It
has come from unemployed workers who have been denied
benefits over the last eight or nine years.
Mr. Michael Ferrabee: Can I maybe just add
something on top of that?
I think Mr. Epp asked an interesting question. In
terms of responses from business groups anyway, I think
what you'll find is that it depends to a large extent
on the degree to which the industry itself is
labour intensive. In an industry like ours, in which
30¢ of every dollar you spend in a restaurant goes back
to paying your staff, we obviously have a much greater
concern about unemployment insurance rates, because
they represent a much bigger chunk of our costs and a
much bigger chunk of our employee costs.
A sector like ours is a place in which the jobs start.
It is able to employ many of the people Mr. Cartwright
is speaking about, as a sort of first place of entry
into the system. So from the perspective of the most
people you can employ, we think a cut in the EI rate is
something that's enormously important.
Mr. Ken Epp: My time is up, and my closing
statement is going to be one for which I hope we don't
get a chance for reply.
I'd like to give a message to the restaurant people,
and that is that they should add 15% to the cost of
their meals and include that in the salaries of their
employees, so that it would be included in their
computations for benefits later on, like CPP and all of
Ms. Joyce Reynolds: The customers are too price
resistant to be able to do that. They have other
Mr. Ken Epp: Just put up a sign that it's illegal
to tip in this café. Bingo.
An hon. member: Ken doesn't tip anyway.
Mr. Ken Epp: I sure do. You just watch that,
buddy. I don't want to get these guys mad at me. They
feed me and make me what I am.
An hon. member: They are mad at you.
Mr. Paul Szabo: There's quite a bit of discussion
about parental leave, so I'd like to have the reaction
of the boards of trade again, in light of the fact that
there is irrefutable evidence now that the first year
of infant development, and particularly neural
development, is very significant in that first year,
light of the fact that abstract
reasoning, general logic, and problem solving are all
established by age one, and in light of the fact that
the quality of care provided during those formative
periods is the single most important determinant of
lifelong health of a child.
Given that 25% of our children are entering adult life
with some sort of significant physical, mental,
behavioural or academic problem, and the research
is showing that an investment of $1 will generate a
return in lower health care, social programs, criminal
justice, and education costs—the return would be
minimally $2 for every $1 invested and up to as high
as $7 in all of those programs.
I understand that, for instance, the
restaurant association would be concerned that the chef
might be off for a year, but the current program allows
for that chef to be off for six months. So if that is
in fact a legitimate concern, it is already there. The
fact is that this is a very serious situation that is
proposed to be addressed in part by allowing parents
who need to care for their children the opportunity to
A voice: Share it between the two of them.
Mr. Paul Szabo: I'd ask for your comments again
about the propriety of providing parents with the
option to provide direct parental care to their
children who need it.
The Chair: Who would you like to comment on that?
Ms. Linda Korgemets: I'm happy to comment. I guess we can do
it in the order in which we spoke.
We feel the source of funding to allow a parent to
choose to stay home should not be out of the EI fund.
I cannot disagree with the importance of having a
parent at home with a small child. I know the studies
say it's up to the age of three, that those first three
years are so critical to their development. Our
position is that there has to be a way to provide
parents with additional take-home pay or something like
that, through tax cuts—payroll tax cuts and income tax
cuts—so that they can make choices as to whether or
not they can afford to have a parent stay at home.
We're a one-income family, but I'm obviously very well
paid because of my profession. Our daughter is now
eight years old, but when we made the choice for a
parent to stay home, we were both in the volunteer
sector. It was under extreme financial hardship that
we made that choice. And it was a personal choice. I
think we have to recognize that families have to have a
way to make their choices. They do need more money in
their hands, because we are significantly taxed. But I
think taking that money for maternity/paternity leave
out of the EI fund is seriously flawed.
Ms. Carolyn Bennett (St. Paul's, Lib.): Maybe I'll
just ask a
question, then. I just want to go back to the
maternity/paternity family issue. In refining it, one
of the questions will be how flexible it can be. If
you look at the European models, all of the countries
that we have looked at thus far that have good
maternity/parental leave have set it at a year. But
how flexible are they within that year, in terms of one
parent taking six months and then the other parent
taking six months, or having one parent take six months
and then just spinning out the next six months at an
hour a day till the kid's in school—just getting the
kids to and from care and all of that? You can design
a flexible system that is worked out with the employer
in order to try to figure out how you do this.
Maybe we can hear from the chambers and from the
restaurant association, because they do make that
choice within families. If you're the renowned chef at
a restaurant, it might be that the partner takes the
time off because within the family they may say it
would be better for the partner to do so. We want
to leave the choice to the family, but I think we heard
pretty compelling arguments on the children and youth
at risk subcommittee of HRD last year, international
examples of why we actually do need to do this in terms
of that year. That was my question to the people
who had already commented on parental leave.
The other question was to the direct sellers, that
sector being an excellent transition job from social
assistance. Other than EI, do you see any flexibility
required from CPP disability? Again, those of us on
the disability committee felt a trial or a partial
disability put them at the same risk if they were going
to try to do something in your sector. Is there
something we could be doing on the CPP side that is
similar to what you said about the EI side?
Ms. Terri Lohnes: We're waiting for
it to happen.
Ms. Elyse Allan: I'd just make one
comment. First of all, in terms of your comments about
research, I'm going to talk a little about it from two
The first comment is that the board of trade is not
only an organization with membership, it is also a
small business. We're a $16-million business with 350
employees. We operate three restaurants and have lots
of part-timers. We haven't gotten into direct sellers
yet, but we have telemarketing.
I think there are two perspectives. First, officially
from the board of trade, we have not looked into where
the payments should be coming from. We have not
gotten into that, but I'll let Terri comment on that if
I'm missing something or misrepresenting something.
I think we have talked about it within the context
of the need for flexibility, as opposed to where the
payment comes from. It's not to refute the research in
terms of what we're seeing and in terms of the desire
among employees, quite honestly, to want to be home
during this time period. From a small business
standpoint and from that of our members that are small
businesses, I think the issue is how to give businesses
the flexibility to deal with this situation when an
assistant, when a key person, wants to leave, has to
leave, desires to leave to take care of a young family,
a newborn or an adopted child.
How do you then deal with that space as
an organization? It's a job that's not being done when
you are a ten-person organization, a five-person
organization, or a three-person department. I think any
one of us working in that situation recognizes how
difficult it is to even run your own offices when a key
person leaves for a year at a time when you don't have
flexibility in terms of how you deal with that and how
they handle it.
I appreciate your key word around flexibility. We've
not come out with any formal position that helps to
answer you at this point, but it is something that
several of our committees—taxation, the labour law
committee, as well as the quality of life
committee—have all been touching on and addressing.
Ms. Carolyn Bennett: Is not the workforce a little
bit more flexible than it used to be? In terms of the
ability to get somebody to come in to do a contract job
for a year, I would believe it's much easier than it
used to be.
Ms. Elyse Allan: That's right. In some places, I
think that's the case. As you're saying, there is more
flexibility. It's a different market than it was two
decades ago, certainly, but I think that would almost
depend quite a bit on skills, experience, and who has
The Chair: Mr. Ferrabee, would you like to join
Mr. Michael Ferrabee: If I could just add
something on top of that, I'd really caution you
when you're going through it, when you look at it.
Perhaps it will involve getting some people who run
their own business or some smaller businesses involved
Ms. Carolyn Bennett: We generally only have five
staff in our office. As a doctor, I sometimes only had
the patient, but we'd go with it.
Mr. Michael Ferrabee: I think there are an awful
lot of professions out there, and there may be an awful
lot in our industry. I have a staff of five. I had
somebody off on maternity leave for four months. It
was manageable. “Manageable” meant that I did the
work, but it was manageable as a manager.
Ms. Carolyn Bennett: I'd think you might have
Mr. Michael Ferrabee: Doing what we do, no,
probably not. It would have just meant that I had to
do it for a year. If I had two or three people off
in an office of five or six, I'm not sure what we'd
do. Those are real challenges—and that's
speaking personally from what I do on the public policy
In a small operation or business, with Joyce's
reference to having the chef you've trained up and
opened an operation with, if you're all set to go and
all of a sudden you discover that chef is gone for a
year, you have to keep in mind that the person is not
just gone for a year, but that you have to hold that
job for them too, right? You're trying to fill a job
for somebody who may have a special knowledge or
Ms. Carolyn Bennett: Like ethnic cuisine.
Mr. Michael Ferrabee: Like Asian cuisine. Maybe
your chef is doing sushi or something like that. You
have to try to find somebody who can do that—and there
is a shortage there. You have to bring that person in
and say you have a job for him or her, but that it runs
out in twelve months.
Ms. Joyce Reynolds: Or three months or six
months or seven and a half months. We don't quite know
how long that job's going to last. That's the other
thing. It's the not knowing whether you're hiring
somebody on contract for three, six, or nine months, or
now for a year.
Mr. Michael Ferrabee: Right, and from an
employee's standpoint, that flexibility fits into the
big picture stuff. The social engineering fits when
you're talking about hundreds and hundreds of employees
with somewhat interchangeable jobs. But when you get
down to the level of many small businesses in which
there's one person in charge and that person has built
up a knowledge over a bunch of years, having to
contract that out may not be feasible.
Ms. Carolyn Bennett: If you don't
give adequate parental leave, the person just quits for
good and you've lost all the training you've given
to that person. There's something about the European
model that allows more and more people to be trained
for these jobs so that when the next person comes on
maternity leave, there is somebody who is able to fill
in. I think that's what the research that came to our
The Chair: Thank you, Dr. Bennett.
Mr. Jack Millar: Thank you, Mr.
On the question about EI and CPP, the thrust of the
submission from the Direct Sellers Association is
that the people who work in this industry are
self-employed. A lot of people who have been displaced
from employment are looking for alternatives in order
to make a living.
This industry has historically been
there for them. Its paradigm is women; the majority of
direct sellers are women, and a lot of them are looking
for some kind of flexible situation whereby they can
earn income. They cannot be locked into a 9 to 5
The information that has come to us is that the
delivery of the EI program discriminates against
Canadians who are trying to start small businesses, in
terms of decisions made on an ad hoc basis across the
country as to continued entitlement. What happens to
people who are attempting to earn a living, who get
blocked off at a certain level, and who effectively
become disinterested in having to make such a
significant leap forward to completely get off EI or
It's the same thing in terms of CPP. The information
we have, although it's much narrower, is that the
program there is so focused on the employment side, on
trying to re-enter the employment market, that it does
not look at Canadians who are attempting to become
self-employed and to earn an income in that fashion.
The Chair: We have a final questioner.
Mr. Scott Brison: Thank you, Mr. Chair.
Mr. Ferrabee, a sushi chef doesn't take a lot of time
to cook sushi, so it's not—
Mr. Michael Ferrabee: If you're interested,
there's an enormous demand for it and it's almost
impossible to fill. They fly people over from Asia on
a regular basis. There are hotels and restaurants in
this country that just can't open their concept—
Mr. Scott Brison: If you knew sushi like I know
Voices: Oh, oh!
Mr. Scott Brison: Thank you.
I have a question on the changes in EI. I was in
Saskatoon on Saturday and met with some people who are
involved in the chamber of commerce there. It was
brought to my attention that it could impact the
decisions of small business people in terms of hiring.
In fact, there may be a law of unintended consequences
in that it may kick in and actually effect a form of
discrimination—potentially—against women in some
roles. That was raised as a potential issue by small
business people who are concerned that it may in fact
create a disincentive to hire women. I'd appreciate
your opinion on that.
Secondly, could having the benefits extended for a
year potentially create an increased level of
subordination of the lower-wage earner, in a couple,
for instance? Obviously a couple would have to make a
decision in that case. In fact, while two people may
be equally committed to careers, not to say that
they're less committed to child-rearing, there may be a
decision made based on income. In fact, one could
expect that to be the case. That decision may in fact
subordinate one person, perhaps unfairly. That also
may have a deleterious effect on women during a
Ms. Joyce Reynolds: Clearly we don't have the
answers to those questions. We don't know what the
impacts are going to be. Our concern is that the
department doesn't know either. These things have to
be taken into consideration.
Maybe there should be a very long phase-in so that you
can try it at different leave levels. Maybe there need
to be other considerations, such as having to tell the
employer exactly when you're coming back if you're
going to extend it for a whole year. That's something
employers are concerned about: for how long are they
replacing the person? They have no idea at this point,
because some people are not going to be able to afford
it, or they're not going to want to, or they've
invested so much in their career that they can't afford
to take a full year off.
A lot of these issues haven't really been considered.
Again, I want to emphasize that our concern is that
it's being funded from a regressive, job-killing tax.
That is our primary concern.
We don't have the answers to all of these other
questions, but they are concerns of ours and we thought
they needed to be looked at before we plunge into this.
Ms. Linda Korgemets: I have a comment for the
group as well, Scott. This isn't my chamber's
position, but at our town-hall meeting 10 days ago,
there was a fellow who attended with me, a very
successful small businessman in our area who does
financial planning, insurance brokerage, and that type
of thing. He said it
would definitely impact how he hires and how he runs
First of all, he's not subject to federal law, so he
does not have to keep a job open for a year, if that's
what EI gives the person. He would say, well, God
bless you, you're making the right decision, because
your child is more important than whatever you would do
for me, but I have to run my business, so your job
isn't being held open and I'll hire another person down
the road. That was his bottom line. I know that's how
he would run his business.
We have not surveyed our members on this point, but I
would be very happy to. I work for a very large
company, but I think we all recognize that small
business truly is the backbone of the country. I would
be very interested in knowing how smaller offices would
run with people going out for a year. Again, I have to
reiterate that we don't like it coming out of the EI
fund either; we think that's not good policy.
Mr. Scott Brison: Thank you.
Mrs. Harmon, you commented on the tax issue and the
corporate taxes. I just wanted to let you know that
the corporate tax rates in Canada are the
second highest rates of the OECD countries, of 31
You mentioned that some corporations aren't paying
taxes. They're allowed to carry a loss forward
sometimes, but by and large, they're paying quite a bit
on the tax fund, just so you know.
But on the general tax side, in the 1990s we've seen
personal disposable income, take-home pay after taxes,
decrease by 8%. During the same time, Americans have
enjoyed a 10% increase after taxes. That has led, in
part, to the highest rate of personal debt in the
history of the country. We have the fastest-growing
personal debt rate of all of the G-7 countries.
So while the country's in the black at an
unprecedented level, Canadians are now in the red. I
would argue that the one thing tax relief could provide
Canadians with is an opportunity to get their own
personal financial houses in order, because that's
becoming a real worry, particularly with the negative
Mr. Ray McLeod (Chair, Canadian Pensioners
Concerned Inc.): May I respond to that?
Mr. Scott Brison: Certainly.
Mr. Ray McLeod: One of the previous speakers
also referred to our debt situation as being the
product of past government financial irresponsibility.
I'm surprised that all you people are so young. The
reason for the big part of our debt is John Crow's
decision in 1988 that we had too high an inflation
rate. Our inflation rate was 3.8%, whereas the
worldwide average in industrial countries was about 4%.
We were not out of line. He decided he would kill
inflation by raising the bank interest rates. It had a
devastating effect. Canada was in a recession by
1989-90. Whereas the rest of the world had a recession
just beginning, we were already in a deep depression
and went further into the depth of the depression.
That is written up in a book called Shooting the
Hippo, which is by Linda McQuaig. The
subtitle of that book is, Death by Deficit and other
As an illustration of the impact that had—these
figures are in her book and an economist has also has
come out with them—in 1992, it was estimated that $20
billion of the $49 billion deficit, of all levels of
government, was due to lower tax revenue resulting from
the high unemployment of Crow's recession.
That's $20 billion because of lost revenue: lost
income tax that wasn't paid. Another $10 billion was
caused by higher social assistance costs. This wasn't
government irresponsibility; this was payment for
people who were unemployed because we were in a
miserable recession and it was survival pay. There was
nothing of financial irresponsibility there. That
accounts for $20 billion plus another $10 billion.
Close to two-thirds of the entire deficit was actually
caused by the recession. Much of the remaining
one-third was due to the excessively high interest
payments, also generated by the Bank of Canada. It
wasn't a case of the government being irresponsible.
I think we're still paying that off. When you talk
about the fact that we are in a deficit position
compared to the rest of the world, this is what we're
paying off. We're now seeing the light of day.
I would strongly recommend that you read Shooting
the Hippo by, as I said, Linda McQuaig. If you
don't want to read the whole book by Linda, here's
something: a 1995 review of her book by a fellow you
all may recognize, John Ralston Saul. Some of those
figures I have here he has also quoted. To get a
better idea of the concept of our debt and deficit, I
think it's well worth spending the time on that amount
Mr. Scott Brison: But the question is not about
how we got here; the question is, how do we address the
current situation in terms of level of debt? My
suggestion is that in Canada we are also suffering from
very high personal debt levels, partially due to
increasing taxes and to decreased spending in recent
years to fight the deficit. In some ways, the issue of
how we got here is perhaps less paramount than how
we're going to address this situation now.
Mr. Ray McLeod: I think I agree with you. The
question is, where do we go from here? But I think you
have to recognize where we're at. If you take a look
at the number of fine automobiles on the road when
you're driving to the Sheraton Four Points... I'm
not complaining; I have a 1994 Taurus and I'm very
comfortable, but I'm surrounded by pretty fine
automobiles. I live in Thornhill and have for 40-odd
years. The houses going up around me are about five
times the size of mine, which I thought was a big house
when I built it. So when we talk about people
suffering from debt, if they're in debt it's because
they've tried to build too bloody much house.
The Chair: Thank you very much, Mr. McLeod.
Thank you very much for your question, Mr. Brison.
On behalf of the committee, I'd like to thank everyone
on this panel for presenting to us your perspective on
the priorities that you feel should be reflected in
We're going to suspend for five minutes. We will be
back with the Association of Canadian Pension
Management; the National Round Table on the Environment
and the Economy; the Canadian Bankers Association; the
Multi-Employer Benefit Plan Council of Canada; the
Investment Funds Institute of Canada; and the Canadian
Ecumenical Jubilee Initiative.
The Chair: I'd like to call the meeting to order
and welcome everyone here this afternoon.
This is our last session of the afternoon. As I
stated earlier, we will be hearing from the
Association of Canadian Pension Management; the
National Round Table on the Environment and the
Economy; the Canadian Bankers Association; the
Multi-Employer Benefit Plan Council of Canada; the
Investment Funds Institute of Canada;
and the Canadian Ecumenical Jubilee
We will begin with the Association of Canadian Pension
Management, the chair, advocacy and government
relations committee, and the director of pension and
benefits policy, CIBC, Ms. Gretchen Van Riesen; and Mr.
Malcolm Hamilton, board of directors, Association of
Canadian Pension Management; and principal, William M.
Ms. Gretchen Van Riesen (Chair, Advocacy and
Government Relations Committee, Association of Canadian Pension
Management): Thank you.
Mr. Chair, members of the committee, thank you for the
opportunity to appear before you today. We have been
here several times before and we always appreciate the
opportunity to have your ear.
I am a past chair of the association and the current
chair of our advocacy and government relations
committee. I will tell you a little bit about ACPM
before I turn things over to Malcolm. We are the
national voice for pension plan sponsors in Canada with
over 1,000 members. We have pension assets in excess
of $266 billion. The members of ACPM represent pension
plans with assets ranging from $2 billion to $53
billion. In addition, ACPM members include
representatives of the major actuarial investment
management, accounting, and legal firms providing
advisory services to plan sponsors, boards of trustees,
With that introduction, I'll turn things over to
Mr. Malcolm Hamilton (Spokesperson, Board of Directors,
Association of Canadian Pension Management):
meeting, we circulated our agenda. I'm not going to read it because
it's virtually the same as what we have submitted in
past years. I don't know whether other groups have the
experience of being able to go with the same set of
recommendations year after year because none of them
are ever implemented, but that's certainly our
Rather than waste your time in light of the late hour,
I'm going to go very quickly through the seven or
eight recommendations. The first is to publish the aging
paper. In 1994 Minister Martin told us that the
Liberal government was going to come forward with an
aging paper. It was important. The Canadian
population was aging. People were concerned about
that. People wanted to know how the government was
going to deal with it and what Canadians were expected
to do for themselves. That paper was delayed and
ultimately never produced.
It's our view that the paper is badly needed. We
don't see that any of the problems the minister
referred to 1994 have gone away. If anything, they're
just getting worse and it needs attention.
The second recommendation is on bracket creep. Every
year taxes are raised for Canadians. Every time we
leave those brackets exactly where they are and let
inflation carry everybody's wages higher, we're
increasing taxes. We then come along and misrepresent
the extra taxes produced by bracket creep as some sort
of a fiscal dividend. It isn't a fiscal dividend; it's
a tax increase. It's over-taxation and it should be
described as such, and there shouldn't be a debate about
whether a tax increase at a time when the government
has a surplus gets used to reduce taxes or increase
If this money is coming out of tax increases and the
tax increases aren't needed, it should go back to the
The third point is fair treatment for the working poor.
There's an odd thing in Canada's system of social
benefits and taxation. A retired couple in Canada with
no income at all, not doing any work, is promised by
the federal and provincial governments $18,000 a year,
and presumably they're given $18,000 a year because
someone says that's what they need to live a decent
A working couple who go out and work all year to
earn $18,000 isn't allowed to keep it. They're
expected to pay a couple of thousand in taxes, where the
seniors given the money don't pay any taxes at all.
I think there's something out of whack in a society
where some people are given $18,000 for nothing and
other people who earn $18,000 aren't allowed to keep
it. So we think we need to strive for some consistency
there, and the obvious way to do it is to take down the
tax burden on low- and middle-income Canadians. This
is an area where some progress was made in the last
budget. We're heartened by that and we hope to see
the progress continue.
The next issue is raising retirement savings limits.
If the members of Parliament look at me, I'm not a
young man any more. I've been working for the best
part of 25 to 26 years, and virtually the whole time
the limit on what a registered pension plan can pay to
a Canadian employee has not been changed. It was fixed
in 1976 and it's still there today. I think we've
tripled or quadrupled old age security, tripled or
quadrupled the Canada Pension Plan benefit, and yet we
leave the pension limit the same as it was. It's now,
by our reckoning, a third of what the corresponding
limit is in the United States or in the U.K., and it's
long past the time when that limit should be changed.
Next is our 20% foreign property rule. We mention
this every year. I don't know why that limit is still
there. It doesn't seem to produce anything for anybody.
I can't find a well-informed constituency that has
much good to say about it. I don't think it costs the
government much, or anybody much, to change it, and I
think it's one of the things you can do that would help
Canadians who are trying to support themselves put
themselves in a better position for their retirement
Next is harmonization of regulations. If you run a
pension plan in Canada you have to live with a very
complicated, not at all uniform, set of rules that vary
from province to province. It's very frustrating to
run a national pension plan in Canada. You burn up a
lot of needless time and energy in trying to comply with
rules that are similar, but not exactly the same.
In our view, it's a significant impediment to
increasing pension plan coverage, and we would like the
federal government to take some initiative there. We
know it's not something the federal government can do
of and by itself, but it could take some initiative to try to
get the provinces coordinated and try to get a more
efficient regulatory regime for Canadian pensions.
Lastly is preparing Canadians for retirement. I do a
lot of public speaking on the retirement system in this
country. I can tell you from first-hand experience
that there's hardly anybody in the whole country who
understands that system, including seniors who are
drawing benefits from it.
Typically a senior citizen is going to get three or four
government cheques. They'll get pension cheques,
they'll get RRSPs, and investment income. All of these
plans are complicated and constantly changing. People
can't plan for retirement if they don't understand what
the state is doing for them and what they're expected to
do for themselves.
In our opinion, Canadians just don't understand that,
and the federal government could take the initiative
and try to do something to promote a better
understanding of those programs by Canadians.
Thank you very much.
The Chair: Thank you very much, Mr. Hamilton and
Ms. Van Riesen.
We'll now hear from the National Round Table on the
Environment and the Economy, the executive director and
chief executive officer, David McGuinty, and the chair,
Dr. Stuart Smith.
Mr. David McGuinty (Executive Director and Chief
Executive Officer, National Round Table on the
Environment and the Economy): Thank you very much, Mr.
I'd like to make a few opening remarks and then turn
it over to the chair, Dr. Stuart Smith, who will walk
the members of the committee through, with a bit more
detail, some of the specific recommendations being made
again this year.
Members of the committee will recall that six years
ago the Minister of Finance, Paul Martin, and then Minister
of the Environment, Sheila Copps, struck a committee, a
national task force on barriers and disincentives to
sound environmental practices. After that committee
concluded its work, the national round table began
making annual prebudget submissions. This year is not
different for us.
There are a couple of things I wanted to table
with you from the outset. The first thing to keep in mind
about these recommendations is that they don't accrue and
they don't come from any one single constituency in the
country. We conduct a one-year national consultative
process to arrive at these recommendations. Over 50
trade associations, government departments,
environmental groups, labour groups, academic
institutions, and many others participate fully in the
So what you have here is a document that we believe
carries a certain weight of authority, because it's backed by so
many, and so many different groups have been consulted
in terms of arriving at the final recommendations.
We believe that the 2000 budget should begin to build
what we're calling an integrated legacy of economic,
community, and ecological well-being. What you'll
find here is a mixture of market-based incentives and
appropriate regulations that we think are most
effective in order to achieve that balance.
I'd like to quote only one passage from the throne
speech, which we believe indicates the government's
intention to try to now operationalize sustainable
development and not simply talk about it. And there
were a number of specific references, not the least of
which is the need, according to the throne speech, to
develop and adopt innovative practices and green
technologies, push the frontiers of environmental
technology and eco-efficient practices, and create
opportunities to access foreign markets.
That being said, I'd like Dr. Smith to
speak in more detail.
Dr. Stuart Smith (Chair, National Round Table on
the Environment and the Economy): Mr. Chairman,
members of the committee, in regard to the
recommendations that came out of this consultative
process that David McGuinty has just outlined for you,
you can be assured that by adopting these you're not
going to get bitten by anybody who objects, because
while not every word and every recommendation has
necessarily been approved by every single person
consulted, we do know that all of these recommendations
have the general support of all of the people who were
part of the process. So they won't come back and bite
In the first place, we understand that there might be
an infrastructure program. If there is, we want to say
that it ought to emphasize environmental issues. Even if
one is doing something like building a road, it can be
done in an environmentally sensitive manner. We think
it's very important, therefore, that if there is to be an
infrastructure program, the environment should be given
The six measures we're putting before you are as
follows. The first is federal government green energy
procurement. This basically says that the federal
government should undertake to procure 20% of its total
electricity from green sources. It also says that by
2005, 50% of federally controlled floor space should be
heated and cooled with energy efficient equipment. I
don't have to explain to you why energy procurement
sets a good example for society and the economy.
The second recommendation is an accelerated capital cost
allowance for investments in highly eco-efficient
technologies. To put it in a nutshell, what we're
saying is if people can develop technologies that are
30% or better improved over the standard, then they
should qualify for an accelerated capital cost
allowance. This doesn't cost the government anything,
but of course it does defer taxation to some extent on
those particular pieces of equipment. This is
nonetheless a tremendous incentive for developers of
that kind of equipment, because it will help them find a
market, and this does make a difference when people make
The third point is to create a Canadian program for
applied sustainable economics. This has been a
subject of very considerable consultation. We have
been asked at the national round table to act as a home
for such a Canadian program for applied sustainable
economics. It doesn't mean we would become an
institution to do this. It will be rather a virtual
institution, a bit like the networks of centres of
excellence, so that the work would be carried on by
experts around the country.
The work we're talking
about is essentially what I might call the new
economics. We know that ecological fiscal reform is
going to be coming. We know there's a movement
towards taxing bads instead of goods, but we don't
understand the ins and outs of doing that; we don't
understand all the consequences of doing that, how best
to do it.
We also have a lot of thought at our various
universities and throughout the world on the philosophy
of the environment, the notion of how do you protect the
commons when the commons has no value in the GNP.
The valuable things in life we seem to regard as being
free. But they are indeed not free; they're merely
free from the point of view of the way we keep our
accounts. And the new ways to do accounting, the new
economics, that treat the environment as though it
has a value greater than zero, is easy to say but
difficult to do. Some of the best minds in the country
are attending to this, and we believe that a certain
amount of support for those people so that work can
be organized and carried forward is a good thing.
Our fourth recommendation is what's called a
sustainable solutions network.
There is an error in
the text you have. I'm not sure if you have
exactly the text I was given; you may or may
not... The text is correct, but if you have a table, it's
wrong. However, I suspect the table was left out, so
probably I'm wasting your time with this one.
The sustainable solutions network basically is to devote $5
million a year for five years to creating centres for
both industry and municipalities so that the best
practices that are now going on in industry and
municipalities can be taken note of—in the case of
industry it would be at the NRC; in the case of
municipalities it would be the Federation of Canadian
Municipalities—amassed, and made available and
promoted so that the best practices that people are
already doing will be spread throughout the economy
The fifth recommendation is to reduce capital gains
taxation on ecological land gifts. You already
did this with respect to people who donate securities.
As you know, if you donate securities there's a deemed
capital gain, but it's taxed only half the normal
capital gain rate.
In the case of cultural properties, the capital gain
is eliminated altogether. But the government is taking
a beating on that one because people can get a
cultural property assessed as being worth perhaps more
than another assessor might say. The net result is
that the government has had a
difficult time with that.
What we're proposing is that in the case of the gift
of ecologically sensitive land, the person giving the
land should be no worse off than if he or she had sold
the land and then donated the net proceeds. If you
sell the land and donate the net after-tax proceeds,
you're in a certain financial position, and if you cut
the capital gains in half, then you'll be in that
identical position. In other words, there will be no
advantage to selling the land and donating the
proceeds. You're just as well off, and
you're not punished for donating the land.
So what we're saying is let's eliminate what is now a
barrier to the donation of ecologically sensitive land
and allow people who donate such land, so that
watersheds can be better managed and so on and so
forth, to at least do as well, or no worse, than they
would have done if they had sold the land. I assure
you that if you do the calculations, which I'll
be happy to take you through later, if you like, you'll
see that what I'm telling you is 100% accurate. You
end up in exactly the same place if you halve the
the deemed capital gain. We really
think that's terribly important.
There's the Nature Conservancy and all the wonderful
work it's doing for this country. As you know, with
the help of government they recently bought back the
island in Lake Erie. They want to do lots of good
work. They have people ready to donate land, but these
people are being punished for so donating.
The final recommendation is a stewardship fund for
habitat conservation. This is the only big-ticket
item. We're recommending that $100 million be put in
as an endowment, and then the stewardship fund would
live on the interest, plus whatever money can be
leveraged from private sources. Industry is very much
behind this. They would very much like to see an
endowment and then only the interest utilized, and then
money raised from industry and private citizens in
order to take care of habitat issues and to deal with
endangered species. It's a very detailed recommendation
as to how this would be done. This kind of fund would
enjoy wide support. It would be a one-time expense,
and it would, as I say, sit as an endowment. You know
how books are kept in government better than I, but it
would not be a great hardship for the government in
that sense because the money would essentially be on
the books but in effect wouldn't have to enter into the
net cash requirement, shall we say, of the government.
So these are the recommendations. As I say, this
is not coming just from the environmental community;
this is coming from all sides of the community,
including the industrialists, the municipalities, the
labour movement, first nations, and so on.
Thank you very much for your kind attention.
The Chair: Thank you, Dr. Smith and Mr. McGuinty.
We will now hear from the Canadian Bankers
Association: Robert Wells, chair, financial affairs
committee; and Mr. Mark Weseluck. Welcome.
Mr. Robert Wells (Chair, Financial Affairs
Committee, Canadian Bankers Association): Thank you,
Mr. Chairman, and thank you,
committee members, for having us here today.
We have three sets of materials: one is the pre-budget
submission dated September 10, which has a fairly
detailed review of our views. We also have a slide
presentation of about 10 pages, which is a summary, and
we also have a one-page summary, which I tend to
favour. You have a multi-page slide presentation
and a one-page version available to you.
In the interests of time, as others have said, I'm
not going to read from any of them, but I will attempt
to summarize what we're saying here.
Essentially, we have two main messages here. One has
to do with the overall fiscal thrust of the budget
program you are reviewing, and the second
has to do with applying the ideas at hand to
banks. So I'll cover each of those two things.
First, we were asked in the letter that was sent to us
to comment on the five themes you have. Having
reviewed what Minister Martin has said and the very
elaborate paper, the economic and fiscal update, dated
November 2, we see really four concepts, all of which
we applaud, support, and encourage.
Those four are: first, tax
reduction for Canadians; second, sound financial
management; third, a focus on productivity; and fourth,
but not last, an internationally competitive tax
system. Our recommendation in this regard is to carry
on with those thrusts. We think they are good and
appropriate and what should happen.
Moving now to the specific application of those to
banks, I'd really like to pick up on the theme of an
internationally competitive tax system, the fourth
theme of the general overview, and drop that down to
banks specifically. The tax issue Canadian banks have
is that they pay roughly a quarter more taxes than
other banks in other like countries, such as the U.S.
and the U.K. Similarly, we pay about a quarter more
taxes on average than other industries in Canada. So
we feel that we are taxed at a high level. So what we
recommend is that we lower the tax rates for Canadian
banks so that we have an internationally competitive
The rationale for doing that is that we believe—and I
think others do, from the various reports that have been
issued over the last few years—taxes affect the
competitiveness of banks, as they do any industry.
Specifically, when it comes to banking financial
intermediation, lower taxes for foreign banks or,
conversely, higher taxes for Canadian banks increase the
cost to Canadian consumers relative to those costs in
other countries. They reduce investment opportunity
and ultimately jobs in Canada, again relative to the
same organizations in other countries. So our
recommendation is to work toward an internationally
competitive tax regime for Canadian banks.
There are three specific things we would recommend in
this regard. The first is to remove the temporary
capital tax surcharge that was introduced in 1995. It
was introduced at that time “to help fight the
deficit”, and we feel it has served its purpose and
can be removed.
The second is to integrate capital taxes in general
into income taxes. We are now virtually the only
country that has a capital tax. Other countries have
eliminated this. It's an extra retrogressive tax, and
we think it should be integrated into income taxes.
The third is to reduce income tax levels to those that
are applicable to international banks, such as those
in the U.S. and the U.K. This would also be congruent
with reducing income taxes for Canadian banks to
the levels of other industries in Canada.
Those are the three specific recommendations we
have with regard to applying the concepts
you have in mind specifically to Canadian banks.
Thank you very much.
The Chair: Thank you very much, Mr. Wells.
We'll now hear from the Multi-Employer Benefit Plan
Council of Canada, Mel Norton, vice-president;
and Joan Tanaka, vice-president. Welcome.
Mr. Mel Norton (Vice-President, Multi-Employer
Benefit Plan Council of Canada): Thank you very much.
In addition to being a vice-president and director of
MEBCO, Joan Tanaka is also the president and chief
executive officer of a national third-party
administration firm that serves the multi-employer
industry. I'm a senior vice-president with an
international human resource actuarial and employee
benefit consulting firm. We're very pleased to be here
The general approach MEBCO would like to present has
been provided in an extensive paper. You'll be very
pleased to know that I'm not going to review it word for
word or even paragraph for paragraph. In essence,
the approach MEBCO would like to support involves
reducing debt, lowering taxes, and focusing on the
key benefit programs.
MEBCO itself delivers employee benefits and pensions
to over 700,000 individuals, and if you leverage in
retirees, spouses, and dependent children, approximately
three million people benefit from the programs under
which multi-employer benefit and pension plans operate.
We find this kind of consultation process to be very
valuable, and we have participated in it for a number of
years. In essence, the approach we would like is
to focus on the areas of our expertise, which are health
care, aging, and retirement.
very much what you have is the three-legged stool,
where you have benefits provided by government through
employment and by individuals, which include
retirement benefits, survivorship benefits, disability
benefits, and health care benefits.
We're going to focus only on health care and the
issues of aging. There is some considerable concern
with respect to health care that the private health
service plans periodically are in jeopardy of having
their current favoured tax status changed. We'd like
to speak out against that possibility. I know it's
probably not on the table at this time, but
periodically it comes up. We believe the private
health services plans, which provide semi-private
hospitalization, drug benefits, chiropractic,
dental, and related care to Canadians, are the key to
making certain that Canadians have proper health care
in conjunction with the government programs.
We are particularly concerned that, in our minds, the
federal government is reducing the amount of dollars
that are being put towards health care or, probably
more correctly from a mathematical sense, is not
increasing the amounts of dollars towards health care
in a fashion that's appropriate for the aging
Our concern comes from the fact that if the federal
money doesn't keep pace with the needs, the provincial
moneys also don't keep pace with needs, and the
province, who actually delivers it, outsources back to
the private sector more and more of these costs,
whether it's through eye care, dental, drug, and so
on. So we're finding that gradually, but consistently,
benefits that have been provided through
government-sponsored plans now need to be provided
through private health services plans such as the ones
our membership has to provide to our members.
With respect to aging, there's no question that we
understand the demographics of Canada and the fact that
the country is aging. We also understand that
Canadians do not seem to be saving sufficient moneys to
maintain the standard of living that they would expect
during retirement. We'd like to add, in particular,
to the point Malcolm made, that the
paper on aging, a joint federal-provincial
paper, which was shelved, should be brought
back, basically to find out these problems. We'd like to
support what the ACPM said with respect to
registered pension plans in particular. These are
incredibly complicated, and it is necessary to have
someone show leadership in order to be able to
harmonize the plans across the country and to simplify
We find that the registered pension plan process is
the best process by which retirement savings can be
delivered in an effective fashion to Canadians,
principally because the costs that are associated with
registered pension plans are so much materially lower
than that which an individual is able to do on their
own, and we find that these things need to be supported
and they need to be grown. They will not grow with the
complex legislation we have; they will shrink.
We are particularly concerned that there is a number
of issues arising through the Office of the
Superintendent of Financial Institutions and some
provincial regulators with respect to multi-employer
pension plans where they want these plans to be
overfunded. They want the plans to have sufficient
moneys on hand in order to be able to deliver the
benefit promises, under the assumption that they wind up
and all maximum benefits are delivered, rather than
Our concern is that if you require a
multi-employer pension plan in particular, or, more
generally, any registered pension plan, to hold back more
money than is needed to meet the expected benefit
promises, the generation that made contributions to the
pension plans will not receive the benefits from them.
We have a number of other issues. I have promised
faithfully to keep to my five minutes, so I will take
some questions. But I would like to focus very quickly
on a couple of issues that are spelled out more in our
The group that sponsors multi-employer pension
and benefits plans is very concerned with the degree to
which the underground economy has expanded and the fact
that you have a significant portion of the population
that is not paying its fair share of taxes. We'd like
to continue to encourage job creation, and naturally,
being the group we are, we are concerned with the
employment insurance issues, the fact that the surplus
in the EI account is overwhelming. Essentially,
this tax is not going down at a sufficiently rapid
rate or the benefits are not being clawed back
appropriately into the economy.
With that, thank you very much.
The Chair: Thank you very much, Mr. Norton.
We'll now hear from the Investment Funds Institute of
Canada, Mr. Peter Bowen and Mr. J. Thomblison.
Mr. Peter Bowen (Chair, Taxation Steering
Committee, Vice-President and Fund Treasurer, Fidelity
Investments; 1998-1999 Chair, Investment Funds
Institute of Canada): Thank you.
Ladies and gentlemen, every Canadian deserves a chance
to save enough to retire with a decent standard of
living. Today we have three suggestions that we think
will help Canadians in this regard.
I'd like to thank you for the opportunity to present a
summary of the Investment Funds Institute of Canada's
submission to your committee. IFIC's membership
currently includes mutual fund companies that manage over
$350 billion in assets. Those assets represent the
savings of millions of Canadians.
How can the government provide Canadians with a fair
opportunity to increase the value of their savings?
First, and most importantly, it can eliminate or at least
relax the foreign property rule, it can increase RRSP
contribution limits, and it can reduce the capital gains
As members of this committee are no doubt aware,
IFIC has been concerned about the foreign property rule
for a number of years now. The current 20% limit on
foreign holdings in tax sheltered plans does not serve
any useful purpose and in fact is harmful to the
Your committee recommended relaxing this rule last
year, and I would direct you to last year's report for an
excellent summary of the issue.
The limit has constrained Canadians from properly
diversifying their retirement accounts both
geographically and by industry sector. This constraint
has cost Canadians billions of dollars over the years.
It has been possible for a number of years now to
circumvent the foreign property rule through the use of
innovative derivative products. This trend has
recently accelerated. There are many new mutual funds
in the marketplace that have attracted substantial
amounts of RRSP dollars. These types of funds use
derivatives to track an underlying fund but still
qualify as Canadian content. Therefore investors can
expand the foreign content of their portfolios beyond
the 20% limit.
While that effectively permits diversification abroad
in foreign markets beyond the 20% limit, there is an
increased cost to the investor. The increased cost in
these RRSP funds is estimated to be between 0.4% and
0.8% a year above the cost in the underlying funds.
This costs Canadians millions of dollars each year and
results in a sizeable decrease of Canadians' RRSPs by
the time they retire—in fact, thousands of dollars
based on a $10,000 investment over 20 years. This
In addition, those derivative-based products are not
easy for investors to understand. Wouldn't it be
better if Canadians could buy products they
understand? Don't Canadians deserve this?
We believe the relaxation, or better yet the
repeal, of this rule will not be harmful to Canada in
any way. A Conference Board of Canada study reported
that the relaxation of the rule from 10% to 20% did not
harm Canadian markets.
The House of Commons Standing Committee on Finance
supported this recommendation last year, and we are
hopeful that you will once again support this important
initiative. Canadians clearly desire an opportunity
for greater diversification of their portfolios, and
it's time to stop harming Canadians with this
The second matter we'd like to discuss is the RRSP
contribution limit. Currently, Canadians who save for
retirement by defined benefit plans effectively get
more savings room than those who save via RRSPs. The
initial proposal to raise RRSP contribution limits to
$15,500 was designed to place all Canadians on an equal
basis. Increasing the RRSP contribution limits is only
Finally, the 75% capital gains inclusion rate is too
high. In order to encourage investments and an
efficient allocation of capital, we recommend that the
inclusion rate be reduced to 50%. This will allow a
more efficient allocation of capital and will lead to a
more productive economy, which will benefit all of us.
In closing, the government has an opportunity to help
Canadians save more for their retirements, and to that
end we ask that the committee endorse these
recommendations. Thank you.
The Chair: Thank you very much.
We'll now hear
from the Canadian Ecumenical Jubilee Initiative,
Reverend David Pfrimmer.
The Reverend David Pfrimmer (Chairperson,
Commission on Justice and Peace, Canadian Council of
Churches, Canadian Ecumenical Jubilee Initiative):
Thank you very much. It's very nice to be here. I know
you're all very patient sitting here for such a long
day, but we very much appreciate the chance to be here
and to share some of our views on where we think the
budget should be going.
My name is David Pfrimmer. I represent the Canadian
Council of Churches Commission on Justice and Peace.
With me is Dennis Howlett, who's with the Canadian
Ecumenical Jubilee Initiative. Our communications
director, Sara Stratton, is also sitting with us today.
First of all, I'll say a brief word about what the
Canadian Ecumenical Jubilee Initiative is. It's part
of a worldwide movement, and some 30 churches,
religious orders, agencies, and coalitions within
Canada have been supporting this effort. It's based on
the Jewish and Christian notion of a jubilee, which we
find in Leviticus and elsewhere throughout the Hebrew
Scriptures, that every 50 years there should be an
opportunity to restore the relationships within
We find a number of prescriptions in Scripture for
what needs to be done. A release from bondage, a
redistribution of wealth, and the renewal of the earth
are the three themes we find in Leviticus. The churches
today find this is a very appropriate metaphor and view
for looking at the world in which we live, where we see
growing insecurity in our society, growing alienation,
frustration, and polarization.
I might point out that one example of this initiative
was the debt cancellation campaign, a call for the
cancellation of the debt of the 50 poorest countries.
Some 635,000 Canadians signed that petition. It has to
be one of the largest petitions that has ever taken
place in Canada.
We're here today to talk about budgets. For us,
budgets are profoundly moral documents. They're a
moral statement about what we value and what we believe
to be important. As the dawn of the next millennium is
at our door, this is an opportunity to set some new
priorities and new directions to ensure a new beginning
by developing what we would describe as a jubilee
budget. It's time to restore some of the relationships
that have gone awry.
I'll ask Dennis to say a bit about the first set of
Mr. Dennis Howlett (Member, Steering Committee,
Canadian Ecumenical Jubilee Initiative): There's a
huge and growing disparity between the rich and the
poor and its deplorable characteristics, not only of
Canada and our society here, but of the global
community. This maldistribution of wealth threatens
our ability to create interdependent and caring
At the core of the jubilee message is that when some
members of society suffer from poverty and debt and
oppression while others have much more wealth than they
need, it is time for an intentional redistribution of
wealth. Now is the time to address decisively the
unconscionable chasm between those who live with plenty
and those whose daily existence is a struggle for
survival. It's for this reason that we're calling for
the federal budget of 2000 to be a jubilee budget.
We not only have a problem of unacceptable poverty,
but we also have a problem of obscene and unjustifiable
wealth on the other hand that threatens democracy and
ecological sustainability because of over-consumption.
In this context, to talk about tax cuts to the rich so
that they can buy luxury cars or expensive foreign
vacations while children both in Canada and around the
world go hungry is simply unconscionable. We have to
ask ourselves, what choices are we called to make?
Because of cuts in foreign aid—in Canada our foreign
aid budget has now gone down to 0.27% of our GDP, which
is the lowest level since 1965—and because of rising
debt payments of the third world, we're in a situation
now globally, even though we like to think of ourselves
as generous, where in fact the poor south is paying $8
in debt payment for every $1 they receive in aid. And
that's a low figure. The World Bank also had a study
that said it was 13:1.
For example, nearly one in five adult Zambians are
infected with HIV, and by 2010, two million will have
died. Yet Zambia spends four times as much on debt
payments as it does on health care. Zambia is waiting
for Canada to cancel its debt so that it can direct
resources to the needs of its people.
We need to ensure a new beginning for one billion people
by cancelling the debt of the poorest countries and by
increasing the quality and the quantity of our aid.
We have a written submission that details some of the
amounts we are calling for. We feel they are well
within what we can afford as an affluent country that
also now has a budget surplus at its disposal.
Rev. David Pfrimmer: I also wanted to speak about
what we believe is necessary in Canada in terms of the
It's our view that the needs of the many in Canada
who've been forgotten must take priority over the wants
of those who have already much more than they can ever
use or spend. That is a fundamental principle that
needs to inform how we set our budgets at all levels of
government in this country.
We are deeply, deeply concerned about the rising level
of child poverty. This is not just early child
development. It's children who are going to bed
hungry. It's children who, with their parents, are
being forced to live in shelters at an alarming rate.
It's children whose parents can't get jobs at a wage
where they can afford to support themselves. These are
Child poverty for us is a symptom of three things.
First of all, it's a symptom of the growing inequality
in this country and the loss of a sense of community.
Secondly, it's a symptom of the growing social
exclusion, about which we all should be concerned,
because our security is caught up very much in the
security of others. It's also a symptom of the growing
level of suffering that many people are living every
day, not very far from this very place.
I know you don't have time to hear lots of stories,
but I happened to bring along a book, which we'd be
happy to give to you. We listened to the stories of
over 400 people who are living in poverty and
documented some of those. If any of you would like a
copy, I'd be happy to give it you. It's their stories
that we need to be mindful of.
I also want to say a little bit about tax cuts, again,
as Dennis mentioned. Poverty is a crisis of the
spirit. We're all poor when we have higher levels of
poverty in our country. Simply stated, I would like to
put it this way: I cannot be who I am in this country,
as a citizen, as a Canadian, unless others are able to
be the people they need to be. This fundamentally goes
to the very heart of what it means to have a national
community we can call Canada.
In terms of tax cuts then, we need to ask who pays and
who benefits. This needs to be a fundamental criterion
in looking at who gets what when we talk about dividing
the national wealth.
In closing, I would call your attention to the six
recommendations we've made. I love a quote by Lester
Thurow, which puts government in its proper
perspective. Thurow is an MIT economist—we're not
unmindful of economics—and he said
“The role of government is to represent the
interests of the future in the present.”
The children of this country and those who live under
the debt burden they face are in fact the future whose
interests need to be represented in this moment.
Thanks very much.
The Chair: Thank you very much, Reverend Pfrimmer
and Mr. Howlett.
We'll now proceed to the question and answer session.
It will be a 10-minute round. We'll begin with Mr.
Mr. Ken Epp: Thank you very much to the chairman,
and also to all of you for your presentations.
I find this process intriguing, because of the huge
number of divergent views we have. I don't think
anybody would argue that we want to meet the needs of
the poor, but there's a huge discrepancy in how we
actually do that. Perhaps we ought to continue this
dialogue over a period of time.
I have a question, which I'll address to the last
group, with respect to the debt cancellation of third
I certainly become very sympathetic when I hear you
say—and I've already read this—these people are
spending money that really they should be spending on
their own health care needs and education needs.
They're sending it to these rich countries that lent it
to them at interest, and now they're having trouble
even making the interest payments. Some of them are
falling farther behind every year, which is a
Yet I am concerned about the lack of accountability
exercised in some of those countries, where the money
sent there—and I guess it's like some of the money the
government has spent in this country—just doesn't hit
the target group. It gets lost in the bureaucratic
jungle, and the people who need it don't get it.
Our own natives are an example of that. We
spend around $20,000 per year per native, which would
mean at least $40,000 to $60,000 for the average
family—and most likely it would be $80,000 or
$100,000, with mom and dad and two or three kids—and
yet they're living in abject poverty. They can't
replace a broken window. They have sewer systems that
don't work. Anybody else in the country who made
$100,000 would be able to arrange that.
Clearly, the money isn't getting to them. That's
totally obvious. It's being eaten somewhere by somebody
This has to be true in many of the foreign countries.
In fact, we have received information that basically
says as much.
When you are talking, then, about forgiving the debt
of these foreign countries—and in principle, I agree
with the concept—are you also then contemplating
putting in some measures of accountability so that it
actually goes for what it's intended?
Mr. Dennis Howlett: On the tax cuts question, I
should make it clear that we are not opposed to tax
cuts at all, but what we would say is that any tax cuts
should be focused to benefit low- and modest-income
families—in other words, go towards helping to
redistribute wealth and deal with the problem of
With regard to third world debt and how to ensure that
the resources freed up go to meeting the needs of the
poorest people, this is a difficult question. One of
the contradictions is that until now, in order for
countries to qualify for debt relief, they've had to
implement up to six years of structural adjustment
programs. These are conditions laid on by the IMF and
the World Bank in order for countries to get debt
The problem is, structural adjustment programs often
have required countries to cut their spending on health
and education. So in order to get the debt relief,
they've had to cut the spending on the very areas they
need to spend on. These are the kinds of conditions
we've had from the IMF and the World Bank.
What we're calling for instead is that not just the
creditor countries and not only governments of the
south and of the north but also citizens' movements
come together to develop a way to effectively hold
governments accountable. I think there are some
specific suggestions of how that could be done, and
there are some UN mechanisms and so on that hold
countries accountable, just as Canada was held
accountable for its implementation of its international
covenants. A similar process could be used to hold
countries accountable for ensuring the money freed for
debt relief goes to people who need it.
It's not something we can solve by simply having the
creditor countries dictate the terms on their own.
That in the past has not worked. It hasn't ensured
money goes for health and education.
Mr. Ken Epp: I don't want to belabour the point
unnecessarily, but is it unreasonable to say that our
forgiving of the debt is conditional upon, say, a small
team of auditors coming in to check out how that
particular government is spending their money, as our
Auditor General checks our accounts?
Mr. Dennis Howlett: Well, this is something we're
working on as part of an international jubilee
movement. Jubilee initiatives in the south have
actually come up with some innovative ways of trying to
For example, in Zambia, which I referred to earlier,
the jubilee movement there has taken the initiative to
bring together government, labour, church, women's
organizations, and other citizens' groups in working
out a proposal for how the resources freed from debt
cancellation would be used in that country. Similar
initiatives are under way in Mozambique, Uganda, and
That's the model we would encourage rather than just
letting the IMF and the World Bank set the conditions.
Canada has played a leading role in trying to address
this issue. We hope the group of 20 that has now been
set up as a result of the September meeting of the IMF
and World Bank, with Paul Martin as the chairperson,
can address some of these questions and come up with
some creative ways to do that, ensuring that both the
south and citizens' groups have a say in that
Mr. Ken Epp: Okay, but from my point of view, I'm
quite suspicious that a lot of the money we lent to a
lot of these countries went simply to buying arms for
the individual government, or whoever it was who needed
arms at that time. It wasn't used for the right
purposes at that time. I think we should at least make
sure it doesn't happen again.
That's where I'm coming from on that.
Mr. Dennis Howlett: That is a problem for other
countries. In Canada's case, most of it went to buying
wheat and Export Development Corporation financing.
That's where the debt is held. I don't think much of
that would have gotten to arms, in Canada's case. But
globally, that has been a problem in terms of
misspending the original loan.
Mr. Ken Epp: Well, I have a son who worked on the
ground in some of these countries. Actually, wheat is
converted into guns quite regularly—
Mr. Dennis Howlett: Okay.
Mr. Ken Epp: —if you check into it. That's the
point I'm trying to make.
I want to talk now to these financial managers. Over
and over I hear that we should increase the 20% rule,
that it's unfair to Canadians, that they don't get a
proper return on their money. I have a question: If
you say, well, you can invest anywhere in the world,
with higher limits or with no limits at all, how do you
keep investment in Canada?
I know it's a pretty broad question.
Mr. Peter Bowen: We've had some studies done that
will indicate that the capital will rebalance itself if
stock prices come down in Canada because money does
leave the country. Now, we don't believe that will in
fact happen, but foreigners will invest in Canada.
Billions of dollars are invested by foreigners into
Canadian stocks each year. That will maintain the
markets and result in an efficient capital allocation.
Mr. Ken Epp: Okay.
Does anybody else want to respond to that?
Mr. Mel Norton: I'll respond in part, if I
One of the things you have to remember, particularly
when you're talking about pension plans, is that the
liability of Canadian pension plans is Canadian
dollars. I don't think you'll find that any prudent
pension plan is going to take all their money and
invest it out of the country, but they certainly need
to be able to diversify beyond the level of Canada.
They need to in order to be able to make returns for
the members of the programs.
So I don't think anybody is suggesting to you that it
should be a 100% foreign limit for registered pension
plans, but I do think people are saying quite clearly
that the current 20% limit is inadequate, and it needs
to be expanded.
But remember, every trustee of every pension plan
understands that his or her promise to pay is to pay in
Canadian dollars, and they will need Canadian dollars.
You do not need to fear that the money is all going to
go out of the country. You do need to make it easier
for Canadians to be able to save in a more effective
You also have a lot more money coming into these
markets. The Canada Pension Plan fund is going there
and you have a lot of public sector pension plans that
are going to invest in the markets. At this time,
particularly, you have incredible room and incredible
opportunity to increase your foreign content limit, but
I don't think you need to remove some caps.
Mr. Ken Epp: Thank you.
Is that it, or can I ask one more?
The Chair: That's it.
Mr. Ken Epp: Just one quick one?
The Chair: Okay.
Mr. Ken Epp: He just mentioned the Canada Pension
Plan. I wanted to ask the bankers and the other
investment people whether they fear the imbalance, the
concentration of a lot of investment dollars from CPP.
That is going to be one huge fund that will make every
other fund look like a midget, basically.
Mr. Malcolm Hamilton: Maybe I could take that.
It's not as big as you think. It will be a huge fund
if they're targeting $100 billion five to eight years
out, but the Ontario Teachers' Pension Fund right today
is $65 billion. The federal government plans for their
employees, which are now going to be pushed into the
market, albeit slowly, are over $100 billion.
So this isn't going to be the fund of all funds,
towering over the Canadian environment. It will be one
of a number of large funds. I think everybody is a
little concerned that people in government won't keep
their hands off it, but I think it's off to a good
start. If there is meddling, I think it will be very
evident to Canadians, and the people who meddle will
pay the price for meddling.
That would be my view.
Ms. Gretchen Van Riesen: I would add that I think
there is a fear, however, that if the foreign property
rule isn't lifted, even for the Canada Pension Plan,
there is a real risk that there could be some
overvaluing, if you will, of Canadian stocks, too much
assets going into the Canadian environment. So I think
the foreign property rule applies equally to the CPP.
The Chair: If I can piggyback on your question,
Canada represents on the global market, what, 2.4% or
Mr. Peter Bowen: Yes.
The Chair: It's not very wise to have 80%
Mr. Peter Bowen: And it doesn't represent many
industry sectors. We're very resource-based. If you
want technology stocks, you're very constrained right
now by the foreign property rule.
The Chair: Thank you, Mr. Epp.
Mr. Roy Cullen: Thank you, Mr. Chairman.
Thank you, panellists, for your presentations. I have
three questions, mostly just to clarify.
Mr. Smith and Mr. McGuinty, in your brief you
mentioned the need for accelerated capital cost
allowance for investments in highly eco-efficient
We met the other day with the Canadian Chemical
Producers' Association, and generally some industrial
interests have been conveying that in the context—I
guess particularly of Kyoto—that big incentives or
economic instruments are not what they're looking for,
that in a lot of these investments that have been made
and will be made the business case will stand on
itself. They're really looking more for general tax
relief, and that will help them further make the
You talk about exportable expertise in
technologies, and maybe that's the distinction, or
maybe I'm just getting mixed up.
Dr. Stuart Smith: We're certainly not opposed to
tax relief of a general kind, because one of the things
we're going to have to do in this country is a great
deal of reinvestment in order to not only meet the
Kyoto standards but improve our productivity and also
protect the environment at the same time. So, please,
Mr. Cullen, don't get the idea that we're somehow
standing opposed to that. We understand the need for
What we're saying is that there are an awful lot
of technologies out there seeking a home right
now that could improve the productivity of business,
that could save on energy. The difficulty has been that
fuel prices have not been very high,
so if you introduce a piece of
equipment that saves you money on energy, your payback
period tends to be a little longer than what companies
normally want to do with their scarce capital.
If you could provide an accelerated depreciation or
capital cost allowance for equipment that is
demonstrably better than the standard, that is a good
30% better, that is novel equipment, the company
that takes a bit of a risk by being out there early
on a novel piece of equipment that isn't broadly
accepted in their industry—they're taking a chance
on it because of the energy saving—at least is
rewarded by a faster payback period. For government, it
merely means deferring the tax for a certain period of
If it's either/or, either general tax relief or
help for innovative new technologies that improve
productivity and improve the environment at the same
time, I think we'd go for general tax relief too.
We're not sitting here in argument against the
Canadian Chemical Producers' Association. In fact, its
former chair, its former president, Jean Bélanger,
is here with us as a member of the round table; he's the
chair of our committee that came up with these
findings. So we're certainly not standing opposed,
but there is a lot of novel technology, which, if
demonstrably better, would be good for the economy and
good for the environment, but needs a shorter payback
period, especially when fuel prices are not all that
Mr. Roy Cullen: Would the accelerated capital cost
allowances approximate at all the useful
life, or would they simply be an accelerated
capital cost to bring the business case into more
I'll put the question on the table, because there is
an argument that says that as a government we should
be moving to equating CCA, capital cost allowances, more
with economically useful lives.
We have a hodgepodge of
CCA rates that were put in for different reasons, and
we have computer people with computer technology
saying it's not fast enough and the railways
saying it doesn't really reflect the true economic
With those accelerated capital cost allowances
that you're talking about, would they reflect useful
life or would they just be an accelerated incentive?
Dr. Stuart Smith: They would not reflect useful
life. Useful life would be much longer. We're
saying continue the same game we've been playing
for a long time, which is to fix certain things that
are desirable and make their payback period
artificially shorter so that we get both an economic
and an environmental gain at the same time. If one is
philosophically opposed to that, then you won't like
this idea, because you'll say no matter how good your
cause, we don't want to do anything other than useful
I understand that philosophical position, but what the
group we brought together said was that it would
be good for Canada to get this new ultra-efficient
technology. As a kind of market failure, namely
that people tend to rely on well-proven equipment
that has been around for a while, if you want to get
something new in that's demonstrably more efficient,
there's a reluctance to do so. If you can make it a
shorter payback period, then you tilt the scales to
some extent toward the new innovative equipment.
Mr. Roy Cullen: Okay, thank you. I'm not here to
advocate one or the other; I'm here to listen.
But if I could go to Ms. Van Riesen and Mr. Hamilton,
in your fifth point you talk about no viable
opportunities for those earnings covered by the RRSP
limit of $75,000 currently. There has been some
representation by some larger corporations in terms of
the registered pension plan limits, and you don't
mention that, along the notion that the amount a
corporation can deduct for tax is limited by the Income
Tax Act. I don't have that number in front of me;
maybe you can clarify that.
What are the limits now and what should they be, and
do you as an association support any increase in those
registered pension plan deduction limits?
Mr. Malcolm Hamilton: While it's imperfect, the
Canadian Income Tax Act attempts to put RRSPs and
pension plans on the same footing. They have to do it
in different ways, so we have an RRSP limit that's
$13,500, which you hit when your income is $75,000 a
year. There was an argument here that it should be
$15,500. The corresponding pension limit is basically
the idea that you should be able to get a
$60,000-a-year pension if you spend a full career
somewhere and work 35 years. So the equivalent in the
Income Tax Act is that a $60,000-a-year pension is like
saving $13,500 or $15,500 a year in an RRSP over your
life. What these vehicles provide is an excellent way
for Canadians who earn $75,000 or less to provide for
themselves, or for their employers to provide for them,
a good pension.
When you get above those limits, if
you have someone who earns $100,000 or $125,000 or
$150,000, there is no tax-sheltered way to save for
retirement. So if you work through all the arithmetic,
what you find is to deliver a dollar of pension on
earnings over $75,000 basically costs twice as much as
delivering a dollar of pension on earnings up to
Mr. Roy Cullen: If I could interject, does
that mean, then, that you support increasing the limits
on the registered pension plan contributions as well?
Mr. Malcolm Hamilton: Yes.
Mr. Roy Cullen: To what level?
Mr. Malcolm Hamilton: We probably support doubling
them, doubling the registered pension plan limit and
doubling the RRSP defined contribution limit.
Mr. Roy Cullen: Okay.
Mr. Bowen, on the 20% foreign content limit and the
recommendation to move to 30%, again I'll be the
devil's advocate, but there has been some discussion that
it could impact the Canada-U.S. dollar, that it may
have impacted the Canada-U.S. dollar rate as it is. In
other words, if you move it to 30%, there would be more
funds moving outside of Canada and that could cause a
further decline in the Canadian dollar vis-à-vis the
U.S. dollar. Could you comment on that? Is there any
validity to that argument?
Mr. Peter Bowen: I would argue that there is not
any validity to that. I refer back to the Conference
Board of Canada study that looked at when the
percentage is increased from 10% to 20%, and
it concluded that there was no harm to the Canadian
market. In addition, this will partly result in a
rebalancing. Canadians have indicated a desire to
move some of their retirement assets outside of Canada
for diversification purposes.
This is done through mutual funds that use derivative
products. It's done by going to banks and buying GICs
that are tied to foreign stock indices. In fact,
one of the significant players in this market is the
federal government itself. The Export Development
Corporation issues notes each year that are tied to a
basket of foreign stocks, but they count as Canadian
All of those things have resulted in movement outside
of Canada. So people have moved money outside. The
issue is we're forcing them to pay additional
costs; it isn't whether additional moneys will move
outside. People are paying very substantial costs in
order to effect these results. They are continuing to
do so, and it's impacting their retirement savings.
It's being done in a complicated fashion that they
Mr. Roy Cullen: Have you done any sort of
modelling—I guess that would be the government's
job—on what effect, if any, these foreign property
rules have had on the Canada-U.S. dollar?
Mr. Peter Bowen: Again, there was no impact on the
markets in the previous change. If you look at the
amount of dollars we're talking about, it is relatively
small compared to the monthly trade flows between
Canada and the U.S.—the monthly investment by
foreigners into Canadian stocks. Billions of dollars
are moving in and out each month. The total amount in
RRSPs, I believe, is around $350 billion to $400
billion. A 2% increase is about $7 billion to $8
billion. We certainly won't see anywhere near that
much move out of it. Not everyone will take advantage
of the increases. There are investors who are closer
to retirement who have all their money in GICs, and
that's perfectly appropriate. So the dollar values
involved are relatively small.
The Chair: Ms. Van Riesen.
Ms. Gretchen Van Riesen: There are reports other
than the Conference Board report on the 20% foreign
property rule. In fact, last year when we were here I
believe we referred to a report done by Keith
Ambachtsheer on behalf the Pension Investment
Association of Canada. There are a number of
modelling exercises in there. I don't recall
specifically if it addressed the impact on the dollar,
but it certainly demonstrated and defended the position
you've heard here that by not removing the foreign
property rule, we're actually providing a disincentive.
What kind of message are we sending to other countries
around the world about investing in Canada and the
quality of Canada as a place to invest when we have to
force our own residents to be restricted to a rule?
Mr. Mel Norton: I think it's also important to
remember that our proposal—everybody has a
proposal—is not looking for you to take the limits off
immediately and start it that way. Just about all the
proposals I've seen are looking for a gradual type of
increase, much like what happened from 10% to 20%. Our
proposal, for example, is the same as a lot of others.
You should get from 20% to 30%. Once you get to 30%,
maybe you'll look and keep going, but that will be five
or more years from now. I think that will mitigate a
lot of the concerns about sudden changes.
The Chair: Some people are getting around the rule
anyway, right? The point is, why do you allow people
who may have the means to get around the rules to get
around them and deny people who want a fair shot at a
Mr. Mel Norton: It isn't a level playing field.
The biggest funds are already doing it and have been
doing it for a considerable period of time. They have
rulings on it to prove it's valid. The classic
example, of course, is the Ontario teachers, who have
about 70% of their money outside of Canada
The Chair: Ms. Guarnieri.
Ms. Albina Guarnieri (Mississauga East, Lib.): You've
sort of answered the
latter part of my question. Is there a general
consensus around the table that it would be prudent
that any discussion on increasing the allowable rate be
a step-by-step, gradual implementation to maximize
for Canadian funds? Do you share
this viewpoint? I see hesitation.
Mr. Peter Bowen: Our thinking on this has evolved
as these derivative products have come out on the
marketplace. Our recommendation is to increase it to
30% by 2% a year, but we would be equally supportive of
eliminating it. Right now, people who want to invest
outside of Canada are investing outside of Canada, and
they're paying a significant price for it. So why are
you forcing people to pay that price? We've come
around to thinking that getting rid of that limit would
be entirely appropriate.
Ms. Albina Guarnieri: I know time is very short—
Ms. Gretchen Van Riesen: Can I just add to that
Ms. Albina Guarnieri: Sure.
Ms. Gretchen Van Riesen: ACPM has been looking at
this issue for many years. We are totally satisfied
that removing it today will only benefit Canadians, and
we don't need to use the step approach. We understand
the political issues. If that's the only way to move
it forward, fair enough. In fact, people today are
being punished by this rule—by the inability. So
every day, every year we avoid removing it, the more it
takes away from Canadians' ultimate retirement incomes.
The Chair: Ms. Guarnieri.
Ms. Albina Guarnieri: I want to give the remaining
time to Dr. Smith to flesh out his proposal, which he
said he wanted to address, on reducing capital gains
taxation on ecological land gifts. We're always looking
Dr. Stuart Smith: Thank you very much, Ms.
Guarnieri. The main thing here is that we should
encourage people to give ecologically sensitive land to
the Nature Conservancy of Canada; to the crown. At the
moment, these gifts are to some extent impeded by the
fact that capital gains tax is levied upon them, if the
land happens to have an adjusted cost base lower than
its current market value.
We're just asking for the government to do exactly
what it did with gifts of securities. If you give
securities now to a registered charity, for example,
the deemed capital gain is taxed at only half the
normal capital gains rate. As a consequence, there's
no advantage to you in selling the securities first and
then donating the net proceeds.
I am just looking for ecologically sensitive lands to
be treated the same way. This is not a departure.
We're not asking that capital gains tax be eliminated
completely, the way it is in the United States, by the
way. If you give land in the United States that's
ecologically sensitive, no capital gains tax is levied.
We're not asking for that.
The evaluation of land is not as cut and dried as it
is for securities. It's a whole lot easier to evaluate
land than to evaluate paintings, for example. When
paintings are donated free of capital gains, as I said
earlier, there's some reason to believe the government
hasn't always received its fair share. But in the case
of land, it's reasonably possible to evaluate it. The
amount that might be lost to the government by
over-evaluation, when you will get only half the
capital gains tax anyway, is fairly trivial.
It would bring forth a lot more donations of land. I
don't want to use the committee's time to go through
the calculations and give you an example, but I can
assure you the algebra has been done. This just makes
it equivalent to selling the land first, paying your
taxes, donating the remainder, and getting your tax
receipt on the remainder. This comes out exactly equal
to that. That's what we're recommending.
The Chair: Explain this to me. If that piece
of land is in the greenbelt and you can't build
anything on it, the value of it will be far less than
if you could build a subdivision on it.
Dr. Stuart Smith: Sure.
The Chair: It's kind of interesting. If it's
ecologically sensitive, obviously they shouldn't be
building on it anyway. So the value would be
diminished quite a bit.
Dr. Stuart Smith: Of course. Whatever the value
is, that's the value. We're not suggesting it be
altered at all. If you have a piece of wetland or an
island in Lake Erie that you own and would like to
donate to the Nature Conservancy or the crown, it has a
value. If the value has been affected by zoning, so be
We're not suggesting you change the value. We're
saying that if you paid $40,000 for the land and a
reasonable evaluation would say that given its
restrictions, zoning and everything else, it's worth
$100,000, you would be taxed on $60,000. If you were
in a 50% tax bracket and 75% was capital gains, you
would be taxed on $45,000.
That's $22,500 that
you're essentially losing, but you're getting a $50,000
credit for donating the land. So you make $27,500.
All I'm saying is if you were to sell the land
for $100,000, pay your taxes on the $60,000 gain, then
donate the remainder and get a tax receipt, it comes to
exactly the same number. If you have paid only half
the capital gains, that accounts to the same number.
If you pay today's capital gains taxes, you actually
do better by selling it. So the land is sold
to somebody who will use it for commercial purposes,
or sit on it or do whatever, but at some point
is hoping to develop it, and it's lost to the
crown or to the Nature Conservancy.
The Chair: It's if it's ecologically sensitive,
they shouldn't be developing it.
Dr. Stuart Smith: If it's zoned properly, you're
absolutely right, Mr. Chairman. If it's zoned to
prevent development, then there's no need to donate it
because nobody can do anything with it, so who cares.
But most ecologically sensitive land, I'm sorry to tell
you, is not zoned in such a manner as to prevent
development. There are plenty of people wanting to
develop the Oak Ridges moraine, not far from you.
All I'm saying is that
zoning doesn't always save you. There's plenty of
ecologically sensitive land, and the government itself
cooperated with the Nature Conservancy to buy the
island in Lake Erie. So there's credit for so doing,
in my view.
All I'm saying is that this way you level the playing
field so that the person is encouraged to donate the
land. Just as we have it for securities, it would be
exactly the same. We're asking half the capital gain.
The Chair: Okay.
Mr. Roy Cullen: Thanks, Mr. Chairman. I wanted to
follow up on that point, Mr. Smith. Our government
will be introducing the endangered species legislation,
in all probability. I think it's a certainty.
By the way, I've looked at the map and I think the map
works. One of the aspects I was exploring with them
is... Minister Anderson has been talking about his
preference to use carrots rather than sticks, in terms
of habitat. Do you think your proposal with respect to
ecologically sensitive land might fit into that package
as a carrot, so someone who suddenly realizes they're
sitting on land that is a habitat for endangered
One of the other things is they've been
talking about compensation. So I don't know
whether the incentives would be jigged
exactly right. Would you think it could be worked into
some package to provide an incentive for people to
turn it over to a nature reserve and not expose
themselves to the capital gain?
Dr. Stuart Smith: Yes. Let me start answering
that, and then I want Mr. McGuinty to add something with
regard to our stewardship fund.
There are all kinds of habitats that have not been
zoned as such, to follow up with your and the chair's
question. And certainly, this provides... Put it
this way: it takes away a disincentive. It provides an
incentive because if a person has a generous spirit and
wishes to donate the land to protect the habitat, at
least it doesn't treat him or her as a fool for so
doing, because he or she would have been better off to
sell the land and then donate some money to the Nature
Conservancy. At least it evens it
We're suggesting, however, to work with Minister
Anderson's idea to rescue habitat, in particular
endangered species, and this is where the stewardship
fund comes in. Maybe Mr. McGuinty would want to say a
word about that.
Mr. David McGuinty: Just to pick up on a point,
one of the interesting results of the millennium
bureau's polling in the last two years has been that
environment is polling in the top three consistently.
Add to that David Foot's and others' analyses that
indicate that this is going to be the largest transfer
of wealth in the history of the country in the next
15 to 20 years and you have a number of people who are
sitting on a lot of assets. One of the problems we're
facing on the ecological side, the species-at-risk
legislation, is that we're not valuing the economic
benefits of healthfully functioning ecological systems.
What is it worth for the natural ecology to cycle
nutrients? What is it worth to control flooding and
keep climate controlled? What is it worth to have soil
productivity, forest health, genetic vigour,
pollination, and natural pest control, for example?
The answer is that we know they have a hefty economic
value, but we don't know what they're really worth,
although one stab at quantifying wild unprocessed
biodiversity in Canada has set a value at somewhere
between $70 billion and $80 billion.
The call for a market mechanism in terms of this fund
for habitat conservation is really in response to the
demand that is coming from every quarter. Every group
we've worked with has been saying, if only there were a
public-private mechanism through which we could partner
and begin addressing this biodiversity issue.
We're talking about a $100 million seed grant here to
launch this endowment fund, but other terms and
conditions can be attached to it. It's certainly been
our experience that in the last five years, I don't
think we've seen such a high degree of receptivity,
from the private sector in particular, to beginning to
address these issues.
One of the reasons for this, of course, is that it's one
voluntary measure that industry can take in order to
The Chair: Thank you, Mr. Cullen.
Mr. Scott Brison: Thank you, Mr. Chair, and thank
you all for your interventions.
On the 20-80 rule, again, with the 20% foreign content
rule, are we creating a boon for
financial advisers and for the people involved in the
analysis of how to get around it? I mean, it's
effectively being circumvented using derivatives. Isn't
it simply creating an opportunity for the mutual funds
and those people involved in financial advisement?
If it's not working in any other way, is it not
creating an opportunity for you people at least?
Mr. Peter Bowen: You're absolutely correct
that it is creating a boon for a number of parties.
As a mutual fund company, we would clearly prefer to
sell the direct investment, that people understand,
that's lower cost to the investors, to Canadians.
The cost associated with these relates to two aspects.
One is that there is a tremendous amount of
effort—hours by lawyers, investment bankers, bankers,
mutual fund company staff—related to these. It has
been a very large investment for all these different
parties and there are tremendous costs. So if you want
a productive economy, this is not how to do it.
Mr. Scott Brison: Arguably, on the dollar question
relative to—Mr. Cullen was asking the
question—whether or not removing it would have a
negative impact, we have it, and relative to the U.S.
dollar, we've lost about 10¢ on the dollar since 1993.
So it isn't providing a lot of benefit in that regard
at this point.
But I would argue that wealth is a relative thing, and in
the long run, having it there, if it reduces the pension
benefits and wealth of Canadians, which clearly it's
doing, then in the long term I would argue that its
being there would have a negative impact on the dollar.
Mr. Peter Bowen: I would agree.
You do have to look at the costs
related to these, and any other costs.
Mr. Paul Szabo: It's the availability of
Mr. Scott Brison: Yes, but it's an anachronistic
mechanism. It shouldn't be there. It's like FIRA.
We got away from that kind of stuff.
The Chair: Is there anything else you would
like to add, Mr. Brison?
Mr. Scott Brison: Anyway, on to the issue relative
to the accelerated CCA for environmentally
Wouldn't it be a better way, and it would be more
transparent in terms of the tax system, to have a
separate tax vehicle—an environmental tax credit or
something to that effect—such that the CCA arguably
should remain just that? It should be calculated based
on depreciation as opposed to the other factor.
Wouldn't it be more transparent to have a separate tax?
We may even find that a tax credit may in fact be more
marketable politically, because one of the things you're
suggesting, and I think it's quite right, is that
environmental issues are clearly on the radar screen.
I would appreciate your feedback on that.
Dr. Stuart Smith: You're absolutely right. An
investment tax credit could accomplish the same thing
and probably not offend those who feel that the capital
cost allowance has already been stretched and pummelled
and utilized for a good many other purposes than the
raising of taxes. I believe those who would like to
see accounts done in a way that's a little closer to
reality would agree with you. And I don't disagree
What I'm saying is shorten the payback period by one
means or another so that we can help the economy and
the environment at the same time.
Mr. Scott Brison: I think it's very important that
you're appearing before the finance committee, because
for a long time I think what got us into a lot of
trouble environmentally was that we separated economic
and environmental issues. The fact is that any
economic argument that ignores environmental issues is
in itself falsely based if you don't internalize the
externalities, if you don't deal with the true
environmental costs. That's very important.
There's one area that I'm not sure you're aware of.
Another area where the capital gains tax issue has had
a significant negative impact environmentally is in
Atlantic Canada. For instance, I represent a Nova
Scotia riding. I suspect this exists in rural Canada
outside of Atlantic Canada, but it's a major issue in
terms of forestry practices. The clear-cutting issue
is becoming increasingly important both politically and
environmentally in Nova Scotia and New Brunswick. Part
of what is happening is that people are finding that if
they have a fifty-acre woodlot or even a hundred-acre
woodlot, for a lot of families in rural Canada that
represents one of their biggest assets. Due to the
capital gains tax, however, they can't afford to leave
that woodlot to an heir. They paid virtually nothing
for it, but it's worth something now, and neither they
nor their heirs can afford to pay the capital gains.
One of the policies we've been pushing for a couple of
years now is the notion of having the same capital
gains tax exemption available to the small farm owners
made available to the woodlot owners. I'd appreciate
your feedback on that.
Dr. Stuart Smith: Absolutely. The
intergenerational transfer of privately operated and
privately owned woodlots most certainly should be free
of capital gains, so that people can be encouraged to
utilize these woodlots properly, to maintain them
properly, and to keep them environmentally sustainable.
The National Round Table on the Environment and the
Economy actually took the lead on that very
subject. We issued a report a few years ago on the
private woodlot situation, and we drew attention to the
fact that these woodlots were being mismanaged. The
gist of our report was that if you can demonstrate that
you have an environmental plan that has been attested
to by an accredited person, an expert, then your
woodlot should be treated differently from the point of
view of Revenue Canada, including intergenerational
transfer. Not only that, but it should also be treated
differently from the point of view of allowing your
expenses in the maintenance of the woodlot—those made
to preserve it in proper form and to manage it
properly—to be deductible against other income. Most
of these woodlot owners don't make a living just on
that little woodlot; they have other income. You must
allow them to deduct those expenses against that other
income so that they'll be encouraged to maintain those
Mr. Scott Brison: Part of that is also based on
the length of time it takes to get a return
financially. It takes a long time to get a return from
Dr. Stuart Smith: You've got it. Absolutely.
Mr. Scott Brison: Thank you.
The Chair: Thank you, Mr. Brison.
On behalf of the committee, I certainly want to
express to you our sincerest gratitude for your input.
We look to experts such as yourselves to give us a
sense of what the priorities for the next budget should
Budget 2000 is going to be an interesting budget. We
go into this with one thing in mind. Whatever we
recommend, the ultimate goal is to improve the standard
of living and quality of life of Canadians, and that's
what we're driven by. So thank you for your efforts.
We are going to suspend, and we'll be back at 7 p.m.