FINA Committee Meeting

STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 25, 1999

• 1218

[English]

The Chairman (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I'd like to call the meeting to order and to welcome everyone here this afternoon.

As you know, the finance committee has been travelling across the country seeking input from Canadians from coast to coast to coast. We actually finished our cross-country tour yesterday in Regina. We're happy to be back here in Ottawa to receive further input by organizations and individuals.

Today we have the following organizations appearing before us: Air Transport Association of Canada, Canadian Automotive Repair and Service Sector Council, Canadian Trucking Alliance, National Tax Force to Promote Employer-Provided Tax-Exempt Transit Passes, Canadian Automobile Association, and Fédération de l'âge d'or du Québec.

We will begin with the Air Transport Association of Canada, Clifford Mackay. Welcome.

Mr. J. Clifford Mackay (President and Chief Executive Officer, Air Transport Association of Canada): Thank you, Mr. Chairman.

First, let me thank the committee for the opportunity to speak to you. I don't intend to take much of your time, since we did submit a formal brief to the committee a couple of months ago, and I'm sure your staff has circulated it to committee members.

Let me start by saying to the committee that the Air Transport Association of Canada essentially represents commercial aviation in Canada. Some of our larger members have been on the public agenda in the last little while, but I want to remind committee members that we also represent a very large number of small and medium-sized businesses that are engaged in aviation activity, everything from flight-training schools to small charter operators to the regionals and other businesses. We take and try to represent the views of the full spectrum of commercial aviation in the country.

• 1220

Our industry generates about $11 billion in revenues annually and employs well over 50,000 Canadians in small and big towns across the country.

As an industry we are obviously going through a period of upheaval. The two major carriers, as you all know, are engaged in discussions about the structure of the national airline system. It would not be my intention today to speak to those matters directly, since they're still a work in progress. But I did want to flag for the committee a number of issues that are germane to that particular problem and that have largely to do with what we believe are some unintended effects of the major changes in the public policy framework, which have affected the air transport industry in the last few years. Let me just start by mentioning the largest ones.

As you all are aware, recently the Government of Canada privatized the air navigation system in the country with the creation of NAV CANADA. We have supported that decision because we believe in the long run it will lead to more effective, efficient, and safe air traffic control services in Canada. Notwithstanding that, the short-term implication of that to my members is that we are now seeing on our income statements and balance sheets $500 million more in costs annually than we did four years ago.

The second major point I want to make to you is that the privatization of airports, which as an organization we supported in principle, has resulted in additional costs for our members of something in the order of $800 million annually. services. In addition to that, a very large number of new service charges have been introduced by various government agencies, which our members have to pay.

When you look at it in totality, what you essentially see is that new costs have been introduced to the industry, which were not paid for by the industry in the past, to the tune of something like $1.3 billion a year. In an industry whose total revenues represent about $11 billion a year, I don't think it takes you long to come to the conclusion that you now know where some of the pressures are coming from in terms of the lack of profitability and other difficulties the industry is generally facing.

Let me hasten to add, though, that while we believe these are very real problems, we would not advocate that you go back to the days of government running the whole system. It is going to be better in the long run, in our view, to have a privatized system where people behave in a more businesslike manner and hopefully respond better to the marketplace.

But we have a real problem today. The real problem is that these are new costs, and we are facing some significant problems in the viability of the industry. I'd like to make a number of suggestions to you of things I would hope this committee would consider by way of things you could possibly do to try to assist the industry to manage its way through this transition period.

You're all aware that we pay fuel taxes. We can't find any public policy rationale for us to continue to pay fuel taxes. It has been argued that we pay fuel taxes because it was an offsetting tax to the services that were provided to the industry in the past. The government no longer pays for those services. The government today collects over $200 million in these fees, rather than paying for the services. So it's now a cash plus for the government on a negative. In addition to that all of the economic advice we have gotten is that input taxes are almost by definition economically inefficient, and that's one of the primary reasons the government a number of years ago moved from the manufacturers' sales tax to the GST. But here we are, an industry that is still paying input taxes while already having problems with profitability. So we'd very much welcome your attention to that issue.

Also, we pay GST for Canada-U.S. travel, whereas no GST is charged for any other international travel, and no other mode of transport pays GST on transborder travel. We believe this is inequitable, and we again would bring the matter to the committee's attention. Frankly, it's also inconsistent with the international principles of taxation in our industry.

• 1225

A further financial burden that some of our members face is that we have to pay the carrying cost on GST when we purchase aircraft, even though we get that money back through the credit process after the fact. Now, that may not seem like a big problem, but when you're purchasing items that are routinely in the hundreds of millions of dollars, these carrying costs become very significant. Frankly, they're another cost burden on the industry where we don't see any public policy justification for it.

Another issue is that we are not able to take advantage of deductibility for meal costs for our flight crews. In the old days, up until recently, we had an 80% deductibility for those costs on the basis that they were legitimate business costs. The rules have changed, and we're no longer eligible for that deductibility, even though our competitors, largely American Airlines, are eligible for these deductibles. We have great difficulty in figuring out why, if you have to have flight crews located in various places and they have to overnight and eat, we're not entitled to that as a business expense.

There are two other items. One, there has been a significant increase in user charges across the board from various government departments and agencies, many of which are impacting our members—everything from the cost of licensing an aircraft mechanic to the cost of importing an airplane and the licences and certificates, to now there is some consideration going on to charging us for inspections of our galleys onboard aircraft.

All of this creeps into our cost base and significantly impacts our ability to provide good and viable services across the country.

The largest item by far that has been newly introduced in the last few years is the government's charging of leased land to airports that they have leased across the country. Back before the privatization of airports, the government generally subsidized airports across the country at about $150 million a year net. It did derive revenues from some, and then it put them back into the system, and the net cost to the taxpayer was roughly $150 million a year.

The government's total outlay for airports in Canada today is roughly $35 million. At the same time, the government will derive revenues from leases and larger airports in excess of $200 million this year.

We would argue that the purpose of privatization was not to create a cash cow for government. It was to create a more efficient, safe, and cost-effective airport system in the country. We would strongly ask the committee to look at this particular practice. We've obviously brought these matters to the attention of the Minister of Transport already.

When you look at that list, accumulatively, the resulting impact on the cost structures and the profitability of our industry is significant. That is one of the reasons, I would submit, Mr. Chairman, that you are reading in the newspapers every day about the problems of viability of two national airlines and what can we do in Canada to have a more viable transportation system.

Thank you very much, Mr. Chairman, for your attention. I'll close there.

The Chairman: Thank you very much, Mr. Mackay.

We'll now hear, from the Canadian Automotive Repair and Service Council, Mr. Keith Lancastle. Welcome.

Mr. Keith Lancastle (Spokesperson, Canadian Automotive Repair and Service Council): Mr. Chairman, honourable members of the Standing Committee on Finance, ladies and gentlemen, I would like to begin by thanking the members of this committee once again for the opportunity to take part in the prebudget consultation process.

I'm here today representing the Canadian Automotive Repair and Service Council, or CARS Council. The CARS Council is a federally chartered, private sector, not-for-profit organization working in and for the automotive repair and service industry in Canada.

The Canadian automotive repair and service industry provides employment to over 200,000 people. Slightly fewer than 30,000 businesses, the majority of which are small to medium-sized enterprises, make up the employer community within this sector.

On a day-to-day basis, our industry provides a full range of repair and service to the over 16 million Canadian vehicles operating on our highways. Each year the market impact of our sector on the Canadian economy is in the tens of billions of dollars. This industry is therefore one of the major contributors to the overall health of the Canadian economy.

Through CARS, we've created a mechanism and a process that brings together our industry's key stakeholders—the manufacturers and importers, the franchise car dealers, the warehouse distributors and jobbers, the retail chain stores and specialty repair facilities, the independent repair and service shops, the employees working in the industry, and the community colleges and trainers.

• 1230

Through a working partnership of these stakeholders, CARS has developed and implemented effective human resource initiatives designed to help the automotive repair and service industry across the country address its key human resource challenges. Perhaps the largest portion of the work that CARS has done to date has dealt directly with the challenges facing automotive technicians and apprentices, the single largest occupational segment within our industry. It is on an issue that directly affects those technicians and apprentices that I wish to speak to you today.

Working as an automotive technician or apprentice today is perhaps one of the more challenging and diverse occupations within the Canadian labour market. Technology has done much to increase the high-tech nature of the profession; however, it is still an occupation with considerable physical demands. The profession is by all accounts a young person's game. It is rare to see an older technician working on the bench on a full-time basis. Typically, by the time a technician reaches his or her late forties, they are seeking out new opportunities that will take them away from the shop floor on a day-to-day basis. For some, this may mean a move toward a less physically demanding position within the industry; for others, the choice is one of leaving the industry altogether for a career in another field.

A recent study carried out by the CARS Council has found that approximately 47% of our current workforce is already over 40. This data clearly points out what our industry has long recognized: that we are facing a severe shortage of skilled labour in the not-too-distant future. As those existing workers already in their forties look to move away from the shop floor, industry will need to be able to draw on a large pool of potential candidates with the skills needed to properly repair the cars of tomorrow. Our industry has looked to CARS to provide leadership in this area and to develop programs and solutions to ensure that their future labour market requirements are met and that the future needs of Canadian motorists can continue to be met.

In the past CARS has, with the support of industry and of government, through Human Resources Development Canada, championed programs such as the CARS Career Choices for Youth. This program is designed to provide young people seeking to make the difficult school-to-work transition with valuable skills and experience. Through this program a great many Canadian young people were trained and, perhaps more importantly, received critical on-the-job experience needed to get a solid start in their career paths. In addition, CARS is now developing career information products designed to provide young people with the background they need to make decisions relative to a career in our industry. This information, combined with a higher presence from industry at the secondary school level, will do much to encourage young people to plan a career in our industry.

We've also taken steps to promote and improve standards for training, both at the entry level and those training standards for the existing workforce, to ensure that the appropriate skills and knowledge are available to those coming into the business and those already established in their career. I tell you this just to explain, in part, that the industry has, through CARS and others, taken some very clear action to deal with its pending human resource shortages. We've not sat back and waited. We're working hard to ensure that we have the right people with the right skills at the right time.

Despite all this work, there are a number of issues and challenges outside of our direct influence that affect the ability of the industry to attract and retain high-calibre employees. Perhaps the longest-standing issue affecting this effort is an issue to which I'd like to speak to you again today. It is an issue that has been brought forward many times over the last decade, most recently during this committee's prebudget consultations last year.

Apprentices and technicians working in our industry face what we believe to be a unique situation within the Canadian labour market. These men and women are required, as a condition of their employment, to purchase and maintain their own set of tools. Simply put, a technician without a set of tools will be unable to find or keep a job. Yet the costs of purchasing and updating these tools are not eligible for deduction as an employment expense.

We would be the first to acknowledge that every Canadian employee incurs some degree of expense associated with their employment. In the case of technicians and apprentices working within our industry, it is the amount of the expense that makes the situation unique and particularly acute. We should look, first of all, at a young apprentice entering the industry. It is for these people that the situation is most critical, and perhaps the most painful.

According to our most recent data, 31% of our apprentices are investing between $2,500 and $4,000 each year, with a further 10% investing in excess of $4,000 annually in the purchase and maintenance of their tools. Approximately 35% of these apprentices have already invested in excess of $10,000 in their tools at a time when their careers are just getting started.

• 1235

I would pause to remind you that we are talking about young apprentices here who are just looking to get their start in the business. The income for these young people is very modest, with 54% of them earning annual salaries of less than $20,000.

If we look at the impact of this same situation on qualified technicians, we find a similar situation. Fully 70% of our technicians have reported an annual investment in updating and upgrading their tools in excess of $1,000; 27% of these technicians are reporting an annual expenditure in excess of $2,500; over 60% of our technicians have a total investment in their personal tool boxes in excess of $20,000; and we know that 12% are reporting investments in excess of $50,000.

While these individuals are fully qualified and experienced technicians, their income levels are still very modest, compared to other skilled trades and occupations. Over 60% of the technicians we've surveyed report annual incomes of less than $40,000. Frankly, we are aware of no other Canadian employees who must make investments of this magnitude as a condition of their employment, while still earning relatively modest incomes. Yet they've been denied a tax deduction that has been provided to Canadians working as artists, chain-saw operators, and musicians.

The impact of this situation continues to be a concern to our industry, in both the short and long terms. The absence of a tax deduction on technician's tools has been cited time and again as a key contributor to the attrition within the existing workforce. More importantly, and for the future health of our industry, it is a systemic barrier and disincentive to young people, who might otherwise consider this industry as a career path.

Imagine, if you will, the reaction of a young person who is considering working in this industry as a technician. They are told that before they get that first job, they must purchase a starter set of tools and they will not receive a tax deduction for the cost of the purchase. It's a reality, I suggest, that might well cause those people to rethink that decision.

As I mentioned to you earlier, this is not a new issue. In truth, it has been a concern to those in our industry for a great many years. The technicians and apprentices are, in many ways, the backbone of our industry. Without them we are unable to provide the level of service Canadians seek and deserve, and the industry as a whole suffers.

We are concerned about our industry's ability to meet the future demands of consumers and the motoring public. Will we have enough people with the appropriate skills and knowledge to meet the demands of not only changing technology, but the ever-increasing numbers of vehicles operating on our highways?

As I have mentioned, our industry has taken a number of positive steps to help secure the future needs relative to employees. However, the positive impact of this work will be mitigated and reduced if steps are not quickly taken to address the issue of tool tax deductibility.

It remains our position that an investment in targeted tax relief that will help Canadians find and keep jobs is perhaps the best way to ensure a wide range of opportunities into the next millennium. We would respectfully request, therefore, that this committee once again incorporate in their report to the minister a recommendation that tax relief be provided to those Canadians who must incur exceptional employment expenses, as a condition of their employment.

Thank you.

The Chairman: Thank you very much, Mr. Lancastle.

We'll now hear from the Canadian Trucking Alliance, David Bradley and Graham Cooper. Welcome.

Mr. David Bradley (Chief Executive Officer, Canadian Trucking Alliance): Good afternoon, chairman, members of the committee. Graham Cooper and I are delighted to have the opportunity to speak to you briefly today.

I want to talk about some realities in Canada. One increasing reality is that Canada's economy moves by truck. The trucking industry presently hauls about 90% of all consumer products and foodstuffs consumed and used in Canada every day. We haul 70% of Canada's trade with the United States, which approaches about 40% of the country's GDP. We employ about 2% of the Canadian workforce directly—that's in excess of 400,000 Canadians. In addition, we support probably another 200,000 jobs in the ancillary industries that service and provide goods and services to our sector.

The Canadian Trucking Alliance is a federation of the provincial trucking associations, and we represent about 60% to 70% of the $40 billion per year generated in revenues in the trucking sector.

You have a copy of our submission. We obviously won't be able to deal with all of the issues in any detail, but suffice it to say we need to look at level playing field arguments on the corporate side and the corporate income tax structure in Canada. We need to look at accelerated depreciation rates, to keep us in line with the United States and allow us to retool and re-equip our fleets at the same pace they do. It would allow us to move into the newer, safer, more environmentally friendly equipment. Those things need to be looked at.

• 1240

Similarly, in terms of a level playing field, we really need to have a Canadian response to the increasing proliferation of state taxes in the United States that fall outside of NAFTA, the Canada-United States Tax Treaty, and the like.

Instead of dealing with those issues in my remarks, I'm going to deal with two issues. One is the need for increased strategic investment in the nation's highway systems, and the second is to talk about meal deductibility for truck drivers in Canada.

Another Canadian reality is that with our small economy we need to generate wealth externally. That means we need to have economic growth, which means we need to be able to trade. Because trade moves by truck, it means we need not only transporter trucking, but an infrastructure to support it.

When Paul Martin was made finance minister a number of years ago, he stood before this committee and quite eloquently talked about compounding interest, compounding deficits, and the impact that was having on the Canadian economy, future Canadian economic growth, and our standard of living. There's another insidious deficit that exists now that also compounds year by year, and that is the lack of meaningful investment in the nation's highway infrastructure.

I mentioned that Canada's economy moves by truck, and trade moves by truck. Again, 70% of Canada's trade with the United States moves over the road by motor carriers. There's now a truck crossing the Canada-U.S. border every three seconds, 365 days a year, and that number is only going to increase. We've seen transborder shipments increasing about 9% per year over the last number of years, and of course we've seen trade between Canada and the U.S. double over the last five or six years. It is expected to double again in the next three to five years.

I would say that Canada's manufacturers, our shippers, are doing their job. They're taking advantage of the free trade agreements and they're producing goods at competitive prices. I would say that the trucking industry is doing its job by getting those goods to markets in the United States and returning to Canada on time, safely and efficiently. If there's something missing in all of this, it's that our governments collectively—and I think there's a particular role for the federal government here—have not been keeping pace, in terms of putting the tax dollars generated by our industry back into the infrastructure.

Indeed we have what I would call a national embarrassment in places like Windsor. At Detroit-Windsor, and the Ambassador Bridge in particular, we see more trade crossing that gateway than anywhere else in the entire world. It is the world's single largest corridor for trade. Yet when you get off Highway 401, you're basically on a residential road for the next nine kilometres. A truck driver has told me that you can take a truck from Toronto to Miami and go through 15 stop lights and 14 of them are in Windsor alone.

Unless we start to see some meaningful investment in these new rivers of trade in our trade corridors, we're going to see a slow strangulation of Canadian trade, and therefore a slow strangulation of economic growth and our standard of living.

This isn't a problem that's crept up on us recently. The neglect of our highway systems really began about 30 years ago, when the Canadian provinces combined spent about 20 cents of every dollar collected from road user taxes on the highway system. Today it's about three cents. The federal Government of Canada hasn't not had a meaningful role in the nation's highway infrastructure since they were partners with the provinces in the development of the Trans-Canada Highway back in the 1940s and 1950s.

At the same time, however, the federal government has decided to get into the fuel tax business. That began in 1984, and it is presently taxing Canadian road users—both trucks and cars—about $4 billion a year, and putting at best maybe 1% back into the highway system, with no strategy whatsoever.

• 1245

So we're calling upon the Government of Canada, which does have a constitutional responsibility for trade, to leverage a partnership with the provinces and the private sector to introduce a strategic plan for increased highway and bridge investment in Canada.

It's a sad state of affairs when a country that relies so much on transportation and relies so much on trade for its economic well-being remains the only major industrialized country in the entire world—a rather dubious distinction—to not have a national highway infrastructure policy. It's high time that changed. Of course we were encouraged to hear in the last throne speech that there will be a five-year infrastructure program of sorts. We were concerned, however, that there was no mention specifically of highways in the throne speech.

We are concerned that what we will end up with is an à-la-carte type of infrastructure program, where we'll have some money maybe for transportation, but some money over here for private boxes at NHL arenas—which you will recall occurred in the last infrastructure program—and those kinds of things, as opposed to a focused strategic investment in our highway system.

Juxtapose that against what the Americans are doing—our major trading partner. Over the next six or seven years in the United States the federal government in the U.S. is going to be investing in excess of $300 billion Canadian in their highway infrastructure. One has to wonder how much longer they will continue to put money at the northern borders to be able to take Canadian trade if there's no reciprocation at the other end.

The other issue I wanted to speak about briefly is one of fairness and equity. Like our friends from the CARS program, we have a human resources problem in our industry at the present time. It's a complex issue, and it's going to take a lot of complex actions on the part of the industry to address it.

We have an issue right now that back in the 1994 budget the Minister of Finance decided he would reduce the allowable deduction for meals for all workers from the prevailing rate of 80% down to 50%. His justification for that was that the United States was moving in that direction—they had already taken action to reduce from 80% to 50%—and there was the issue of how you separate personal consumption from business expense.

Certainly we were empathetic then, and we remain empathetic to him in terms of wanting to cut out the $200 lunches and the bottle of wine at the Rideau Club and having the taxpayer of Canada subsidize that. But that's not what we're talking about here. We're talking about truck drivers who are away from home for significant amounts of time, whose rest stops are governed by regulations, that is, the federal hours-of-service regulation, so they really don't have choices in terms of where they stop.

We're talking about a country that has not invested in rest stops and those types of facilities, as they have in the United States—and they're not welcome at many of those. We're talking about guys who are having to take their little Coleman stove with them in the back of their truck just to be able to get a subsistence diet.

We are arguing that we need a restoration of the 80% meal deductibility limit. The Americans have seen the error of their ways. They've now introduced and passed legislation, and are moving back in a phased approach to the 80%. That will occur over the next six or seven years.

It doesn't really matter on what side of the border employees are located any more, in terms of the movement of freight. We would like to keep those jobs and those truck drivers in Canada.

It's interesting—and this may not be a totally fair comparison, although we think it is from an equity point of view—that when you look at the Treasury Board guidelines for federal civil servants, you'll see that civil servants get a tax-free allowance of $47.70 a day for meals if they're out of town and having to spend the night away, plus $6 for tips and those kinds of things. In addition, as they get a little higher up in the scheme of things, there's a category for hospitality, where on approval at a director level, a civil servant can treat someone to a meal and drinks for the amount approved, whatever that might be. And that is all tax-free.

• 1250

First, that's not fair. And secondly, I buy a lot of those dinners for those civil servants, and I don't know where that money is going at the end of the day. I'd like to be able to put $50 in my pocket every day tax-free. I just don't think that's fair. I think it's sending out the wrong message to the hard-working men and women of the Canadian trucking industry who just happen to represent, according to the census of Canada, among males at least, the top occupation in Canada.

So we would ask for your consideration that we restore that, particularly now that the Americans have gone back and are moving toward 80%. We're not talking about elaborate meals and bottles of wine. And we would be quite open to any suggestions in terms of a limit on that to ensure there isn't that type of abuse.

Thank you very much. If you have any questions on these issues or on anything else in our submission, we'd be more than pleased to try to respond.

The Chairman: Thank you very much, Mr. Bradley.

We'll now hear from the Canadian Automobile Association, the vice-president, Elly Meister, and Leanne Wright, researcher.

Ms. Elly Meister (Vice-President, Public Affairs and Communications, Canadian Automobile Association): Thank you very much. Good morning to the members of the Standing Committee on Finance, ladies and gentlemen.

The Canadian Automobile Association is pleased to once again have the opportunity of presenting our submission to this prebudget consultation. I'd like to introduce you to Leanne Wright, our chief researcher.

By far the most important issue facing the Canadian Automobile Association and our four million members is the transportation infrastructure in Canada. It affects every province and every region in the country. More specifically, we would like to address the importance of our national highway system.

I'm going to be kind of repetitive here, because David Bradley has made most of the major points, but it's just for continuity—and repetition is good. You'll hear our aspect of this as well.

The lack of funding and attention to our country's basic infrastructure needs does not befit a country regarded by the UN as the best country in the world to live in. For every year that funding has been withheld from the national highway system, Canadians have continued to pay the real price of neglect. Nearly 40% of our highway system is substandard. Our roadways have not kept up with growing population, urbanization, and vehicle travel.

We remain the only G-7 country without a national highway plan. By stark comparison, the highway policy and funding mechanisms in the United States show expenditures by their federal government of $300 billion to $400 billion during the next five years. In Canada, our federal government has spent an average of $300 million annually over the past five years, for a total of $1.5 billion, this despite the fact that the federal government collects from motorists over $5 billion annually in road-related revenues such as gasoline taxes and GST.

We are concerned that unlike other countries, there's no strategic plan for funding or development of our roads for the next one year or five years. Studies show that $17 billion is needed now to bring our current system up to standard. In the wake of NAFTA, new trade corridors, and increased competition for markets, Canada is trailing behind.

We have lost hundreds of lives and had thousands more injuries because of problems with our roads. A recent study showed that over 247 lives and 16,000 collisions could be saved if our highways were upgraded. We have wasted millions of hours in traffic, burning up over 236 million litres of fuel annually, and spent millions of dollars on extra repairs because the road conditions are so poor.

Inferior roadways affect not only the health of Canadians, but the health of Canadian business and its productivity. Late deliveries, higher fuel cost, and production delays all cost businesses more, and in the end cost Canadians more.

Studies show that bringing the national highway system up to standard would generate as much as $2 billion in accelerated productivity growth. Failing to invest in our highways retards productivity growth and hinders economic development. Production costs may increase and output may fall, which would increase our reliance on exports, and new businesses may opt to invest elsewhere.

• 1255

Transportation access is a key factor to business. In the 1997 corporate opinion survey, accessibility to highways was the number two factor influencing site selection by business. Labour costs ranked as number one. Following a survey of CAA members earlier this year, 78% of our members told us that improvements to the national transportation infrastructure was a spending priority for the government. CAA has of course delivered this important message to ministers in the finance and transportation departments.

In our submission brief that you have, CAA presents a five-point plan that addresses our concerns and those of our four million members. Canada needs a transportation infrastructure plan that clearly states objectives and priorities. The federal government must provide the leadership in the development of a plan and stable long-term funding.

Funding for a national transportation infrastructure program in the 2000 budget is critical for the safety, productivity, and economic prosperity of Canadians. Reinvestment of gasoline revenues into the national transportation structure should be considered. The special Senate committee on transportation safety and security supported the reinvestment of gasoline revenues into highways through the creation of a national highway program. In their interim report, the committee recommends that the federal government and the provinces establish a fund for highway building, repair, and maintenance by setting aside a portion of the excise tax imposed on gasoline, and that the federal government and the provinces also establish a new infrastructure program dedicated solely to building new highways and to upgrading and repairing existing highways.

CAA recommends that the government look at the possibility of public-private partnerships. Canada has an opportunity to take a lead role in developing a national policy and guidelines for public-private partnerships that are solidly grounded in responsible public policy. Provisions, however, must include safety standards, technological standards, privacy guidelines and revenue policies to guard against excessive profits or, most importantly, user fees to the public.

We'd also like to recommend that the government look at new technology in construction methods and materials, as these present opportunities to maximize the life cycle of these valuable public assets, our roads. The commercialization and export of these new technologies can also give Canada a competitive edge internationally.

We were encouraged a few weeks ago when the provincial finance ministers called for infrastructure funding. Now we look forward to an announcement in the year 2000 budget that reverses the highway deficit by again establishing the development of a long-term plan and a commitment by the federal government to long-term funding.

CAA asks the Standing Committee on Finance to find better ways of making our roads an investment in Canada's economy.

I'd like to close with a quote attributed to the late John F. Kennedy: “It's not our wealth that built our roads, but our roads that built our wealth.”

Thank you.

The Chairman: Thank you. That was a good quote, by the way.

The next presentation will be made by

[Translation]

the Fédération de l'âge d'or du Québec, which is represented by its president, Mr. François Legault.

Mr. François Legault (President, Fédération de l'âge d'or du Québec): Our concerns are entirely different from those the preceding speakers have voiced. I shall read our brief statement.

The Quebec Federation of Senior Citizens (FADOQ) is a voluntary organization of persons of more than 50 years of age; its main objective is to maintain and improve the quality of life of its members, and consequently, of Quebec seniors as a whole.

Today, the FADOQ is present in 16 Quebec regions, and has close to 1 000 clubs that offer leisure activities, principally, to their 275,000 members.

The FADOQ defends the rights of its members and provides them with opportunities for growth and development, whatever their area of expertise and wherever they live.

Finally, the social involvement of our members also contributes to furthering the well-being of their communities and the equilibrium of our society.

• 1300

We thank the Standing Committee on Finance for hearing us and we also wish to congratulate the government on its openness and its efforts to hear what citizens have to say about the country's finances.

Of course, we are concerned by the effects of the debt on our economy and by the spending of the federal government. Federal transfers to provinces as well as transfer payments to individuals are also a source of concern to us. But since we have limited time and have set our won priorities, we will limit our discussion to the problem that seems the most acute and is the most distressing to us at this time, and that is the problem of the poorest senior citizens.

To FADOQ, it is crucial that the government realize the importance of its responsibility toward seniors. In light of the fact that an increasing number of formerly free services must now be paid for, and that senior citizens have very few ways of increasing their incomes, there is a pressing need to increase support programs in order to allow senior citizens to live with an adequate income.

You probably know that in 1997, single persons of 65 or more had an average income of $19,944 in Quebec. You also know that the low-income cut-off has been set by Statistics Canada at $17,409 for a single person living in an urban area of more than 500,000 inhabitants, and at $12,030 in rural areas. But did you know that 64% of senior citizens living in Quebec have incomes that are below the low-income cut-off, the poverty line? Moreover, in 1996, 57% of senior citizens' income was derived from government programs, i.e. Old Age Security and the Guaranteed Income Supplement. The fact that people have to resort to that already indicates that they are in very difficult circumstances.

Furthermore, we should not forget the deplorable situation of women who have never been in the labour market and can thus only receive Old Age Security and the maximum Guaranteed Income Supplement: they live with $10,864 a year.

How should, and how can, seniors manage with such tiny incomes? The cost of living is the same whether you are retired or still working. Some go so far as to say that seniors spend less that other citizens! Do they have a choice? To give you an example, room and board in the Montreal area costs at least $8,400 a year. Senior citizens continue to need accommodation, to drink milk, to eat, and not bread alone, to clothe themselves. You know how much a simple pair of shoes or transportation can cost. A senior's bus pass in Montreal costs $26 a month, and for those living in rural areas, a car is an absolute necessity, Can they afford cablevision or pay for essential services such as the telephone, electricity and insurance? How can they have anything left to cope with emergencies? If those persons need medication, you will have to acknowledge that they won't have much left, even if they manage to make ends meet in-so-far as their basic needs are concerned.

Let's take the case of someone with $10,864 of yearly income who must spend $8,400 a year for room and board, $100 for the medication deductible and $312 for a bus pass. They only have $2,052 a year for clothing, small personal articles and toiletries and leisure activities. You will have to agree that this is very little. The pill is hard to swallow, especially if you have been forced to move into a rooming house because you no longer have the means to afford a small apartment.

There is thus a pressing need to increase support programs in order to allow senior citizens to live with an adequate income. It is deplorable that there are still senior citizens faced with this horrible decision, month after month: the choice between buying groceries or medication, since they don't have sufficient income to meet their basic monthly expenditures!

FADOQ is asking the government to undertake a gradual increase of the basic yearly income provided by Old Age Security and the Guaranteed Income Supplement programs in order that they at least match the low-income cut-off thresholds set by Statistics Canada.

That increase, as mentioned in the brief we submitted last year, could be implemented in the following way. The first year, the $120 basic yearly allowance for retired persons receiving Old Age Security and Guaranteed Income Supplement benefits should be increased. It must be possible to provide that amount, since the minister had already included it in his draft seniors' benefits program.

• 1305

In the second year and the following years, the basic yearly pension should be increased proportionally to the consumer price index plus 1%, until pension income reaches the low-income cut-off threshold.

The Finance Minister redefined his concept of net family income in the last budget. Thus, couples start paying back the amount of income security they have received during the year if their income is above $25,921, not $52,000 as it used to be. We believe that the additional money the government is collecting should be paid to the poorest people.

I will now state our main concerns. There is a great deal of talk about the future of senior citizens. We are concerned about what the future holds for us. It is often mysterious and we have the mistaken impression that there is very little we can do about it. But when it comes to the present, we can act and we must see to it today. It is crucial to both our future and our present circumstances.

The reform of the Canada Pension Plan and of the Quebec Pension Plan is aimed at providing today's workers, whose contributions have increased, with a certain financial security in the future. However, we don't feel certain that that pension, together with the Old Age Security program, will guarantee minimum financial security when they retire.

Moreover, since the majority of workers do not have access to a private pension plan, we would like the government to confirm that the fate of senior citizens will remain one of the country's priorities. Furthermore, we think that the government should adopt additional measures to help Canadian men and women set aside money in retirement savings plans, in addition to encouraging job creation in order to ensure the viability of existing programs.

In conclusion, according to Statistics Canada projections, 16 p. 100 of Canadian men and women will reach the age of 65 or more in the year 2016. In the year 2041, senior citizens will make up approximately 23% of the population. Perhaps you will no longer be there. But if your children are still around, what will the quality of their life be like? When their turn comes, who will pay for them? Rumours abound to the effect that Old Age Security coffers will be empty when their turn comes. Until now, the government has not been very specific on that issue; we are worried about that and we think that taxpayers need to be reassured in that regard.

If the past is indeed the herald of the future, we must take nothing for granted and we must have the foresight to provide for the unexpected. Since economic fluctuations are a fact of life, the government must be farsighted, and for our part, at the Quebec Federation of Senior Citizens, we intend to be most vigilant.

We beseech the government to continue its efforts to improve the situation of the poorest senior citizens. The possibility of living with dignity right up to the end of one's life should not even be at issue in a society such as ours. We have to remember that Old Age Security benefits are not privileges, nor charity donations given to the elderly, but a debt that society owes them. We mustn't forget that, when these plans were set up, when seniors were workers, they paid for their own parents.

As we near the new millennium, in a society where fairness is touted as one of our values, the State cannot turn its back on its very real responsibility to its weakest and poorest members. It is our governments' duty to protect and provide financial support to those members of society who cannot, for various reasons, meet their own basic needs. In our opinion, that is an obligation that lies on all governments in any society that claims to be civilized. Thank you.

The Chairman: Thank you, Mr. Legault.

[English]

We'll now hear from the National Task Force to Promote Employer-Provided Tax-Exempt Transit Passes: Ms. Amelia Shaw, manager of public affairs, Canadian Urban Transit Association; and Donna-Lynn Ahee, project manager. Welcome.

Ms. Amelia Shaw (Manager, Public Affairs, Canadian Urban Transit Association (CUTA); National Task Force to Promote Employer-Provided Tax-Exempt Transit Passes): Thank you.

Mr. Chairman and members of the committee, we are here today to present employer-provided tax-exempt transit benefits. I'm actually going to speak to an acronym we use, because as Mr. Bevilacqua had problems with employer-provided tax-exempt transit benefits, we also have the same problem. So we call it TEI. This stands for the tax exempt initiative. Please bear with me as I use this throughout the presentation today.

• 1310

The Chairman: No, I didn't, I was just giving you the floor.

Ms. Amelia Shaw: Sorry.

I would like to begin by giving you a brief overview of TEI, the expected outcome of making such a change to the Income Tax Act, the support that has grown across Canada for this initiative and the results of the cost-benefit analysis prepared for the national climate change process.

First of all what is TEI? We're asking the federal government to review its tax laws and make employer-provided transit benefits income-tax-exempt. Parking and transit benefits are both designated as taxable income, although exemptions exist allowing many employers to give their employees free parking income-tax-free.

While Revenue Canada cannot identify the extent to which Canadians avoid tax on their parking, surveys show that free or subsidized parking is a common benefit provided to approximately 80% of auto commuters. Employer-provided transit benefits, however, are practically non-existent.

Employer-provided parking is a significant incentive to drive. Workers receiving free parking save on average $1,280 a year. When income tax is not charged, they save approximately $1,776 per year.

One way to compete with free parking is to encourage employers to offer transit benefits. A tax exemption gives employers the financial incentive to offer transit benefits. A transit benefit provides an equitable benefit for non-drivers, as well as motivation for drivers to switch to a mode of transportation with lower societal costs.

In the United States, TEI is a proven incentive to use public transit. Early reports show that transit use increases approximately 25% among employees offered this benefit. The 1998 TEA-21, the Transportation Equity Act for the 21st Century, further improved this incentive by allowing employers to provide $65 per month of non-taxable transit benefits. Just to make you aware, as of 2001 this will increase to $100 per month.

By allowing employees to purchase this benefit themselves using pre-tax income, the results have been impressive, with transit use increases of over 40% being reported and employers signing up to participate in droves.

It is very important to all levels of government, municipal, provincial, and federal, as well as to individual Canadians to promote public transit use.

Technological advances such as cleaner fuels and more efficient engines have been overwhelmed by the increasing number of cars on the road and the kilometres these vehicles are driven. Reducing auto use would be a key strategy of the federal government if we are serious about reducing greenhouse gas emissions and meeting our Kyoto obligations.

Increased transit use results in decreased traffic congestion. Decreased traffic congestion reduces the amount of smog we are subjected to. As a preventative health measure, lessening pollution will reduce the incidence of respiratory and cardiac illness, with fewer emergency room and physician visits. This is an especially important benefit to our children and to the elderly, who are susceptible to pollution-related illnesses.

On a monetary level, reduced pollution-related health care leaves our provincial governments with more resources to divert to other pressing health care issues, such as home care for our aging population.

Reducing auto use or the rate at which auto use is rising also reduces the need of expanding auto-related infrastructure. Municipalities across Canada are struggling to cope with increased transportation demand. Investing in public transit is a less expensive alternative to building new roads, bridges, and parking facilities. Increased transit use gives transit properties the flexibility to provide better transit service. This is extremely important to allow all members of our society access to job and educational opportunities.

All these benefits have a positive impact on our economy. As taxpayers, we simply can no longer afford to support unlimited increases in automobile use.

Support for this initiative continues to grow. This committee heard submissions last year from Pollution Probe and the Federation of Canadian Municipalities asking for this change in income tax law. Physicians for Global Survival, the David Suzuki Foundation, the Canadian Labour Congress, and the Ontario Coalition of Senior Citizens' Organizations are a few examples of the many social, health, labour, transit, political, environmental, and business organizations across Canada that support TEI.

• 1315

A 1999 Environics poll found that 73% of Canadians are in favour of this change in income tax legislation. Political support for TEI has also grown over the past year. As most members of this committee participated in the three hours of debate in the House of Commons over motion M-360, I thank you, because most of you voted in favour of it. You are among the 240 members who voted in favour of considering making employer-provided transit benefits income-tax-exempt.

While motion M-360 was being discussed in the House, a cost-benefit analysis was already under way as part of the national climate change process. This report by IBI Group on management of technology services estimates transit increases of 37% to 58% among participating employees, with a resulting decrease in auto commuting of 2.4% to 7.5%. Of particular interest to the federal government are estimates of transportation greenhouse gas reductions that are approximately 2.1% to 4.8% among commuters, depending on the type of legislation enacted.

Mr. Chair, at this point Ms. Gail Logan, president of the Ottawa Board of Trade, was prepared to present the business case supporting tax-exempt transit benefits. Due to an unfortunate incident this morning, Ms. Logan is unable to attend this hearing, but she has forwarded her statement to us. I hope you won't mind if my colleague, Donna-Lynn, now reads from her prepared text.

Ms. Donna-Lynn Ahee (Project Manager, National Task Force to Promote Employer Provided Tax-Exempt Transit Passes): Ms. Logan is the president of the Ottawa Board of Trade, which represents businesses in the Ottawa—Carleton region. After hearing a presentation from the national task force, the Ottawa Board of Trade has decided to support this initiative. The board has already written a letter to the Honourable Paul Martin, and Gail had hoped to be here today to ask this committee to make TEI one of the recommendations for the millennium budget.

The businesses of Ottawa—Carleton are very supportive of this measure. The Board of Trade of Metropolitan Toronto and the Saskatoon Chamber of Commerce have also both written to the Honourable Paul Martin letters of support for this initiative. A recent survey in Vancouver found that 75% of the participating businesses are also in favour of this change to income tax legislation.

This initiative simply makes good business sense. We must find ways to keep Canadian businesses competitive. TEI is a strategy that allows businesses to retain and attract valued employees while reducing their overall costs and taxes.

Parking can be a very expensive part of an employer's overhead in urban areas. Finding or building suitable parking facilities is a key concern of employers looking to expand or relocate their businesses. In areas where parking is limited, attracting customers can be difficult. In order to compete with area businesses for good employees, providing free or subsidized parking as a benefit has become commonplace.

A tax exemption provides an incentive for employers to offer transit benefits, as well as an incentive for employees to accept this benefit. Providing transit benefits to employees can be cheaper than leasing or maintaining parking spots, and employees who choose public transit for commuting purposes help businesses to reduce their parking costs while freeing up parking spots for customers.

Offering a tax-exempt transit pass in lieu of a raise cuts payroll costs. By providing an employee with $720 worth of transit benefits, I as an employer have just given my employee the equivalent of a $1,000 raise, assuming he or she is in the minimum tax bracket of 28%. The tax exemption represents a direct reduction in taxes for both business and the employee, or a combination of both. Encouraging employees to use public transit by providing transit benefits also helps to stabilize corporate income taxes.

Business taxes help pay the cost of our unsustainable transportation practices. If we cannot reduce our dependency on the automobile, our taxes will increase municipally to support greater infrastructure costs. Taxes will increase again provincially to pay pollution-related health care costs. And in order to meet our greenhouse gas reduction targets, we have to implement more strategies or be subject to more federal regulations than is necessary, again resulting in greater costs.

For many businesses where transportation of either products or people is a part of their business, traffic congestion results in increased production costs. For example, time spent in a traffic jam can mean fewer sales meetings per day, fewer deliveries made per hour, and workers waiting for just-in-time deliveries.

A 1999 report by the transportation issues table of the national climate change process has estimated societal savings of $3 for every $1 invested in TEI. We all represent only one taxpayer, so any initiative that's going to cost money at one level of government but will result in overall savings at other levels of government is a sound investment.

• 1320

Being able to provide employees with a tax-exempt transit benefit will have several ancillary benefits. A survey of San Francisco employees found that 79% of respondents noted an improved opinion of their employer as a result of receiving this benefit. Other reports included reduced stress from not driving to work, daily improvements in productivity, and improvements of on-time arrivals as a result of increased transit use.

It's Gail's understanding that the Honourable Jim Peterson has recently suggested that this government will examine the following question: Would it be fair to provide tax assistance for employer-provided transit benefits when the majority of riders would still continue to purchase their passes on after-tax income? Gail says she must respond by saying she hasn't heard of any benefit that is universally provided by all employers to all employees, yet the federal government does allow income exemptions for many other employee benefits.

This benefit, like many of the other current tax-exempt benefits, warrants a tax exemption because of the good impact it will have on our society. This government has a choice to make, and its choice either way will have consequences. If the government decides to refuse this request out of a feeling of perceived inequity, the consequences will be negative, as the number of cars on the road will continue to rise, more taxes will be diverted to infrastructure and to pollution-related health care costs, and less competitive businesses will be struggling to cope with the cost of this choice and the cost of congestion.

This government can make a choice to implement this initiative on the basis that it is a first good step toward keeping our Kyoto commitments. The consequences of this will be positive and will lessen our congestion costs. Tax savings and transportation cost savings will be reinvested in our economy, and our communities will be healthier and more liveable, with all members of society enjoying improved mobility.

Business leaders do care about the communities we work and live in. Health and environment continue to be leading concerns for many individuals. We want to keep our communities healthy and liveable by supporting this proposal.

Ms. Amelia Shaw: We understand this committee is looking for initiatives that will improve the budget-making process, provide tax relief for reform, invest in social infrastructure with a priority in education and health, and improve productivity and the Canadian standard of living. TEI is an initiative that satisfies all of these themes. TEI provides direct tax relief for participating employers and employees. This tax relief is very specific, however, and only occurs when employees accept the benefit and use public transit. In other words, if this exemption creates a smaller impact than what is being predicted, it will cost proportionally less money.

It is an exemption that will provide relief for those who need it most: mainly our lower-income workers—such as working women—students, seniors, and others who cannot afford or prefer not to use a car. At the same time, it is an investment in our social infrastructure. Reducing smog is a proactive way to prevent illness, while adequate mobility is essential to providing all members of society with equal access to jobs, goods and services, recreational and education opportunities.

From a business perspective, this small reduction in taxes will have impacts on both productivity and our standard of living. A family that can reduce its transportation bills below the average 14% of income currently spent will have more choices in how they invest their money in the economy.

Finally, does this initiative affect the budget-making process? We believe it does. We are asking you to recommend that TEI be implemented as part of the year 2000 budget. This issue has been debated and objections have been addressed eloquently by many speakers in the House of Commons. The majority of the members of this committee have voted in favour of motion M-360. The cost-benefit analysis has been completed for the transportation issues tabled, and the results were positive.

Implementing TEI is a priority recommendation of the climate change options papers. Canadians have faith in the budget-making process and our political process when these processes allow for real public participation. There are people across Canada waiting to see if this finance committee will recommend TEI. There are people all across Canada waiting to see if our voices have been heard. It's time to take action, and we are asking this committee to recommend that the tax exemption for employer-provided transit benefits will be included in the millennium budget.

Thank you.

The Chairman: You can use the acronym if you want.

Ms. Amelia Shaw: Yes, I know.

The Chairman: Thank you very much.

We'll do a five-minute round, and we'll begin with Mr. Loubier.

[Translation]

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): Mr. Chairman, I'd like to ask a question to Mr. Legault.

• 1325

Mr. Legault, did you read this summer the report from the National Council of Welfare which stated that, in recent years, the situation of senior citizens had deteriorated in relation to the gains brought about by the various policies introduced over the last 25 to 30 years? It showed that their situation was deteriorating and the National Council of Welfare recommended a tax reform. Do you agree with this orientation?

Mr. François Legault: We obviously support a tax reform to help senior citizens. We could have a long debate on this issue. But we should look at slightly higher incomes first. I told you earlier how important it would be to increase the income of the poorest people, who normally don't pay any income tax.

Mrs. Moir, do you wish to give more details on this?

Ms. Nicole T. Moir (Executive Director, Fédération de l'âge d'or du Québec): The National Council of Welfare informed us that 602,000 senior citizens lived in poverty in this country and, more specifically, that 42% of single women above the age of 65 were poor. They are the ones who benefit most from the guaranteed income supplement and they are the ones we try to protect.

You discussed the whole issue of taxation. I'd like to stress that, as a matter of fact, we just appeared before a parliamentary committee of the National Assembly which is looking at reducing the tax load of the middle class, which includes a majority of the workers. We should also review the tax load of all social classes. .

Mr. Yvan Loubier: Mr. Legault, for your information, I'd like to make it clear that, on the federal side, the threshold above which income tax has to be paid is set at 13,719 $, which affects our category, whereas, in Québec, you must pay income tax only if your income is higher than 30,316 $. A tax reform would probably involve an increase of this zero tax threshold.

Mr. François Legault: It goes without saying that we hope the threshold will be increased in order to lighten the tax burden of all people with a lower income.

Mr. Yvan Loubier: Thank you very much.

[English]

The Chairman: Ms. Guarnieri.

Ms. Albina Guarnieri (Mississauga East, Lib.): Mr. Bradley, one of the striking things that has emerged over the last several years in the trucking industry seems to be the arrival of major U.S. players like Schneider, combined with the increasing appearance of Canadian fleets being dispatched out of the United States or bought by U.S. firms. After the impressive case you made earlier about the significance of your industry in the Canadian economy, we would all prefer, obviously, to have a strong, viable Canadian-owned trucking industry with Canadian dispatch centres and all the jobs that surround them here in Canada.

So I'd like to ask you to prioritize what tax measures you think can help achieve that kind of strength in our homegrown industry. Is it in the order of your brief?

Mr. David Bradley: Sure. I guess there are a couple of points there, between getting value for your tax dollar and the pure tax system.

First, let me say about some of the companies you mention from the United States, just to give you a sense of the difference in size and economies of scale, the top three U.S. trucking firms are the size of the entire Canadian trucking industry. Our industry is still basically small businesses, most of them family-owned and, happily, for the most part still Canadian-owned. But we are seeing an incursion of the U.S. players into the market, particularly the ones that are publicly traded. We just don't have the size in Canada to have access to that kind of capital.

But to come to your question in terms of what should be done to level the playing field from a competitiveness point of view, I think we need to look at our corporate income tax rates, which are still significantly higher than those existing in the United States.

Secondly—and I think there are some real policy benefits to this as well—we need to look at the depreciation rates. We can presently write off a tractor in Canada, fully, to 97%, in about eight years. In the United States, you're in the four-, five-, or six-year range. So they're able to turn that fleet over in about three to five years, whereas it takes us seven or eight years.

• 1330

The other thing you could do there is allocate that to make sure that equipment has all the new technologies that would help with the environment and safety, and the like. I think that's something that needs to be explored.

Thirdly, I would lump into one area all the taxes that have no relationship with profit. Particularly, let's talk about the fuel tax. Right now, of course, we're hearing a lot about increases in fuel prices, and the price of diesel fuel has doubled in the last several months.

I agree with Cliff Mackay when he said there has been no policy purpose for the taxes on fuel in Canada whatsoever. At least the federal government hasn't tried to portray it as an environment tax or an infrastructure tax, as some of the provinces have tried to do from time to time. We need to take a look at that tax to make sure we're getting some value for it, that it has a policy purpose, or that we look at restructuring that tax, which is something the Department of Finance engaged a team of experts to do. That's what they indeed recommended.

Those would be the primary areas we would want to take a look at.

Again, I think we have to look at the fact that our industry is a mobile industry that can cross borders, that can be located anywhere, and we have to look at whether we want to keep those 225,000 truck driver jobs in Canada or want them all to become U.S. jobs in the future.

Ms. Albina Guarnieri: You mentioned it being a mobile industry. I know your industry is impacted by regulations that apply in Canada and not in the United States. Certainly your industry faces very rigid and costly safety regulations that don't apply to the U.S. truckers. Given the fact that you have to compete with the U.S. trucking firms for loads across North America, and given your repeated plea for a level playing field, how would you quantify the impact of regulatory differences between Canada and the United States in terms of job losses and sales? Can you quantify it for us?

Mr. David Bradley: It would be difficult for me to quantify that without pulling a number out of the air. But in terms of how I think we should be approaching this as a country, first, all industries need to have a level playing field if they're going to compete. If you don't have the same rules applying to U.S. carriers as to Canadian carriers, not only are you impairing the competitiveness of the Canadian industry, but you're not meeting your safety goals either.

The trucking industry is not saying we don't want safety regulations. Safety is good business. Anybody who doesn't believe that either shouldn't be in the business or doesn't know very much about our business. But let's make sure when you're introducing regulations and legislation that they indeed are going to have that safety payback and are not just political window dressing to address some public perception problem. Let's make sure it has teeth, and then let's make sure the enforcement effort is there to make it work. We have some real problems right now with the national safety code for trucks, which is trumpeted as the made-in-Canada approach to truck safety. Well, I'll tell you, it's neither national nor is it a code.

We also have examples of what I would call off-highway regulation where, for example, the Department of Human Resources and Labour Canada right now are attempting to go to the gazette part two on a regulation for fall protection, to protect truck drivers from falling off the tops of trailers. Nobody wants people falling off trailers, but the reality of it is they have not quantified this measure in terms of its impact on safety. They can't even tell us how many drivers have been injured or killed from this sort of a fall from these heights. They cannot quantify for us what will be reasonable and practicable under the legislation. We've estimated that the cost of this measure could run in the range of at least $250 million to the industry.

The department has disagreed with that, but in their regulatory impact statement they've really provided no meaningful justification. At the same time, they're not going to apply it to U.S. drivers working on Canadian job sites.

• 1335

We're not opposed to regulation. Our industry will always be a highly regulated industry, because we share our workplace with the public. But we need to become much more intelligent, much more sophisticated in developing that regulation than what we've seen in the past, which is “A big truck, that's big and scary, let's introduce a piece of legislation”. But I'll tell you, it doesn't work. The reason the industry is getting safer—and despite the increase in the number of vehicles, accidents are down 20% from what they were 10 years ago—is because the trucking industry and the responsible operators, who are the vast majority of them, recognize that safety pays. It's as simple as that.

Ms. Albina Guarnieri: Thank you very much.

Do I have time for another question?

The Chairman: Sure.

Ms. Albina Guarnieri: Okay. Actually, I have a question for Mr. Lancastle.

I'd like to begin by congratulating you on the tremendous success you have had in building a network efficiently serving people in the auto repair industry. I know you're expanding now and you have a new studio planned, I understand, and are entertaining thoughts of offering your services in the United States. Clearly, you are a success story, or a training success story actually.

My question relates to the issue of how to replicate your success in other industries. You are able to economically train thousands of mechanics in 450 locations, I understand, across Canada, using distance learning technology. You did it by applying for funding from the government and the private sector, which is obviously quite a lengthy process. One concept we were examining in another committee was a mechanism to give workers the ability to direct a percentage of their EI contributions to a training program. Do you think this kind of secure funding would accelerate the development of programs such as yours in the future?

I know I'm going to have very little time, so I'll quickly get in my supplementary question and then the time is yours. One other mechanism you were actually highlighting as tax relief that might be of use would be a system of tax credits for companies that invest in worker training through sectoral initiatives such as your own. In your opinion, would tax initiatives accelerate decisions by Midas or Speedy or other repair companies to join a common efficient training service such as yours?

The floor is yours.

The Chairman: Thank you, Ms. Guarnieri.

Just before you answer, I do want to take this opportunity. We've just been joined by students from a high school from Peterborough, Thomas A. Stewart.

What you are witnessing here is the finance committee at work. Ms. Guarnieri has just placed a question; we're doing prebudget consultation.

I simply want to say that many, many times when we make decisions and recommendations to the Minister of Finance, we do keep you in mind, quite frankly, because the decisions we make in Parliament have an effect on the future. When we speak about the future, of course we speak about our young people. I simply want to welcome you on behalf of the committee members here.

Go ahead, Mr. Lancastle.

Mr. Keith Lancastle: Well, thank you for the multi-phased question. I'll try to respond to it and address the key points you've raised.

First of all, thank you for the comment about the success we have enjoyed in the industry. I think if we're being very frank and very honest, what we've been successful in doing is being able to leverage partnerships between our industry and governments at times, but actually having people come forward and seeing the benefits of working together as a stakeholder community, as opposed to breaking down into some of the smaller sub-segments of the industry. The success has come in large part because our industry has been willing to step forward and spend some hard dollars and actually spend some cash to move things ahead, such as the distance learning satellite network.

You raised the question about tax incentives. I think it has to be kept in mind that this particular industry is not unlike a lot of other industrial sectors in that it is very heavily populated by small businesses, often one- and two-person shops, what we call the mom-and-pops in the industry. Anything that is going to help increase the cost-effectiveness of training for those small businesses is obviously going to increase their training activity.

• 1340

In the last couple of years I worked across the country talking to small-business owners, and many of them spoke about the cost of training being a barrier that they were having challenges overcoming. So whether it's in terms of a tax credit or some other financial consideration that assists small employers and their employees in purchasing training, I think you're going to see a natural increase in that level of activity.

I'm not sure if that's the type of answer you were looking for, but it's very difficult to quantify it much more than that.

Ms. Albina Guarnieri: Fair enough. One of the considerations we're looking at right now... The United States has put out a study which cites that they're going to have to retrain 90 million people in the next five to seven years. You mentioned and highlighted that you were having problems in terms of getting a skilled workforce. I was just wondering if you're seeing similar trends and what we could do to assist people in retraining efforts or to get the skilled labour force as required.

Mr. Keith Lancastle: I think we are looking at the issue from two perspectives. One is the training of the existing workforce, and I think we've made some fairly significant inroads there, recognizing that for some of the small employers, particularly those in more isolated areas, it still is a challenge, and any support or assistance that can be given financially to aid them in that is only going to improve things.

I think the issue that is also there has to do with the demographic shift in our workforce. As I've mentioned, almost 50% of our workers are over 40. You don't see a 50-year-old technician working on the bench. It just doesn't happen. Where are we going to get the next generation of young people? The challenge that we're facing is attracting the young people with the requisite skills and knowledge. How do we get them encouraged and charged up about a career in our industry? We're taking a number of steps. We're doing a lot to publicize the industry. We're getting out to the school level and talking to students about the opportunities that exist. A number of steps have been taken.

This issue of tax deductibility on tools continues to be a speed bump, if you will, a barrier to young people who would otherwise seek this industry as a profession.

The Chairman: Thank you, Ms. Guarnieri.

Mr. Szabo, followed by Mr. Pillitteri.

Mr. Paul Szabo (Mississauga South, Lib.): I'll split my time with Mr. Pillitteri, so we'll be brief.

I want to thank the Canadian Automobile Association for their presentation. I spoke in favour of that motion when it was before the House. It made very good sense then and it makes even better sense now. You did a very good presentation.

My question is directed to David Bradley and is about the trucking and the highway infrastructure. My understanding—please correct me if I'm wrong—is that something like 80% of Canada's exports are to the U.S. Of that, about 70% are through Ontario, particularly through the Sarnia-Windsor-Niagara area. I'm a little concerned that the national highway strategy is often talking about east-west infrastructure, yet our north-south infrastructure, particularly in that corridor, is very poor, I believe, and generally at capacity most of the time.

If the U.S. continues to outspend us... There must be some compelling evidence as to why we must have a highway strategy that also incorporates a north-south element and why we need not just road repairs but new roads to keep up with the corridor that's there and serving Canada.

Mr. David Bradley: Yes, absolutely. There are five hot spots in Canada: the border crossing in British Columbia; three in Ontario; and Lacolle, south of Montreal. The three Ontario border crossings account for 65% of Canada's trade. So whether you're travelling on the 401 between Quebec City and Windsor or on the QEW from Toronto to Fort Erie, you're going to see the bulk of Canada's trade moving on those highways.

You're right. The priority... And that's why we want a strategic approach, because we need to focus on where the need is greatest and where we're going to get the biggest bang for the buck. Clearly in a trading environment, north-south has to be of paramount consideration at the present time.

• 1345

Having said that, though, it is also very important that we have the east-west connecting links into those trade corridors so that the other areas of Canada can get their goods onto those corridors as well. But because we don't have a national vision, what we have right now are some of the greatest regional squabbles I've ever seen. Every province, every region, and every town has its national NAFTA superhighway proposal, and they're all trying to compete against each other for whatever dollars may eventually trickle down. There's no national strategy to say, now look, let's make sure the money is going where it should be going.

The other interesting thing is that while Ontario may represent 65% of the trade, if you look at where the other provinces' trade is going, like to the United States, for example, over 30% of Quebec's exports to the United States leave Canada from an Ontario port, so it is very much a national issue.

The Chairman: Mr. Pillitteri.

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

Thank you for sharing our time, Mr. Szabo. I think this is an opportunity in sharing time. I can also say that I represent the Niagara Falls and Niagara-on-the-Lake riding, where we have Queenston crossing and trucks and trucks.

My question is to the people representing the task force and to Mr. Mackay—a two-parter. One, you said about the use of public transit and the tax-exempt, tax-free... A lot of times coming over here I drive the Queen Elizabeth Highway. I come into Toronto and I see parking lots full; people leave their vehicles behind. They're going to work in Toronto and they start from Burlington, Niagara, and St. Catharines and along there.

Of course there are the GO trains, and people who go to work are using that facility. How far would you go in using that public transit? Because that is public transit. Then, going into the city, the inner-city public transit, roughly what percentage who use public transit...the cost factor, what would it be for those individuals who use the GO trains and so on? How much are they spending a week? How much money are we talking about? Have you done a study on that? If not, why not? That's one thing.

Mr. Mackay, you mentioned the GST being put on travel in Canada, but you said that you can travel outside of Canada and by buying a ticket from outside of Canada, not have the GST put on. As I understand it...how can we compare this? The GST is a service and it's a consumption, so we're taxing Canadians inside Canada. Actually, when people from Europe are coming in, why should they be paying the GST? Because, one, actually this is an export product. Also, if we take a look at adding value-added tax the way the Europeans do, it is strictly a consumption tax within their own countries, which includes air travel and gasoline and all. Which were you making the comparison to? Were you only relating it to the United States or to the rest of the world?

The Chairman: Who would like to start?

Ms. Amelia Shaw: I'll tackle one part of it and Donna-Lynn will tackle the other. That's normally the way we do things.

As for providing it to people on GO Transit—absolutely. They are part of the public transit system, of the same people who use the subway; they're commuters. This is what we're after: we're requesting a tax exemption for commuters.

Normally the way it's done in the United States is through a voucher process. An employer provides an employee with a voucher that they then use to purchase—whether it's GO Transit, TTC, Mississauga, whatever. That's how it actually works. It's all-encompassing as far as public transit is concerned. You asked me the price. It's approximately $50 per month, averaged nationally.

Ms. Donna-Lynn Ahee: Toronto of course has a higher price per month, but nationally averaged, people are paying approximately $50 a month.

• 1350

Toronto also has one of the higher percentages of revenues being collected through the fare box. I'm not sure what GO Transit is specifically, but the TTC, which is one of your major transit properties in the Toronto area, recover 80% of their costs through the fare box—80% of their operational costs. All other funding in Ontario at the moment is now the responsibility of the municipalities.

Mr. Clifford Mackay: To answer the question on GST, just to clarify, we do not collect GST when we sell an international ticket. The only tickets we are required to collect GST on are transborder tickets. When we sell a ticket to someone going to the U.S., we have to, according to the tax department, collect the GST. But if we sell a ticket to someone going to Antigua, or London, England, or anywhere else in the world, that's international.

Our point is, why is the U.S. not international? The tax principles that have been endorsed by ICAO—the International Civil Aviation Organisation, of which Canada is a member—clearly indicate that you should not be placing domestic taxes on international activities. That's true of fuel taxes, it's true of these kinds of taxes—sales taxes—and it's generally complied with by all the member countries of ICAO.

This particular tax practice is definitely an anomaly, and we've been trying to get an answer as to why they're insisting on it. The only answer we've gotten to date is they seem to think it would be a potential significant loss in revenue. Well, it's certainly inconsistent with our international tax obligations, and we would frankly argue that it's imposing an undue burden on the private, individual citizen in Canada. A business traveller obviously will take that and go back through his company and get a GST credit in the end. The individual trying to go someplace to visit friends or relatives, have a holiday, or whatever gets no tax break at all. So it's a very unjust practice.

Mr. Gary Pillitteri: I just want to clear something up. So in other words, you do accept that GST would apply for travel within Canada.

Mr. Clifford Mackay: Oh, we have absolutely no concern about that.

Mr. Gary Pillitteri: Thank you.

Mr. Clifford Mackay: This is a particular problem we have.

The Chairman: Thank you, Mr. Pillitteri.

On behalf of the committee, I'd like to thank you.

As we travel across the country, one of the challenges we face is that the quality of the presentations people make is very good. You all make a very strong case, which raises a challenge. Everybody is making a very strong case, so what are the tradeoffs? What decisions are we going to make? What recommendations are we going to make?

I must say this year I've really been impressed with the quality of the presentations. Given the fact that we finally do have a surplus, we'll have to make recommendations that speak to the issue of raising the standard of living, raising Canada's competitiveness—things that eventually speak to a better quality of life and a higher standard of living.

You've certainly added value to the debate. There's no question about that. As we reflect upon the recommendations we will make, you can rest assured that your thoughts and ideas will be part and parcel of our internal debate.

Thank you very much.

The meeting is adjourned.