EVIDENCE

[Recorded by Electronic Apparatus]

Friday, December 1, 1995

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[English]

The Vice-Chair (Mr. Campbell): We're resuming our pre-budget consultations in Montreal.

[Translation]

Welcome to the Finance Committee. My name is Barry Campbell. I'm a member of Parliament from Toronto, Vice-Chairman of the Finance Committee and I am chairing this meeting today here in Montreal.

You undoubtedly know my colleague, Mr. Loubier, and our colleagues Mr. Pillitteri,Ms Brushett and Mr. Solberg.

The pre-budget consultations give interested parties and interest groups an opportunity to comment on the budget. As you know, we are seeking answers to three questions. But all these questions lead to some discussion. This afternoon, our witnesses are:

[English]

from the Gamma Institute, Ioannis Philopoulos,

[Translation]

Francois Rebello of the Federation of University Students of Quebec; from the Senior Citizens Forum of Montreal, Henri Hudon and Henri Gervais; as well as Suzanne D'Amour of the Association des producteurs de films et de télévision du Québec.

[English]

We're waiting for the arrival of certain other witnesses who have not joined us and will possibly join us in progress.

[Translation]

Someone has just arrived; Ms Worsfold,

[English]

from the Canadian Council for Refugees,

[Translation]

from the Canadian Council for Refugees.

We will begin with the opening statements which I would ask you to limit to four or five minutes so that we have enough time for a discussion between witnesses and members of Parliament. After these presentations, we will have time for a discussion among ourselves and later the members will put questions.

[English]

We're going to start with Mr. Philopoulos from the Gamma Institute.

[Translation]

Mr. Ioannis Philopoulos (Economist, Gamma Institute): Thank you. I will speak in French if you have no objection. Later on, the discussion may be bilingual. We can switch from French to English.

Mr. Chairman, esteemed members of the Finance Committee, I'm very pleased to be among you. The point of my presentation is to move this debate in another direction than that currently followed by presenting a few points in question form.

I will begin my speech with a general introduction and then concentrate on six major points that deserve further attention. I agree with the principle of reducing the deficit and the national debt.

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However, I disagree with the way public authorities have approached the subject. I see no strategy in the process they are following.

For example, has a realistic deadline been set to eliminate the budget deficit, the consequence of which would be to reduce the national debt to a tolerable level? It's possible, but this deadline is based on unrealistic economic hypotheses. That is why I would submit a 10-year timetable to reach that goal, taking into account the fact that we would have to have a rate of real growth in our national economy on the order of three to four percent per year on average.

Any effort to eliminate the deficit should be part of a broad national strategic plan that would require consensus from all political parties in the country. What do I propose this future plan should contain?

Let us now talk about the six points that could be debated around this table. Our prime obective should be to increase budgetary revenue. However, this should not be done through the sale of crown corporations or the privatization of those that remain under state control, because after a time, we would be forced to resume regulation of these privatized corporations. Nor would we achieve our goal through the privatization of certain government activities, which is more likely to be the result of improvisation caused by a general panic than any real stragegic plan.

To attain our objective, would it be possible to come to an agreement on the possibility of completely revamping the mission of certain government services by strategically converting them into profit centres which would operate according to market criteria?

Would it also be possible to consider the possibility of temporarily accepting a modest inflation rate on the order of 4% a year for the next five years with a view to stimulating economic growth?

Have we also considered the possibility of rethinking and reorganizing the work of public servants to make them more productive while giving them a mandate to make profits rather than trying to reduce the payroll by sending them home?

The second objective would be to tackle the public debt, particularly the part of it held by foreigners. How should we achieve this? First of all, I think that we should consolidate all public debts in the provinces with the federal debt. Once that operation has been successful, we should convert the external debt into internal debt through the use of non-taxable treasury bills as an incentive for private institutional savings.

Our objective would therefore be to control the national debt and offer interest rates that are low enough to stimulate the economy. Right now, as you know, any increase in the external debt leads to an increase in our interest rates, which paralyzes our economic activity.

There is yet another possibility, which would be to create special securities listed on the stock exchange. Why not give our financial elite a mission to create appropriate financial instruments designed to reduce our level of indebtedness while seeking to recover the Canadian capital that leaves the country because it is not profitable here?

Thirdly, rather than make general cuts in programs or reduce the budgets of various departments to the tune of 20% per year, why not list our existing programs in order of strategic priority? We could thus reinforce productive programs, that is, those that contribute revenue to the treasury, while creating jobs that would contribute to a qualitative increase in our GDP, and on the other hand eliminate programs that we do not consider necessary or at least change their mission. Without this reorganization, the cuts will not have the expected results, because improvised budget cuts that were not calculated by taking into account their global impact on the economy will have the opposite effect than the one originally sought.

Fourth, with regard to changing the mission of certain programs, I would propose that we look at the social program fund in a different way, particularly unemployment insurance and welfare. For example, would it be possible to group them together under a new concept different from the one the government presented last year, which would create a new form of social sharing known as ``guaranteed minimum income''? This would be a product that is midway between unemployment insurance and welfare, and which would provide a basic income sufficient to guarantee a person's minimum subsistence. Recipients would only obtain this by working to some extent.

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A superficial study estimated that 5 billion dollars a year would be saved by such a program for the federal treasury. I would propose that the Minister of Human Resource Development seriously review the labour force training program, because it does not prepare our human resources to be competitive in an open economy. If it is true that this afternoon's reform will enable us to save 2 billion dollars a year, as journalists tell us, I would suggest that this money be invested in the way I have indicated.

Moreover, rather than reduce foreign aid, which is an excellent way of promoting our products abroad and which provides long and short-term financial spinoffs, we should instead increase the budget allocated for foreign aid and direct our young graduates and entrepreneurs into the world market.

Fifth, given the high level of taxation we currently have, could the government seriously examine the possibility of innovative measures that would substantially reduce the tax burden on individuals and give the young people of this country an opportunity to be confident in our economy? Moreover, as an incentive for the private sector, we could introduce a real tax deduction for any company that creates productive jobs, that is in the high-technology sectors.

Lastly, one can question whether the Report of the Auditor General of Canada is useful. Some points merit an in-depth examination. Thank you very much.

The Vice-Chairman (Mr. Campbell): Thank you very much. We will now hearMrs. Worsfold. Other witnesses have arrived.

[English]

Mr. Weiser has joined us from Positron Industries Inc. Also, let me introduce Pierre Jasmin,

[Translation]

the Artists for Peace. Welcome to the committee.

[English]

I think I've introduced everyone now. We're in the preliminary statement part of the panel discussion. I'll come back to you, Mr. Weiser, after we've gone around the table.

[Translation]

I now give the floor to Ms Worsfold.

Ms Nancy Worsfold (Director General, Canadian Council for Refugees): Good afternoon, members of the committee.

[English]

When I witnessed before this committee for the Canadian Council for Refugees last year, we expected the results of the consultation to be a budget that included cuts to the Department of Citizenship and Immigration and, yes, certain increases to the processing fees charged to refugees and immigrants. Never would we have imagined that the budget would bring the grossly unfair right of landing fee, and we could never have believed a subsequent popularity in opinion polls, partly a result of its misrepresentation in government press materials.

The head tax is unfair. The head tax is not a fee for service. Immigrants and refugees already pay very high processing fees. The processing fee for an immigration application is $500 per adult and $100 per child. The head tax is a fee for the right to land, whatever that right may be. All refugees and immigrants pay the same dollar amount for the right to land: $975 per adult.

Like a poll tax, the head tax is a far greater burden to those who have less money and to those coming from countries whose currency is weak relative to the Canadian dollar. The real cost of the head tax to a Belgian immigrant is very different from the real cost to an immigrant from India. It is even more onerous to an Algerian refugee.

The head tax discriminates against newcomers from poor countries. Once in Canada, newcomers pay taxes like everyone else. In fact, study after study has shown that newcomers are a net gain to the public treasury. Making newcomers pay even more tax up front is unfair. It is also clever and sneaky. The government has introduced a new tax on the one group that really cannot mount a protest: people who are not yet in Canada.

Does this reflect the Canadian values of fair play and decency? Charging newcomers the head tax is also counter-productive. It means newly arrived families will have less money and less financial security for their integration into Canadian life.

The head tax hurts genuine refugees. Although there is a loan program and although, in principle, no one is refused protection because they are unable to pay, the head tax does hurt refugees. For refugees selected abroad, the existence of the head tax forces Canadian visa officers to select those refugees most likely able to pay back a large loan upon arrival in Canada, instead of more appropriately selecting those refugees most in need of Canada's protection.

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The head tax is also a powerful dissuasion to the private sponsorship of refugees. For example, the Catholic Diocese of Montreal will not be renewing its sponsorship agreement, in part because the group is tired of spending church money to pay off the refugees' loans for fees. Furthermore, the sponsorship coordinator for the Anglican Diocese of British Columbia is finding it harder to inspire parishes to sponsor refugees because they are using their funds to pay off the head tax for refugees and their families accepted within Canada.

For those accepted as refugees within Canada, the head tax creates numerous problems. The worst effect of the head tax is on families. The inability to pay and/or the refusal of a head tax loan delays indefinitely family reunification for husbands and wives and little children who are often in vulnerable situations overseas.

The head tax also causes extreme stress on people who have just gone through the uncertainty of the refugee-determination procedure following their escape from persecution or civil war. The tax will no doubt contribute to the proliferation of exploitative loan sharks who will prey on the desperation of vulnerable people.

Other categories of immigrants who may not be convention refugees but who are also vulnerable and in need of protection include: family members of refugees; people accepted under the post-claim-review program, as well as the deferred removal orders class; live-in caregivers; people accepted on humanitarian and compassionate grounds; and family-class immigrants.

The head tax sends a pernicious message -

The Vice-Chair (Mr. Campbell): Ms Worsfold, I'm sorry, but could you slow down? The translator is having a little bit of trouble. Also, as you're halfway through your time, I just want to point out that if you have other issues other than the head tax and you want to make sure to introduce them in your preliminary remarks, please do so.

Ms Worsfold: I'm halfway through my text. Don't worry.

The Vice-Chair (Mr. Campbell): Okay, thank you. And if you wouldn't mind just slowing down a little bit, I thank you for that as well.

Ms Worsfold: The head tax sends a pernicious message to Canadians about refugees and immigrants. The head tax contributes to the myth that newcomers are a drain on social services. It encourages Canadians to view newcomers not as important new members of our community, but as interlopers here on our sufferance and welcome only if they pay up front.

Yes, as members of Parliament, you are well aware that the head tax has been popular in opinion polls, but as MPs - especially those of you from urban centres - you're also aware of the burden that the head tax creates for people who come to your constituency offices every day. If those individuals who answered the pollsters by saying they approve of the head tax could have heard a few of those individual stories, do you really believe they would still support the head tax?

The head tax violates our international obligations. As time is limited, I will spare you a long argument by simply quoting the Geneva Convention Relating to the Status of Refugees, a convention that Canada has signed. Article 34 states:

The Contracting States shall as far as possible facilitate the assimilation and naturalization of refugees. They shall in particular make every effort to expedite naturalization proceedings and to reduce as far as possible the charges and costs of such proceedings.

The Vice-Chair (Mr. Campbell): Could I ask you to slow down, again? The translators are still having trouble.

Ms Worsfold: Still?

The Vice-Chair (Mr. Campbell): Yes.

Ms Worsfold: Do you want me to reread that?

The Vice-Chair (Mr. Campbell): No.

Ms Worsfold: At the time of the head tax announcement, government press material implied that other receiving countries also charge refugees similar fees. This is simply untrue.

There are alternatives to the head tax. The Canadian Council for Refugees has been told numerous times that if the department had not introduced the head tax, the $150 million a year that it is expected to generate would have been slashed from settlement services for newcomers. We do not accept this either/or logic. Immigration policy is an investment in the future. Refugee and humanitarian policy is Canada's response to our international obligations and to the suffering of the world's 23 million refugees.

In our last appearance before this committee, we outlined a number of ways in which the Department of Citizenship and Immigration could conduct its business in a more cost-effective manner. That brief is attached to this one as we believe the recommendations still hold.

We understand that the government needs to increase revenues and decrease expenses. In our last brief, we suggested ways to save money in the Department of Citizenship and Immigration. Although economic policy is not the expertise of the Canadian Council for Refugees, common sense dictates that the key to Canada's debt problem is having more people working and less unemployment. If more of the workforce were working, the government would not need to resort to measures like the head tax. If this budget does not rescind the head tax, the department could, at very least, diminish the burden by making it payable on reception of permanent residence rather than on application. The loan program could be improved by expanding eligibility and by allowing the loan to include processing fees.

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The Vice-Chair (Mr. Campbell): Thank you very much.

[Translation]

Mr. Rebello.

Mr. François Rebello (President, Federation of University Students of Quebec): Good afternoon.

The first thing I would like to talk to you about is the debt. I would simply like to remind you that the debt that you are attempting to reduce and completely eliminate one day is everyone's affair. In a way, we will be paying the debt for many years and even paying very dearly because of interest rates.

We, the young people, will have to pay a lot more tax than we will receive in services, which is not the case for the rest of the population. That's the first point that should be considered.

Moreover, you simply have to think about the values of young people in order to answer the questions regarding budget choices in Ottawa.

First of all, choices have to be made. In our opinion, there has to be some hierarchy of expenditures in accordance with the responsibilities of the State. We think, and everyone seems to agree, that the spending on education is the most important because it is a useful expenditure from a social standpoint and is also an economic investment. So in the hierarchy of expenditures, education should top the list.

Next, certain fundamental responsibilities of the State must be discharged in an effective manner, and I don't think that private enterprise can replace the State in sectors such as health care, justice, social programs and old age pensions, because the services provided would certainly be of lesser quality. In the eyes of Quebeckers, these are crucial responsibilities, and we hope the same is true for the rest of Canada.

As for the rest, the students of Quebec propose clear changes and reforms.

With regard to subsidies to business, it is quite clear that even pressure groups that represent the business sector are proposing that such subsidies be abolished. We think the time has come to consider that seriously.

I think that those who want to maintain business subsidies are not always the companies themselves but rather members of Parliament who need that money to finance their election in their riding. I think we need to think about that seriously.

I would also like to say that the State does not necessarily have to play such an important role in the economy, but it must surely guarantee a decent income for the most disadvantaged.

The State must also educate youth and provide old age pensions, but surely it does not have to continually subsidize business to the tune of millions of dollars.

The other issue is that of military expenditures. In our opinion, what happened in Canada this year is completely unacceptable. In fact, no one knows what went on. And yet, during the election campaign, Mr. Chrétien had stated very clearly that military spending was less important than the rest. To illustrate that, he had promised to cancel the helicopter contract, which would lead to savings of 4 billion dollars. That was perfectly justified and in fact that promise was kept.

However, a few months later, we realized that a 2 billion dollar contract had been awarded for tanks, for armoured vehicles. And that sum of 2 billion dollars corresponds to the cuts in transfer payments planned for next year. That is completely unacceptable.

Can you imagine the different impacts that the same amount of 2 billion dollars could have if it were invested either in social programs, education or health care, rather than in a single contract for a single defence plant?

We have read all the documents that were available in an effort to fully understand this decision by the government, and I would like to go a bit further in my analysis of this choice because it more or less reflects the viewpoint of the government, which seems to have problems with logic and consistency right now.

In our opinion, the criteria used to make those decisions were completely unjustified.

The first criteria was the defence of our territory. It was claimed that we needed 650 new armoured vehicles to ensure the defence of our territory. Yet, the only land border we have is the American border and I don't think we need to fear an invasion from that side.

Peacekeeping operations were the second reason invoked.

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It should be pointed out that at the moment, only 200 armoured vehicles are being used in the former Yugoslavia. There are 1500 of them in reserve in Canada. Why should we order 651 more? This is rather strange.

The third reason was to support civilian power. We found that excuse rather funny. Support to civilian power means that in situations of internal strife, the federal government could request assistance from the military. Does the federal government fear an uprising by the Aboriginal peoples or by Quebeckers?

All things considered, we do not think that all these expenditures are justified. In our opinion, the main reason is the proximity of financial powers and federal elected officials. We know that certain things can be negotiated even though they may not necessarily be in the interest of the people, but when you're talking about 2 billion dollars, that's a lot of money!

Little gifts of a few million dollars can be overlooked, but 2 billion dollars! Moreover, as you probably can guess, we're the ones who are going to be paying for this, and with interest, of course! There are others who took this kind of decision in the seventies. One of them was called Jean Chrétien and he was Minister of Finance. When the government authorized expenditures for the frigates, we had to pay 9 billion dollars for those boats and we're still paying interest on them.

We have to stop all this. We thought that the government had understood, but a decision like the one that was made is completely unacceptable. However, I want to point out that the rest of Canada seemed very happy with that decision. There were barely any criticisms from the Reform Party in the newspaper, in the rest of Canada. Despite their great desire for financial rigour, they did not intervene at all on this issue. There were only a few comments from Quebec.

In fact, there was consensus in Quebec on this subject. There were serious problems with regard to the choices made. In addition to military expenditures and business subsidies, we have also noted some elements that are absolutely unacceptable in the tax system. I'm referring to the family trusts that everyone has been talking about for many years. In his budget, Mr. Martin gave such trusts two years to invest their money elsewhere before taxing it, which gave us all a good laugh.

This year, we lost 1.5 billion dollars in revenue because of a decision by the Chrétien government. I hope that this was not because of family or other pressures. Some things are really aberrations.

Many other tax measures have been considered over the years, such as taxing lottery winnings. A number of tax measures could be applied, but I don't want to go into details. We are not tax experts, but in reading certain documents produced by Yvon Séguin or other tax specialists, we realized that some choices were made at the expense of the most disadvantaged and for the benefit of the wealthiest. You only have to think of tax avoidance in tax havens. I therefore think that the Finance Committee has a responsibility to take action on this issue and to go beyond the interests of the well-heeled in this country.

Lastly, I would like to say that the young people of Quebec are beginning a process of very important reflection with regard to public finances. This winter, we will strike a commission that will visit every educational institution in Quebec - cegeps and universities - to discuss the issue of public finances and employment, in order to present, eventually, a clear societal choice to Quebeckers with regard to public finances.

We don't really understand what was said both by the union and the employer. Neither of the two shows any kind of nuance and I think there could be more reasonable debate on public finances.

The Vice-Chairman (Mr. Campbell): You know, it's also hard for us as members..

Mr. Rebello: Of course, but we still think that people should say and do sensible things. Let's not forget the hierarchy of values. It's unacceptable for the last federal budget to have only cut 10% of military expenditures while cutting 10% in health and welfare. Any family that could have made the choice would probably have decided on 50% cuts to the military while maintaining health and education budgets. Members should really think in those terms.

If ever the federal government wanted to cut transfer payments and if ever the provinces decided not to compensate for those cuts by increasing their own deficits, at the post-secondary level that could translate into very high increases in fees, with young people taking on a far bigger debt load.

If you decrease the public debt only by off loading it on to the shoulders of our youth, you are not settling my problem. Finally, I'll pay the debt not just once but twice. So I'd thank you to be a mit more consistent in your decisions on taxation.

The Vice-Chairman (Mr. Campbell): Thank you, Mr. Rebello.

[English]

It's appropriate, then, that we turn to Monsieur Hudon and Monsieur Gervais,

[Translation]

representatives of the Montreal Seniors' Forum.

[English]

Mr. Rebello has raised some issues about debt load and who has the burden.

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[Translation]

Who carries the burden of the debt? I'll give the floor to Mr. Hudon.

Mr. Henri Hudon (Treasurer, Montreal Seniors' Forum): The Montreal's Seniors' Forum is a non profit organization working to promote and protect our seniors while contributing to improving the commonweal. The Forum is a member of the Quebec Seniors' Coalition whose membership is made up of Quebec francophone and anglophone seniors' associations representing over half a million people. The coalition was set up to protect the vested interests of our seniors. Some of the members are FADOQ, AQDR, AREQ, ARGQ and the Golden Age Association whose members are here to witness this presentation.

We intervene when government policies threaten security and quality of life for all generations and we base our actions on the following principles.

In any democratic society, the State is responsible for seeing to the external and internal security of its citizens and protecting the people against the use of force and exploitation by outside forces, on the one hand, and on the other for improving the powers under its jurisdiction to ensure the provision and distribution of resources, rights and responsibilities.

Ideas of need and right evolve over time. They include physical security and health as well as the means to provide them, freedom of the press, freedom of action and movement, taking into account the rights of others, respect for the person, the idea of a just society and the opportunity to give and receive compassion.

The programs are the means available to the State to discharge its responsibilities, including all its procedures and all its legal, administrative and financial agencies. The principles to be observed during this process include equity as understood by public opinion and the law, equity in allocating the contributions and benefits available in the society, the opportunity to take part in decisions affecting individuals and the community, and reaction to changes in the conditions and expectations of the population.

When we give our opinion on the questions put forth by the Standing Committee on Finance, we always try to stick to our fundamental policies. The government must attempt to balance the budget. However, its objective should be attained gradually and not through drastic cuts in expenditure done too quickly or too arbitrarily. A decrease in expenditure, either as a gross amount or as a percentage of the gross domestic product is an essential ingredient in any potion made up to cure our financial woes.

One of the most important challenges we must face as a community is deciding what programs and what service standards we are expecting from the government within the scope of those programs. Arriving at prudent decisions concerning monies to be expended on government programs requires relevant information on the anticipated results as opposed to the results actually attained. Value-for-money audits and comprehensive audits should allow the government to attain that objective. We should demand full financial accountability.

Hardly two weeks ago, the Auditor General's Report emphasized the need for value-for-money accounting. There was no clear indication of the results accruing from the injection of $4.5 billion in regional economic development over the last eight years. The $2 billion invested in training in 1994-95 did not necessarily focus on the 300,000 hard-to-fill vacant positions. Electronic filing of income tax returns was not being adequately monitored.

A balanced budget should not only depend on the rationalization of government expenditures; its main goal should be to increase its revenues.

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Some thought should be given to establishing more progressive income tax rates. Estate taxes would also be another source of revenue deserving of attention. The ceilings for contributions to RRSPs could be brought back to $8,000 which, according to the Department of Finance, would lead to savings of $1 billion in the first year.

In terms of tax burden, Canada is not a country with high income taxes. However, it does stand out in that, to a large extent, it depends on personal income taxes. The proportion of revenue obtained through income taxes on individuals has almost doubled since 1965 and has reached 40% as compared to taxes on corporate income which have dropped from 15% to only 5% over the same period. This visibility of personal income tax explains why Canadians protest any tax increase.

Some things could be done to increase the revenues from corporate income taxes: you could abolish the many tax shelters, subsidies granted to industry, impose a minimum income tax on corporations and possibly increase corporate tax rates.

There's the possibility of requiring more rapid payment of corporate income taxes deferred because of accelerated tax deductions for capital expenditures. An examination of the annual financial reports of many public corporations reveals that considerable sums were thus accumulated over the years. The trend is for those deferred taxes to increase rather than decrease and the prevailing impression is that they will never be paid. An examination of the latest financial statements of 10 of those corporations show us they have deferred taxes for a total of $10 billion.

What kind of budgetary policies can be used to stimulate hiring and economic progress?

Massive cuts in government spending on social programs as well as other activities will cancel out the benefits sought if cuts are not adequately planned and evaluated. The massive reduction of government expenditure will have a negative effect on the economy and will thus decrease government revenues drawn from taxation.

We should think of repatriating our national debt. The fact that 40% of our debt belongs to foreigners tends to drive up our interest rates. The more Canadians own of their own national debt, the better we'll be able to control our interest rates. We are under the impression that the high interest rates paid on our national debt over the last 10 or 20 years have contributed to a rapid increase of that debt.

We must all be innovative and creative. The voix suggested using a ``war bonds'' program. The Corporation of Canadian Retirees, Ontario Division, recommended converting the part of the debt held as bonds into shares of Crown corporations.

Finally, you ask us what federal activities should be cut. You even ask us whether those activities should be commercialized, privatized or transferred to other administrative levels. That reminds us of the New Zealand crisis. The more the deficit was lowered through massive cuts and sale of assets, the higher the national debt rose, as did foreign indebtedness in the private sector.

There is something illogical in the fact that very often government activities cost more than if they were carried out by the private sector. If appropriate value-for-money policies were in force for all government activities and if the people responsible for those activities were answerable for their administration, then we wouldn't have to look at the possibility of commercializing or privatizing.

It goes without saying that many activities should rest in government hands simply because if they were privatized the access to service would be restricted to those who can pay while a lot of people would simply have to do without.

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Let's not forget that for the aging population, drawing better income means that their purchasing power is maintained and they can contribute to improving our economy and society in general. As for the old age pension...

The Vice-Chairman (Mr. Campbell): Mr. Hudon. As time is flying by and other witnesses are waiting their turn, could you rapidly summarize your thoughts on the old age pension?

Mr. Hudon: It will only take a couple of minutes.

So, as for the old age pension, many points were unanimously accepted by certain seniors' organizations during a forum on the subject. The old age pension is not part of a social program but is the first universal pension plan funded by mandatory contributions from individuals. It was sanctioned by the 1951 legislation which set up the old age security fund.

In 1971, the taxes levied for the old age security fund were combined with income tax rates and that brought about the disappearance of the fund over time. In 1976, when the government abolished the old age pension security fund, it still contained 3 billion dollars excluding the disbursements for the guaranteed income supplement.

As today's retirees contributed to the fund during the 1950s 60s and 70s and took that into account in the calculations they made in view of their retirement, clawing back the pensions of those whose income is greater than $53,315 is discriminatory and unfair and should be abolished.

The age tax credit should be reestablished as that exemption was granted as compensation for taxation for the old age security pension. Eligibility for this pension should be maintained at age 65 and not be subject to family income.

The 1995 budget proposed a considerable decrease in social transfers to provinces in 1996-97 and 1997-98. To do so, the plan was to introduce a system of block funding thus decreasing the possibility for the federal government of ensuring and maintaining those principles established in the area of social programs and more particularly in the health field: universality, transferability, financial responsibility and other measures in the area of public administration. We can thus draw the conclusion that the effect of the brakes being applied in the area of taxation is having its impact on social reform.

The Chairman: Ms D'Amour.

Ms Suzanne D'Amour (Association des producteurs de films et de télévision du Québec): Good afternoon. The Association des producteurs de films et de télévision du Québec represents some 100 private producers whose productions total 400 million dollars a year. The independent production industry in Canada accounts for some 1.4 billion dollars a year and allows us to convey Canada's culture within Canada and abroad. So this is an expanding economic sector that has shown a 200% growth rate during the last ten years.

We're happy to be appearing here today and we thank the committee for giving us this opportunity to air our ideas on public financing.

First of all, we're not telling the government to decrease its deficit but we are saying that it should be done in a realistic manner and within a reasonable time frame. Canada's overall economic activities should not be slowed down because of inconsiderate cuts.

The government should ensure that all measures chosen to decrease its deficit won't have negative effects on job creation and economic growth. It should try to support those sectors of economic activity that are strong job producers.

The government must make cuts but we think it would perhaps also be best to give part of its activities over to the private sector. All those avenues will doubtless be explored during your deliberations. I won't give you any detail as we can do that during our discussion.

The Vice-Chairman (Mr. Campbell): Thank you very much.

[English]

That will allow us to have a lengthier discussion than would otherwise be possible. We appreciate it.

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[Translation]

I'll give the floor to Mr. Jasmin.

Mr. Pierre Jasmin (President, Artists for Peace): Thank you for giving me the floor.

I'm the President of Artists for Peace, an organization with 500 paying members of whom the best known at the federal level are: the Honourable Gérard Pelletier, involved in the Canada 21 report whose 1993 recommendations on military expenditures, alas, were not followed up; Senator Jean-Louis Roux, who was our spokesman last week in the Senate concerning the death of Mr. Yitzhak Rabin, as well as on the matter of firearms control settled most satisfactorily thanks to Minister Allan Rock's involvement. Best we talk right away about the only positive point!

We thank the Liberal government for having cut subsidies for the exports of arms manufacturing plants so progressively. From almost 300 million dollars under the Tories, they should be falling to 47 million dollars next year.

Unfortunately, the subsidies for certain companies partially involved in producing armaments have increased since then. One might wonder if there is a compensatory effect there.

Anyway, as Mr. Rebello said, I think that zero would be a far more appropriate figure of subsidies granted the armaments industry.

As for military expenditures, Artists for Peace did intervene when they organized the Quebec portion of the people's investigation on peace and security in 1992, one of whose five commissioners was Ms Campagnolo. Moreover, in the spring of 1994, Jean-Louis Roux and I presented a brief to a special joint committee of the Senate and the House of Commons.

Unfortunately, in his White Paper, Mr. Collenette ignored democratic representations because of the pressure coming from senior military officers. Less senior officers were actually scandalized by the complicity between headquarters and the armaments industry. I'm referring here to Colonel Michel Drapeau, editor-in-chief of a publication for the armed forces, the Esprit de Corps magazine, as well as to Jean-Marc Jacob, the MP, who is a member of the committee I have just mentioned and who was explicit on that point in his dissident report.

Without repeating was Mr. Rebello said, I'll give a few examples of military expenditures that deserve to be looked at. First of all, there are our UN missions that don't even use 10% of the available material. Then, there are armoured vehicles that cost 2 billion dollars. The possibility of Canada being invaded by enemies in tanks being zero, this expenditure is a toy for the military boys and is seen to be absurd, immoral and anti-democratic by the Canadian public. It discourages one's faith in the common sense of governments.

Then there are the 2 billion dollars for submarines that our ministers of Defense and Fisheries and Oceans seriously claimed to be useful for protecting schools of fish. This expenditure is of the same order: absurd.

As for the $1.5 billion for search and rescue helicopters, while it is justifiable in principle, in practice, spending $1.5 million, or 1,000 times less, on a network of battered women's shelters would save a lot more human lives and would mean a lot more in terms of safety for Canadians.

I think that this government must stop believing in massive subsidies, in megaprojects, like Hibernia in Newfoundland, MIL Davie Inc. or Hyundai in Quebec, and instead, give subsidies to SMEs or farmers, as set out in the Liberal Red Book.

This government must also establish strict rules on tax havens in the Bahamas or elsewhere. Let's force Canada Steamship Lines Inc. to stop using ships sailing under the Panamanian flag in Canada, and then we will believe that the Liberal Party and its Red Book have really come to power.

It is up to you as a committee to act so that dozens of investigators are assigned to cases like the Air Canada kickbacks or the $9 billion Paramax Unisys contract for non-operational frigates. It is also up to you to act on tax shelters, family trusts, tax deferrals, specifically in the case of oil and mining companies where this is exaggerated, and this must be done according to the Auditor General's Report.

Thank you.

[English]

The Vice-Chair (Mr. Campbell): Mr. Weiser, you have joined us late, but this would be a good time for you to address the committee with your comments.

Mr. Reg Weiser (President, Positron Industries Inc.): An important and critical thing when looking at a budget exercise is to differentiate between expenses and investments. There is a significant difference.

While we cannot subsidize unprofitable industry or protect it with tariffs, we also have to look at where we're going to create the jobs and wealth of the future. This is not a simple exercise.

Why do nations run deficits in the first place? It's either due to overliving or investment for the future. Why do companies borrow dollars? They do so because they hope to get a greater return than the cost of borrowing their money.

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In the new world of today, R and D and high-tech are two of the areas that Canada is leading in. A little-known fact is that the telecom industry in Canada now employs more people than the entire natural resources sector. More technical papers are published out of Montreal than any other city in North America. Quebec produces over 60% of the world's French software.

We have pockets of excellence in the world. We cannot compete in all areas, but there has to be strong support for knowledge-based industries that give us the greatest opportunity to create wealth in this country.

One of the key areas that is under potential attack is this concept of R and D tax credits, which is not a handout. We're not talking about government grants but about equal investment with industry supporting the capitalist system, where industry puts its dollars where its mouth is and looks for additional leverage to help us maintain and increase our position in competing on a worldwide basis.

We have the engineering talent available here. The investment has been made in education. It has been shown that you get something like a 900% return on every dollar invested in R and D. Most of the R and D in Canada, the United States, and everywhere is in development. Very little is done in the way of pure research; it's development that results in the return.

If we were to change or attack this program in any way, Canada would be repositioned from being the second-best R and D environment in the world to being sixteenth in competitiveness and very much an also-ran. So we have to be very careful when looking at the budget, not to throw out the baby with the bathwater. We want to look at the budget in a way to reduce expenses, but not necessarily to reduce investment. The budget exercise should be more like business does - a zero-based budgeting exercise. It's not a pure accounting exercise. We also have to look at the returns.

I have some general comments concerning other slight ideas. For example, there is significant abuse in the unemployment insurance program. I applaud what the government is attempting to do there, and I think unemployed people should be forced to work at least two days a week - if they are not in training - on some government-related program in order to collect their unemployment insurance.

If one looks at other investments, I would also suggest the training of parents. You get to train for jobs, but you don't get to train for parenthood. So make training compulsory, and if you don't do that, you would not be eligible for child allowance payments. That might significantly save on some future expenditures. I would also suggest a pollution tax - the greater the pollution an industry produces, the higher the tax.

I'd also like to single out banks. Banks get a 700% or 800% return on every dollar invested in them. It's a seven times circulatory effect. They should be able to afford to loan out money for less interest than what is effectively paid in investments. Because of their preferential position in Canada - they are protected under the current government rules - the tax rates of banks should be adjusted upwards. If they were hit with surtaxes if they didn't provide a certain percentage of their loans to small business and knowledge-based industries, this would have a major impact on the economy.

With regard to the underground economy, we should think about legislating and forcing purchases over certain dollar amounts and from institutions to be done by credit card or bank transfer, so as to reduce the ability of some underground money to be spent.

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The key issue is that R and D is where the jobs and wealth of the future are going to be created - in the knowledge-based industries. That is where Canada excels. The government should look carefully at the track record of companies that have been highly successful, matching their investments in this area and helping to create wealth by creating jobs, products and services, but these must be for resale.

We're not talking about the recent abuse by the banks. It has to be for the creation of products or services for resale. We have to balance both sides of the ledger - that's investment, not just deficit reduction. I'm suggesting that we support the winners, not the losers. The average citizen will invest his or her funds in the stock market. You want to invest in the winning companies and industries, not the losers. The government should do the same with our money - look for the highest return to the economy and the best contribution to the growth of wealth in Canada.

Thank you.

The Vice-Chair (Mr. Campbell): Thank you, Mr. Weiser.

[Translation]

We will now move on to the discussion. The round table format gives you the opportunity to make comments on the budget as well as on the presentations made by other witnesses. Would someone like to add something or comment on the presentations of other witnesses? Yes,Mr. Jasmin.

Mr. Jasmin: I found Mr. Weiser's presentation very interesting. When we talk about research and development, we must always come back to the notion of the results of sustainable development. This idea was introduced by the Brundtland Report in 1987, which was entitled Our Common Future. It is something we must always keep in mind. Governments can subsidize sustainable goods in particular.

The Vice-Chairman (Mr. Campbell): Would someone else like to speak? If not, I will give the floor to members of the committee so that they can ask their questions and so that a discussion can take place between them and the witnesses.

Mr. Nunez, I forgot to introduce you. Mr. Nunez, who is one of our colleagues, is attending the meeting this afternoon. Welcome to the committee, Mr. Nunez.

Mr. Nunez (Bourassa): Thank you, Mr. Chairman.

The Vice-Chairman (Mr. Campbell): Would you like to ask the first question?

Mr. Nunez: Will you allow me to begin?

The Vice-Chairman (Mr. Campbell): Yes.

Mr. Nunez: I attach great importance to these consultations, especially since they are being held in Montreal today and I am the member from North Montreal.

I would like to thank you for your very interesting presentations. They contain a lot of ideas. I hope that the government will take action on some of the suggestions you've made. There is a real problem and that is what you were saying. I wonder why cuts are always made to social programs. Today, in Ottawa, Mr. Axworthy will announce cuts to unemployment insurance. Why don't they also consider our tax system, as Mr. Jasmin mentioned.

Our tax system is not fair. In 1992, the Auditor General of Canada estimated flights of capital to tax havens at $16 billion. Sixteen billion dollars is a lot of money! My colleague, Yvon Loubier, member for Saint-Hyacinthe-Bagot, has often denounced tax havens in the House, as has the Bloc Québécois, but the federal government has never acted in this area. It was $16 billion in 1992. Today, it's probably a lot more!

I would specifically like to underscore the presentation by the Canadian Council for Refugees, since I am the Vice-Chairman of the Standing Committee on Citizenship and Immigration.

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The $975 immigration head tax, in addition to the $500 fee for studying the file, seems extremely unfair and discriminatory, especially for immigrants who come from poor countries and for refugees who are always people in distress. I would like to hear the Canadian Council for Refugees' assessment of this tax which was decreed last February 28 in the Martin budget. What problems have been linked to this tax? What cases were the most discriminatory, or the most unfair? Could you elaborate a little more on this please?

Ms Worsfold: I can tell you a short personal story to illustrate the effects of the tax.

[English]

I'm going to speak in English. Sorry.

I'll tell you a couple of personal stories. The Canadian Council for Refugees is a coalition of organizations working with refugees. We ourselves do not do client work. So these are stories of friends of mine.

A man I know came from Rwanda last year as a refugee. He was accepted very quickly and immediately had to pay the processing fees and head tax. He comes from a large family. His two older brothers were killed in the massacre, as were his parents. He has two sisters, who are still in Kigali. He is the sole support for those sisters. His choice was between sending money so his sisters could survive, or paying the head tax. He didn't pay the head tax.

So he falls into a kind of legal limbo within Canada. He will not be deported because he is a convention refugee, but he remains with a temporary work permit and an uncertain status.

He was refused a loan because he was considered a bad risk. I don't know why he was considered a bad risk. He's a young man. He was a teacher in his country. He speaks good French. But he was refused his loan. I don't know why and neither does he, because they don't have to give reasons when they turn down a loan.

Part of this is a problem with regard to the mess in terms of processing these things. A woman who worked for me came with her Zairean husband, who also worked for me. The family was accepted as refugees. They applied for landed immigrant status just at the limit, around the time of the budget, because, as you may recall, the head tax was introduced sort of one day to the next. If you had applied for your permanent residence before midnight February 28, you didn't have to pay; if you applied after midnight February 28, you had to pay.

So this summer, she didn't get her residence. They called and called and called, and they couldn't figure it out.

Between times, her husband, who is a preacher, was accepted at a Bible school in Saskatchewan, which was what they wanted to do. So they went to Saskatchewan and enrolled in this school. Then they found out to their horror that although nobody had ever told them they had to pay the head tax, and they hadn't paid it, because of the bureaucratic problems in introducing the head tax, they couldn't go to school even though they had moved to Saskatchewan from Montreal.

They had wasted all their savings in moving from Montreal to Saskatchewan. The family was in a total mess. They had made plans, they had invested in moving to Saskatchewan, and their lives were destroyed by not knowing they should have paid the head tax. Of course, when they were told if you pay right now, today, you can get your permanent residence and go to school, they just didn't have the $2,000 it would have taken for them to get their permanent residence.

The Vice-Chair (Mr. Campbell): Thank you.

Mr. Nunez.

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[Translation]

Mr. Nunez: Regarding the repatriation of the debt, at least two people mentioned that 40% of Canada's public debt is held by foreigners, which is a threat - it's the least we can say - to Canadian sovereignty.

Could Mr. Philopoulos elaborate a little more on his proposal which seems quite interesting?

But first, I would like to ask for your agreement on suggesting that the committee recommend the government undertake an in-depth review of the tax system. I think the time has come to act. I have heard a lot of speeches in the Canadian Parliament, but I think that in the coming months, the tax system will have to undergo an in-depth review.

My question is for Mr. Philopoulos.

Mr. Philopoulos: Mr. Nunez, the foreign debt problem is the variable in the budget that eludes public authorities in Canada, because as you know, it continues to increase. And what do we do? Our securities are sold abroad, and each time the financial markets are even slightly disrupted, we are penalized.

So what we need to do is repatriate the debt slowly but surely. Of course, I challenge you to do it, since you are the elected representatives. I proposed mechanisms like non-taxable publicly traded securities for buying the debt, repatriating it, or repatriating a large part of it over the next five years, for example, so that we have lower interest rates which will allow for development.

As it stands, we are attuned to the financial markets. That's fine, but time is of the essence. Everyone agrees with that last statement! I do not see any real development in Canada. If I were in government or in Parliament, I would not tackle the problem in the way that you're tackling it.

At present, the government is tackling the problem by making cuts. However these cuts are absolutely pointless, because one small international financial crisis is enough to push our debt up. So the cuts won't yield any results.

The Vice-Chairman (Mr. Campbell): Mr. Loubier.

Mr. Loubier (Saint-Hyacinthe - Bagot): The point my colleague raised on reviewing the tax system is of the utmost importance. Is there agreement around the table to recommend that in preparing his next budget, the Minister of Finance plan an in-depth review of the tax system, and of the corporate tax system in particular?

Rightly or wrongly, people in general feel that the tax system is unfair and that if we plugged up the loopholes in the tax system, we would not end up having to face drastic cuts in the area of education, for example, or cuts in other areas such as health, unemployment insurance and even pension funds.

For me, this is a crucial issue. Everywhere we have gone, we have tried to get agreement so that we can present a solid argument to the Minister of Finance with respect to preparing the next budget.

With your permission, Mr. Chairman, I would like to make some comments on whatMr. Philopoulos just said, after this question.

The Vice-Chairman (Mr. Campbell): Who wants to respond? Mr. Jasmin.

Mr. Jasmin: We fully agree on the effects of a better tax system. We believe that people would not resort to the underground economy as often if they felt that the system were fair.

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Mr. Hudon: That was the essence of my presentation. I did not use those words, but that is what I meant. We must review our tax system in order to make it fairer.

[English]

Ms Worsfold: Obviously, the Canadian Council for Refugees doesn't have a lot of opinions about fiscal policies. But I know as someone who runs an organization, which is a corporation, although à but non lucratif, one thing I've always found curious was that we pay the auditor. This is just on my mind because we were audited a couple of weeks ago. It also seemed strange to me that corporations, for profit or not for profit, pay their own auditor. It seems to me the kinds of audits done are not particularly serious. If one is paying one's auditor, they're beholden to you rather than to the good sense of running a business.

The Vice-Chair (Mr. Campbell): Unfortunately, we have nobody here from the industry to respond to that. I'm sure they'd have some response to it, but it's just an observation. We'll take it as that.

Ms Worsfold: It is not that they shouldn't be paid. But I understand businesses have been judged to be solvent when they're not and so on and so forth, because your auditors are in your pocket.

The Vice-Chair (Mr. Campbell): Well, we're not really here to discuss audit standards and the behaviour of the industry, but we'll accept your observation. Thank you.

Mr. Weiser: The idea of repatriating foreign debt is good to whatever extent we can provide a tax break for Canadian bondholders. I mean by this Canadians who hold Canadians bonds, much as in the U.S., where they have tax breaks on U.S. municipal bonds. This may help some repatriation. It could be an interesting budget exercise.

With regard to the underground economy, it is really one of the big, big holes. I would suggest a major study be undertaken with a significant workforce to study how these loopholes may be closed. The study could use hordes of MBA students and the like. I'm sure if it were really suitably studied a lot could be done to close these loopholes. Thank you.

[Translation]

The Vice-Chairman (Mr. Campbell): Mr. Rebello, would you like to answer the same question?

Mr. Rebello: Yes. I would like to say that we agree to reforming the tax system. However, the discussions and commissions must not be loopholes to avoid the decisions to be made in the next budget. It must be crystal clear that some tax measures are already agreed upon and do not require in-depth consideration.

I'm thinking, for example, about family trusts. Measures like that are abberations, gifts to wealthy families and abuses that a government which showed a little leadership could eliminate. The corporate tax system also needs to undergo an in-depth reform, where the international aspect is taken into account because of competition and competitiveness which are important factors.

If we are to reform the corporate tax system, we must have leadership internationally so that several countries agree to move in the same direction. Of course, our neighbours are the Americans, and it's not always easy for businesses, but the fact remains that we have to move in the same direction when we tackle this reform if we want to avoid problems with competitiveness.

That shouldn't prevent certain decisions from being made quickly. But if Mr. Martin were to say that he would undertake to review the tax system over two years, including issues such as family trusts, we would have wasted our time. In the meantime, if we want to reduce the deficit, we will have to cut social programs or make decisions that are not as pertinent.

Ms D'Amour: I more or less agree with what Mr. Rebello has just said, especially since the Association des producteurs de films et de télévision du Québec, when it appeared before the committee last year, recommended abolishing tax shelters in the audio-visual field.

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That tax shelter led to abuse and more of the money invested went to paying brokers and lawyers than it did to financing production.

So we asked Mr. Martin to abolish it and to replace it with a film tax credit, which he did in his budget of last February.

We already have this tax credit in Quebec. It has been in existence for five years and it is very effective. It has made it possible to eliminate work done under the table and has helped create new jobs. I think that these are the avenues that must be explored from now on, instead of creating tax shelters which are used to avoid paying taxes and not for the reason they were created.

The Vice-Chairman (Mr. Campbell): Thank you. Mr. Loubier, you have some clarifications for Mr. Philopoulos?

Mr. Loubier: Mr. Philopoulos, allow me to express my skepticism as to your proposal for repatriating the debt held by foreign investors.

You know that at present, the fact that foreign investors hold 42% of Canada's debt securities...

Mr. Philopoulos: It is more like 44%.

Mr. Loubier: Well, it's worse than last year. So the fact that they hold 44% of Canada's securities, and the uncertainty around the medium-term evolution of the federal debt encourages them to demand a better return than they would normally demand.

Given the scarcity of savings in Canada, if you gradually repatriated the debt, you wouldn't solve the problem. You would make savings more scarce, you would exert pressure on domestic interest rates, and instead of coming from abroad, this pressure on interest rates would come from a typically Canadian base.

In my view, this problem is almost impossible to solve. Whether the debt is held by foreigners or by Canadians is not at issue; it is more a question of the magnitude of the debt that must be reduced.

Mr. Philopoulos: Look, I understand what you're saying, moreover, I have debated those arguments several times. I will tell you two things. First of all, there are not enough studies on the foreign debt and who holds it. But I did a small superficial study. I do not know what you will have to say about it, but this small study reveals that roughly 20% of the foreign debt is held by Canadians who have left the country, who are non-residents and who are taking advantage of it.

What do you think about the fact that, for a long time now, Canadians have been taking money outside the country and buying securities in other countries? I do not know if the government and Parliament are really considering this issue. In my view, the answer is no.

Secondly, have you thought about issuing securities like swaps on the market? In international financial circles, there are swaps for the environment, and they are really starting to turn the capital markets upside down. Has anyone thought about creating something like that?

Excuse me, if you already know about it, all you have to do is tell me. I have been studying the debt of a long time. I'm almost a ``debtologist''!

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Mr. Loubier: That's why the old saying: ``The cobbler's wife is the worst shod'' does not apply to you. If you were a ``debtologist'', you would be very much in debt.

Mr. Philopoulos: I would like to say something else about the tax system. I fully agree with a reform to remove all of the loopholes and tax shelters, except that there are some tax shelters which must be maintained and which must even see an increase in their envelope. Mr. Weiser said this earlier in his statement. As for the high tech sector, like telecommunications, pharmaceutical products and chemical products, by eliminating tax shelters there or eliminating and reducing subsidies, we would deprive the country of wealth which serves to produce high value-added products which are highly saleable abroad.

[English]

The Vice-Chair (Mr. Campbell): It's over to you, Mr. Solberg.

Mr. Solberg (Medicine Hat): Thank you very much, Mr. Chairman.

I just want to follow up on some of the discussion with respect to taxation. For the sake of fairness, I think it's important to point out to my honourable friend that it was indeed during the referendum campaign that M. Le Hir proposed in a study that Quebec itself could become a tax haven by implementing a series of tax breaks.

Mr. Loubier: No, no.

Mr. Solberg: Yes, he did, and I just wanted to point that out for the sake of fairness, because we've gone through this before.

Mr. Loubier: You're kidding.

Mr. Solberg: No, I'm not kidding.

Mr. Loubier: Yes.

Mr. Solberg: I also want to make a point with respect to taxation, again just out of fairness. We've discussed this a lot over the last several days, and I don't think anyone is suggesting that corporations don't pay any taxes. If I hear what people are saying, I think they're saying - andMr. Loubier may want to correct me on this - that we should ensure that we have a reasonably level playing field; that we understand who is paying taxes and who isn't paying taxes; and that we don't necessarily increase corporate taxes.

Corporations already pay somewhere in the range of $40 billion to $50 billion a year, depending on profit levels. In fact, apart from corporate income tax they pay all kinds of other taxes, and certainly they benefit. For instance, they are contributors to the Canada Pension Plan, the UI program, and other programs that I think people would agree have been valuable in terms of maintaining the social fabric of the country. So for balance's sake, it is important to point these things out.

I do want to follow up on something Mr. Rebello said with respect to subsidies for business. Over the last several days, I think there has been close to a consensus that actual subsidies for business should be eliminated - and I'm talking about grants and that sort of thing.

Let me speak to you as a member of the Reform Party also, Mr. Rebello. We have spoken out very loudly and clearly on this issue. All of our literature that addresses the deficit problem calls for the complete elimination of grants to business, absolutely, so I want to be very clear on that.

The Vice-Chair (Mr. Campbell): Mr. Solberg, I'm sure you didn't want to leave the witnesses with the impression that we hadn't done anything in the business subsidies area in last year's budget, of course.

Mr. Solberg: No.

The Vice-Chair (Mr. Campbell): This very committee recommended a substantial reduction in business subsidies, and that found its way into the budget.

Mr. Solberg: I was counting on you to share your....

The Vice-Chair (Mr. Campbell): I'm sure you were going to give the government credit for doing that.

Mr. Solberg: Oh, absolutely. I was counting on you to step in.

I would also point out to Mr. Rebello that he, himself, is of course the recipient of many subsidies as a university student, and it's not just wealthy corporations who pay for that, or regular people. It's people who are out driving cabs out front, as well. So I ask him to be mindful of that when he takes a swipe at businesses, because everybody in some way enjoys the largesse of the country. So I did think it was important to point that out.

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I do want to turn the situation around a little bit. We've talked a considerable amount about the taxation problem. For instance, we can certainly plug some tax loopholes and not allow people to flee to tax havens to avoid paying taxes at all. We certainly feel that everybody should have to pay taxes. If they enjoy the benefits of the country, they should have to pay in some way.

Even if you do all of that, even if you plug some of the money that leaks out of the country and are able to maintain more revenue in the country, I think we're going to find that we're still woefully short of where we need to go if we wish to balance the budget.

I challenge people here to discuss where we can make some cuts that will allow us over the long run to maintain our social safety nets, which have to be sustainable. Currently they are being eroded by interest on the debt, which eats away one-third of every tax dollar.

I want to turn the discussion around, if people are willing to do that, and ask for some suggestions on where we can find the cuts that will still allow us to target help to those most in need and that will at the same time move us down the path to reducing the deficit to zero.

[Translation]

Mr. Rebello: I have not yet read the Reform Party's program, but I have heard about it. The important element to consider, for young people in Quebec, and there is broad consensus on this, is that there's a very big difference between education and business subsidies. Education is clearly a responsibility that lies with the government. There is another less obvious one, which is that of business subsidies.

Fundamentally, providing subsidies to businesses is not always a government responsibility. As for funding for education, even neo-liberals, the contemporary thinkers, believe that education must remain a responsibility in the public domain. When a government has very clear responsibilities, like education, it must fund them adequately; if not, it is not taking on its responsibilities.

I will give you a concrete example: financial aid for students. If we cut financial aid to students sufficiently so that the system is no longer effective, students will not devote 100% of their energy to studying, because they will have to work several hours a week. The bottom line is that the government would not be living up to its responsibility to fund education.

We could also take a look at health. If the government does not fund health sufficiently, there will be consequences with respect to its responsibilities. I wanted to make sure that it was clear that there is an important difference between education and business subsidies. Funding education is not simply generosity on the part of the government.

If education is an example of government largesse, I wonder what MPs' salaries are, for example, or other costs related to Parliament.

[English]

Mr. Solberg: Mr. Chairman, could I jump in here for a second? I agree. I have no concern with that. In fact, our party's always maintained that higher education should be a priority. I am not arguing that point.

I was simply pointing out that almost everyone in this country is the recipient of largesse of some form because that's the nature of our system. I felt that needed to be pointed out, because I sense that perhaps you are taking a swipe at everyone else and forgetting that you are enjoying the benefits of this.

Again, just for the sake of fairness, I did want to point that out.

[Translation]

Mr. Rebello: I am taking that into consideration. As to the choice of expenditures to be cut, if the government is thinking of withdrawing from certain areas or greatly reducing its expenditures in certain areas in which it does not have any fundamental responsibilities, it might be advisable for it to cut in less important areas. For example, at the present time, it may be less urgent to maintain such a highly developed military system.

Cuts of 5 or 6 billion dollars in military spending would be almost the same as the proposed cuts to social programs. The figure for them was 6 or 7 billion dollars under Mr. Axworthy's reform proposals. So it is readily apparent that there could be major cuts in expenditures in some areas.

At the moment, I don't know whether we really have the political courage to tell some firms or senior army officers that they would have to operate with half the budget. All that's required is some courage on the part of our decision-makers.

There are a few other areas of this type that could be looked at within government. Rather than cutting in sectors where the government has an important responsibility, it should be reducing its expenditures quickly in areas in which it should not be involved. That could be done quite quickly.

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There's also the question of abuse in the system. We see, and we often hear in the Auditor General's report that members of Parliament and senior public servants have some bad habits. There are also the departure incentives that are paid to the senior officials when they leave the public service.

There are all sorts of customs of this type that were established at a time when people did not wonder where the money came from and did not realize that some day there would be less of it.

So these customs can be changed. Such a change might not amount to several billion dollars in the short term, but eventually, if we find other ways of managing the money we have, there would probably be a significant reduction in expenditures.

[English]

The Vice-Chair (Mr. Campbell): Mr. Weiser also wanted to speak.

Mr. Weiser: It is simplistically appealing to say that we should become completely laissez-faire and virtually abolish all government. Part of the function of government is to invest wisely and to have a vision of the future.

For example, the investment in the information highway is creating the necessary infrastructure to allow Canada to compete effectively, not only on the world platform. Governments are doing this around the world, not only for the purpose of the infrastructure for business, but also to help Canadian businesses supply products they can export.

When you talk about the area of high-tech industry as an investment and you talk about the idea of cutting out grants, I agree that grants are not the solution. The solution is things like tax credits or matching investment. There must be a matching of investment where you say that if industry's prepared to put up the money you're going to match it. Let's look at it in terms of return on investment. What dollars are we going to get back in terms of costs, lower unemployment insurance, jobs, revenues, and creation of wealth? And how does that compare with the cost of that investment? That's crucial. You just can't take a purely simplistic view. There's a full story to be told.

The Vice-Chair (Mr. Campbell): Yes, Mr. Solberg, very quickly, in light of the time. Two of our colleagues still haven't asked questions.

Mr. Solberg: Absolutely, Mr. Chairman. I certainly don't want to be simplistic in our approach to this, but I think it is also important to point out that in the past many of these scientific research and development tax credits of various kinds have not been very effective and have actually been abused. They also have a distorting effect on the economy.

We already had quite a bit of development in the information highway, and business was already moving well along in that sector before the government got involved in any great way.

I also point out that although high-tech is a very sexy industry these days, there are other industries that have traditionally been very vibrant in the Canadian economy. When you start favouring one sector over another you draw funds away from those other sectors, which in and of itself is unfair. I think that needs to be pointed out because these other sectors - although they may not be very sexy - still provide jobs and still make contributions to the economy.

You must remember that when you direct money to one sector of the economy, you're taking it away from another.

Mr. Weiser: That's understood. However, we're not necessarily singling out high-tech. You want to invest where you're going to get the greatest return. Where is that? You have to analyze it. The high-tech industry is certainly one of the areas of highest return to the economy. It's the real engine of job creation right now and that's the one area in which Canada's competitive on an international plane. Any other industries in which Canada competes or can compete on that plane would also be worthy of support.

The Vice-Chair (Mr. Campbell): Madame D'Amour.

[Translation]

Ms D'Amour: I will answer in the same way as Mr. Weiser. Governing means making choices. I think it's difficult, but that's why you are where you are.

We must identify those sectors of the economy that are growing. For instance, it is true that telecommunications are a growth area, one that will create many jobs. We must put creative material and content on these electronic highways. The information highway must project Canada's image. We must chose economic sectors that are revenue-producers for the government. So I couldn't agree more with Mr. Weiser. Some sectors may be penalized, but I don't think so, because if the various sectors of the economy are doing well, the government will have access to good returns and will be able to support activities throughout the country.

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The Vice-Chairman (Mr. Campbell): Thank you.

[English]

Our panel members don't always agree with each other, so it's nice when it occurs once in a while.

[Translation]

Mr. Jasmin.

Mr. Jasmin: I believe it's Mr. Weiser who spoke about a pollution tax. I would like to add that the case of the Irving Whale leads us to this type of solution as well. Panelists rarely suggest new taxes of this type. Rather than proposing new taxes on refugees and other shameful ideas, we should think about taxing industries that pollute. Thank you.

[English]

That concludes Mr. Solberg's questions.

Ms Brushett.

Mrs. Brushett (Cumberland - Colchester): Thank you, Mr. Chair. I will be brief in light of the time.

I would like to address my question to Mr. Hudon in particular. He talks about corporate taxes being so uneven and about corporations not paying their share as compared to citizens. He refers to this great divide between them. Many people have brought this to our attention. It's like there's a bunch of people out there you can never get your hands on and they're not paying their fair share. I want to query you on this a little bit.

Have you considered all the taxes that corporations and small business do pay? For example, there are the property tax, the payroll taxes, and the corporate tax, and everybody is at their door for a handout all the time. If they put in a telephone for the business, the cost is two to three times higher, maybe more, than if you put it in at your house. They're hit day in, day out. Have you considered those taxes as part of the taxes they pay?

Second, business creates jobs. Without business out there creating jobs and giving our young people a foot in the door.... It plays a real role in our society. Have you given that any thought?

Mr. Hudon: What I said was that the contribution of corporations to income tax lowered from 15% to 5% over the years.

As an individual, I pay taxes. I pay payroll taxes. I think individuals pay an awful lot of taxes, including sales tax and whatnot. We're trying to earn a living to pay for our needs. Companies are operating to make profit, to give the owners revenues too, but we have the impression that corporations are not contributing enough. That's all.

Mrs. Brushett: Mr. Chair, I'm certainly not here to defend corporations that take profits out of the country and renege on responsibilities here at home in Canada, but I would like to say on behalf of business that after the war in the 1950s, when income tax was brought in, corporations did pay substantially more at that time than the individual did in income tax.

But as times went on we needed a stronger base, so the individual income tax was increased. And if we brought corporations to that point today, including their payroll taxes, which have skyrocketed in terms of the property taxes and all the additional taxes, if we tax them at rate it would be over 100%. They wouldn't exist.

And if tax havens were so prevalent here in Canada, we'd have corporations flocking to these shores, setting up business here and creating jobs. We just don't have that happening. I think there's something of a myth that we're not all paying somewhat of a fair share.

Mr. Hudon: As I said, the impression was that inasmuch as the contribution of the workers.... Probably what you're saying is that companies or corporations contribute in different ways to the economy. Is that it?

Mrs. Brushett: Yes, indeed. There is a much broader tax than what you and I pay as an individual.

Mr. Hudon: That may be, but I'd like somebody to make that calculation and show us that they're really paying their fair share.

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The Vice-Chair (Mr. Campbell): Mr. Hudon, that point has been made by other witnesses. Maybe what we need is greater transparency so that people can judge for themselves. We tend to sometimes compare apples and oranges, as they say, and sometimes with incomplete information.

[Translation]

Mr. Rebello: I would just like to make one point that may guide you in your thinking about sharing the tax burden. Over the last ten years, the gap between the rich and the poor has widened tremendously. Although you seem to be saying that corporations and the rich have done their share, the figures clearly show that the gap between the rich and the poor has widened greatly despite our so-called social democratic system. If you look at the facts objectively, you see very clearly that the rich are getting richer and the poor are getting poorer.

That being said, if we keep the system in its present form and try to defend the rich, we will continue to widen the gap. And if the gap continues to grow, we will have a more and more unjust society. I have a great deal of difficulty when I hear the government in power defending corporations and suggesting that there is no injustice in this regard.

I observed some of the things done by members of Parliament on both sides of the House. When the Conservatives were in power and defended the corporations, the Liberals were in opposition and spoke for the people. Now the Liberals are in power, and, surprise, surprise, they are defending the corporations. I don't know if this is because they have such a strong lobby group.

[English]

Mrs. Brushett: Thank you for those comments, but I think it's only fair that I give you a rebuttal here, and not in defence of any government. We live in a changing society. We are no longer in a domestic, home-grown economy - it's international, it's global. It's an economy that's changing and in which jobs are changing.

You're right, the gap does spread, but I don't think you can attribute that to the income tax or corporate tax situation today. It's a much more complex equation, and as you look at how our youth - and I'm very concerned for our youth - become educated.... To know what kind of education to take, what kind of jobs will be there, and how to translate that into a healthy, hopeful future - it's not easy.

It's more than just a policy that's generated through a government within one country. It's a changing global economy and we're part of it. We can not step back in time. We have to look forward. Our policies are not to defend corporations, but to look openly and objectively at what we can do, and to look for your opinions as to where we go in budget planning in this regard.

Our whole objective is to make it fair. We haven't talked a lot about social programs today, but we must aim to balance the budget in a few years so that we might restructure those social programs for students and for health care, so that we have the number one country that we'd all like to maintain.

Thank you.

[Translation]

Mr. Loubier: I would just like to add a slight clarification to Ms Brushett's comment. There is no doubt, and I'm personally convinced of this, that most corporations pay income tax. Canadian companies do their duty as corporate citizens. So it is in the interest of justice towards this majority of companies that pay income taxes and thereby help clean up the government's financial problems, that we must seriously study the tax situation of corporations.

There are some loopholes that must be closed. There is absolutely no doubt about it, this must be done. It is our responsibility to do this, in the interest of justice for individuals who have had to make huge sacrifices in the last ten years and who will be called upon to make more in the years ahead.

I fail to see why the government is refusing to look at the corporate tax system and to see why most companies are doing their duty while others are not.

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Just because we are living in an increasingly global economy is not a reason for tolerating injustice and questionable transfer of capital to tax shelters. We're talking about the line between legal tax avoidance and illegal tax avoidance.

[English]

Mrs. Brushett: I have a brief comment on this. As we've understood from our researchers and from our Department of Finance, the reason there are tax havens existing in this global environment is that they have refused to draw agreements with Canada. This is one of the reasons people or corporations have the opportunity to take money offshore.

There is nothing we as a government can do to force someone to sign an agreement. But we can look at the opportunities to close these loopholes that may -

[Translation]

Mr. Loubier: You could amend the federal Income Tax Act to force them...

The Vice-Chairman (Mr. Campbell): Please, Mr. Loubier.

[English]

Mrs. Brushett, do you have anything you want to add?

Mrs. Brushett: I did want to make a clarification. The economic backbone of this country is small business. That's who is creating the jobs today. It's small business. Last year, at the expense of revenue to the tune of $2 billion, we gave small business more corporate tax opportunity in creating jobs. They are paying their share. I defend small business and we need to do more, if we can do anything. These are the people who are carrying this country today, and the growth in exports is what's driving this economy.

I will make this final point. In international agreements we have no control, but we should and we must take every opportunity to look at a sense of fairness through taxation throughout this country.

[Translation]

The Vice-Chairman (Mr. Campbell): Thank you, Ms Brushett. I will now give the floor to Mr. Pillitteri.

[English]

Mr. Pillitteri: Thank you very much, Mr. Chairman. Welcome here this afternoon, everyone. Certainly it is enlightening hearing everyone's views. But sometimes there's a tendency to hear the same thing in all the time we do have these hearings. Today I heard again - and it's not the case I want to jump on it - someone mentioning deferred taxes. Deferred taxes are just a provision for future taxes. As such, deferred taxes are not tax owed to the government and no interest can be collected. It is only an accounting facility, not that these taxes are owed to government. I'll give you a chance to respond, but I just wanted to make this comment.

To Mr. Rebello, I want to commend you for your presentation. You're a young man still going to school, and it's almost not fair that you should be tied to all of this debt we as Canadians have created, most of us being older. Some of us benefited vis-à-vis pensions. Some of us are about to benefit from it. But certainly you have a point. I would also like to inform you, sir, of an income tax statistics. Ten percent of the top filers who file income tax in Canada pay 50% of the tax in this country. This amounts to a third of all taxes.

It was quite interesting to hear you say Liberals who are supposed to be defending such a policy are just not. I never knew I was elected only as a Liberal. I was also elected as an individual. I am a Liberal, but I do have my mind. In hearings like this I do have my mind to express myself. I'm not bound by my government or policy, but as a person I can respond to questions.

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Also let me say to you, sir, you did mention members of Parliament and their earnings. Here's a prime example. Mr. Nunez is an immigrant and Mr. Pillitteri is an immigrant. So you have quite an opportunity to represent your riding yourself or your generation within this Parliament or possibly in next Parliaments. The opportunity is there for you, sir, to try to be a member of Parliament.

But one question I want to ask you is this. You made a remark about trust funds. I was privileged to be sitting in to examine trust funds, as was Mr. Loubier, in Ottawa. We're getting reports of how much there is in these trust funds. You said just last year alone it was $1.5 billion lost in taxes in trust funds. We got our information from the department. I think it was if we were to eliminate all the trust funds, we would recuperate just one-half of that amount, some $750 million dollars. Would you elaborate on where you got your information?

[Translation]

Mr. Rebello: We got these figures from the former Minister of Revenue of Quebec, Yves Séguin, who writes regularly in the business press and often raises the issue of family trusts. We took from him the figure of 1.5 billion dollars the federal government could save by abolishing exemptions for family trusts.

If this were unfair, it would be a good idea if you could produce a document to support that. In fact, this would be quite important for a student group such as ours. There is no doubt that some of us, who are taking courses in economics or finance, are better able to understand this issue. Not everyone understands all the problems with the tax system.

The government produces very few documents on the tax system. When people try to understand it better, they have difficulty obtaining information.

The Vice-Chairman (Mr. Campbell): I would just like to request a clarification regarding trusts. Some measures in last year's budget dealt with family trusts. There are trusts throughout Canada and Quebec.

[English]

For small business, Mr. Pillitteri, for widows and orphans, as we say - and I don't think anybody would be suggesting here we do anything to undermine the use of this vehicle to protect young children, to protect the aged and infirm.

But I just want to clarify. We did take measures. Also, I'd like just to clarify, because I don't think the translation may have had it right, Mr. Pillitteri's point about income tax. And again I think it demonstrates the point Mr. Rebello was making. We are sometimes dealing with different numbers and different information. We're not all looking at the same data sometimes.

The point was the top 10% of filers, the wealthiest filers of income tax, who account for one-third of the income of this country, pay over 50% of the income tax. Now you may feel this group should pay more than 50% of the total income tax. But I just wanted to clarify the point, because I don't think it came out precisely.

Did you have a follow-up question?

Let me make a suggestion. It's at this point we would be concluding.

[Translation]

It is already 3:30 pm. Perhaps we should go around the table one last time so that you can

[English]

a chance to sum up, to respond to what you've heard and your last words. We'll begin withMr. Jasmin.

[Translation]

Mr. Jasmin: I have here a list of the companies with the 20 largest amounts of income tax deferred over for 1993. They include companies such as Canadian Pacific, Alcan, Shell, Chrysler, Xerox, Noranda, and so on. The total amounts to 15 billion dollars. I'm not saying that we should not accept the deferral of the 15 billion dollars, but there is probably some fat there that government should be cutting. We would just like the government to be more vigilant about the problem of income tax carry overs.

In conclusion, we'd like to pick up on a comment made by Mr. Rebello. I am the president of an organization called Les artistes pour la paix, artists for peace. Peace depends to a large extent on eliminating the gap, which is unfortunately growing, between rich nations and poor nations.

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The same is true of our country. The violence or injustice in our country is due to this gap between the rich and the poor. Governments must be judged at the end of their mandate. We must ask whether the government has managed to overcome the gap between the rich and the poor, or rather to narrow it, because we must be realistic here; we cannot overcome it. That is how the Liberals will be judged.

We would urge you to take energetic steps to narrow this gap and not widen it significantly as was done by Conservative governments both in Canada, under Mulroney, and in the United States, under Reagan and Bush. The peaceful atmosphere that could exist in this country has been greatly damaged.

Ms D'Amour: If the government must make cuts and clean up its finances, I repeat that we are in full agreement. However, if it were to decide to cut 10 per cent across the board, this would be ridiculous, ineffective and would do no one any good.

We must support our economic sectors and ensure that government agencies are performing as they should be. In recent years, there have been many examples of cuts which forced some Crown corporations to change their approach considerably. I'm thinking of the Canadian Broadcasting Corporation where Mr. Beatty recently announced a whole litany of cuts. There had been a longstanding call to close down the Corporation's head office and to use the money from that for other purposes.

As for the tax shelters that exist in many areas, the government must ensure that it reviews all of them. It's all very well to say that we're talking about income tax that is carried over, but in some cases, the income tax is carried over forever and the money never ends up in the government's coffers. I think Mr. Martin is very wise and will certainly be reviewing this problem. The government must also set its priorities, and know exactly what it wants to support, and carry through on its convictions.

The Vice-Chairman (Mr. Campbell): Thank you. Mr. Gervais.

Mr. Henri Gervais (Vice-President, Forum des citoyens âgés de Montréal): I would just like to make one comment. We've been talking about tax reform. I've been hearing about this for two or three years. I hope some government will finally deal with this issue, not superficially, but in depth.

All the economists we hear seem to say that such a reform would enable the governement to implement many solutions.

We've been hearing about this for four or five years, maybe even more. Last year, I heard the same thing, and this year we're hearing it again. Next year, I'm sure you'll probably hear the same thing once more.

Mr. Hudon: With respect to the 10 billion dollars in income tax on deffered revenues that appear in corporations' statements, these are not just bookkeeping items. These are income taxes that companiesd would have had to pay had it not been for some rules that allowed them to postpone the depreciation. When we depreciate an asset, each year, the government allows us a certain amount, but corporations have an advantage and can defer the amount or depreciate the asset more quickly.

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The Vice-Chairman (Mr. Campbell): Mr. Rebello.

Mr. Rebello: I would like to tell the government representatives that a referendum was held in Quebec recently, and that during the campaign, the federal government said very clearly that it intended to make some changes.

The Constitution is all very well, but the budget choices made by the government are even more important. We really want Jean Chrétien's government to listen to Quebeckers and to understand their social vision. That is very important.

It is true that there is a move to the right in the rest of Canada, but we Quebeckers did not elect this type of government.

Beyond the question of sovereignty, there is a social vision that is very important in Quebec. If, in its next budget, the federal government were to disregard this vision, we would find it very difficult to continue paying income taxes to Ottawa.

We're not making threats, but at some point we'll have to ask ourselves, as citizens and taxpayers, what power we have. We have the power to stop paying if we are not satisfied.

In order to renew the confidence of Quebeckers, the federal government must make a decision about the budget quickly. It must keep transfer payments at the same level, at least, in order that provincial governments may discharge their responsibilities in the most important areas... education, health care and social programs.

In order to achieve this objective, some choices can be made quickly. As Quebeckers, we did not come here just to make some suggestions, go back home and then let everything go.

Clearly, we are going to try to bring together people, both in Quebec and throughout Canada, who do not agree with the decision to spend 2 billion dollars on tanks. People won't let you make decisions of that type. If some day you want to prove to Quebeckers that there is a good long-term outlook in Canada, the first thing you must do is to start listening to people about the budget choices that must be made in the next few months.

The Vice-Chairman (Mr. Campbell): Thank you very much, Mr. Rebello.

[English]

Ms Worsfold.

Ms Worsfold: We've discussed the head tax numerous times with Sergio Marchi, the Minister of Immigration, and he has told us each time it was not a decision of the department but rather one of the budget and of Finance, and one he could not change.

I request of this committee that it submit to the Minister of Finance that the debt should not be on the backs of those least able to pay, and shameful measures like the head tax should not be a part of the Canadian heritage.

The Vice-Chair (Mr. Campbell): Thank you.

Mr. Philopoulos.

[Translation]

Mr. Philopoulos: I will conclude by asking you to think about five points. First of all, we did not talk very much about the open economy. As citizens, we must also express our views.

The first factor the budget does not take into account is globalization. Government and Parliament must focus on this issue.

Secondly, with respect to social programs, I would like to see discussions of the proposal I made about a guaranteed minimum income and its applications.

In the text I submitted in French - and I could have submitted it in English as well - I made a number of suggestions that deserve consideration. If the government wants to make cuts, it must do so, but it must do so strategically, and not by penalizing those sectors that can produce jobs, such as high technology and education, which is an investment for the future and for our young people.

We agree that the tax system must be reformed. We must think about that and see whether corporations are really paying their fair share.

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I think they do, but there seem to be some problems. For example, I was reading an analysis of government revenues which said that business taxes, the taxes paid by corporations, account for only eleven per cent of government revenues. So this issue must be examined.

Finally, we must set an objective for reducing the deficit and eliminate it completely within10 years.

The Vice-Chairman (Mr. Campbell): Thank you very much, Mr. Philopoulos.

[English]

Mr. Weiser, the last brief word goes to you.

Mr. Weiser: A very important factor to stress is to not throw out the baby with the bathwater. Due to some abuses, we should recognize that the tax credit should be for the creation of products and services for resale, and also recognize that we have to call a spade a spade, and R and D is really D. Let's not call it R and D and go for fictitious esoteric research. It has been said that the research on the atomic bomb, if one goes by that definition, only had three days of actual research and the rest of it was all development.

We have to be realistic. We want to recognize it as an investment. We want to say the government should match investments with the industry and go for high returns. It should invest in our future and in the creation of jobs.

One very important thing is to determine the definition of small business. I say it should be expanded because we have to compete internationally. A medium-sized company here is a very small company by international standards, so we don't want to cut off such a company at the knees just as it begins to be able to compete internationally. We need the Mitels of this world. Therefore, the definition of business size should not be judged by capitalization, which would effectively go against promoting investment, but by sales and profitability.

Finally, another suggestion I didn't make before was a no-cost method - a no-negative cashflow methodology to improve R and D in the country. There would be no cost to the government, and no cashflow implications. That follows a bit on what Quebec has done in examples like the SDI, Société de développement industriel du Québec.

If the government would effectively guarantee to the banks the R and D tax credits so companies could borrow on this money, and guarantee this would not be used against the rest of the line of credit, it would make more cash available to industry at a lower cost. It would be able to invest more in R and D, and we would increase R and D. That is money the government pays in any case. The function of the amount of R and D a company can do is not only the fact that it gets the money back and has it on the profit and loss statement, but it has the cashflow availability as well.

Thank you.

The Vice-Chair (Mr. Campbell): Thank you, Mr. Weiser.

[Translation]

I would just like to thank you all very much for taking part in our discussion this afternoon in Montreal. The questions and answers were very interesting. There was a good discussion between panelists and the members of the committee. Thank you very much. Have a good weekend.

The meeting is adjourned.