IN) omiR INDlSIRIAl IM VH.Ol'Ml.N 1 K)llCII.S 



K>;ils anJ Kiri;cs have a trailitioiial place in the salmon 

 indu.stiA, and are used in the riH.'-heriMiL; tishei\ as well. 



At present any vessel that is licensed tor fishing may he 

 used as a packer, with no additional licence recjuired. 

 Other vessels iiia> be issued special packer ("D") 

 licences, which aiithon/e them to pack il they meet 

 requirements regarding their construction and fish pro- 

 cessmg capability. These licences are issueil annually tor 

 a tee ot'$IO. and their number is unrestricted. In 1^80-81, 

 192 packer licences were issued. 



Over the years, the dependence on packers has dimin- 

 ished foT several reasi>ns.- One is the increase in size and 

 seaworthiness ot fishing vessels, which enables them to 

 deliver their own fish. A second is the progressive short- 

 ening of weekly fishing times (resulting from expanding 

 fleets) enabling fishermen to deliver fish between open- 

 ings. A third is the decreasing proportion of the fleets 

 controlled by the processing companies, so that more 

 fishermen seek out and deliver their fish wherever they 

 can obtain the highest price. A fourth reason is that 

 developments in other forms of fish transport have 

 reduced the need for packers: transportation by truck or 

 even aircraft is sometimes faster or more economical. 



These trends have created concerns about the future 

 place of packers and tendermen. But it would not be in 

 the broad public interest for the Department to intervene 

 directly to obstruct this gradual evolution of the industry. 

 It should confine its activity to maintaining standards of 

 vessels that handle catches to protect the quality offish at 

 sea, as it now does through packer licences. I therefore 

 propose only a change in the licence fee to bring it into 

 line with my other licensing recommendations. 



2. The Department should continue to is,sue licences to 

 Ush packers not otherwise liceased to carry fish, pro- 

 viding they meet established quality control standards. 

 The fee for packer licences should be raised to $50. 



The fleet rationalization I propose in eariier chapters 

 could have the result of reducing, if not reversing, the 

 recent decline in demand for packing services. 



SUBSIDIES FOR VESSEL CONSTRUCTION 



An obvious reform needed to provide consistency 

 between other govenmient programs and fisheries policy 

 is the removal of subsidies that encourage construction 

 and rebuilding of fishing vessels. It is incongruous for the 

 government to provide financial incentives to build new 

 fishing vessels when the overriding problem is one of too 

 much fishing power, particularly when almost the entire 

 fishing industry disapproves of the subsidies, as is the 

 case on the Pacific coast at least. In 1980, the government 

 was advised (not for the first time) to eliminate "perverse 

 subsidies" to those who construct new fishing vessels.-* 



The overwhelming weight of opinion cxpres.scd at my 

 public hearings was consistent with that position, and my 

 Preliminary Report last year contained strong recom- 

 nicndalions for immediate removal of direct and indirect 

 subsidies lor vessel construction. Since then, the Minister 

 has announced his support for these recommendations, 

 but beyond this no action has been taken.'' 



The general policy position of the Department is that 

 no subsidies will be paid to suppi>rt ci)nstruction of ves- 

 sels to be used in the Pacific fisheries. This is an improve- 

 ment over previous policies, under which vessels were 

 subsidized heavily; however, it is contradicted by policies 

 of other federal government departments. 



The most important of these direct and indirect subsi- 

 dies are the following: 



1) The Department of Industry, Trade and Commerce 

 provides a subsidy to Canadian shipyards of 9 per- 

 cent of the approved cost of constructing or convert- 

 ing vessels greater than 75 feet in length. These ship- 

 yard subsidies are normally passed on to those who 

 contract for new vessels. 



I have been informed by the Department of Indus- 

 try, Trade and Commerce that during the last 3 fiscal 

 years (which were depressed years for fishing vessel 

 construction) subsidies were provided for construct- 

 ing 32 vessels intended for fishing on the west coast, 

 and they amounted to $5.7 million.^ 



ii) The Income Tax Act permits investors to deduct a 

 varying fraction of the cost of new investments from 

 their tax otherwise payable in the year of acquisition. 

 A tax credit of 10 percent is provided for designated 

 equipment on new fishing vessels.* This is a deduc- 

 tion from tax payable, not from taxable income, and 

 so is much more valuable to a taxpayer than a stan- 

 dard deduction of the same amount. 



iii) Ordinarily, the Income Tax Act allows fishing ves- 

 .sels to be depreciated at a rate of 15 percent, but new 

 vessels built in Canada can be depreciated at an 

 accelerated rate of 33 '/3 percent. This rate can be 

 claimed on a "straight line" basis, and the result is to 

 shelter from tax an amount of income equal to the 

 full cost of a new vessel in as little as three years, 

 whereas it would ordinarily take seven years. 



These arrangements provide an incentive for fisher- 

 men, especially those in high income brackets, to 

 invest in new vessels in order to shelter incomes from 

 tax. 



iv) The Department of Fisheries and Oceans, under the 

 Fisheries Improvement Lx)ans Act, guarantees Fish- 

 eries Improvement Loans of up to $150 thousand 

 from banks to fishermen for the purchase, construc- 

 tion or improvement of vessels. The subsidy element 



