STFC Committee Meeting

SUB-COMMITTEE ON TAX EQUITY FOR CANADIAN FAMILIES WITH DEPENDENT CHILDREN OF THE STANDING COMMITTEE ON FINANCE

SOUS-COMITÉ SUR L'ÉQUITÉ FISCALE POUR LES FAMILLES CANADIENNES AVEC DES ENFANTS À CHARGE DU COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, April 20, 1999

• 1537

[English]

The Chair (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)): Pursuant to the motion adopted by the Standing Committee on Finance, dated March 17, 1999, the subcommittee commences its study on tax fairness for Canadian families.

I would like to welcome our witnesses today. From Status of Women Canada we have:

[Translation]

Ms. Florence Ievers, Coordinator; Ms. Sheila Regehr, Economic Policy Coordinator for the Policy Analysis and Development and External Relations Branch; Ms. Zeynep Karman, Director of Research; and Ms. Jackie Claxton, Director General of the Advancement of Women and Regional Operations Program.

[English]

I'd like to thank our guests this afternoon. You are the first witnesses.

We have asked all presenters to adhere to guidelines given by the standing committee, because we want to provide this full committee with a concrete report on what we were actually mandated to do.

I believe, after looking at your deck of slides here, you've hit the nail on the head.

I will immediately turn this over to Ms. Ievers to commence the presentation. We've discussed the format, which is five to ten minutes for opening remarks. We'd like to leave ample room for our members of Parliament to ask difficult questions.

So welcome, and please begin.

[Translation]

Ms. Florence Ievers (Coordinator, Status of Women Canada): Thank you very much, Mr. Chairman. Status of Women Canada is very happy to be able to take part in the deliberations of your committee. It's a great honour for us to start the parade.

We have, as I already told you, quite a short presentation, but the subject before you is very vast and very complex. Solutions are not easy and the implications for Canadians are very great.

I am accompanied, as you said a while ago, by two specialists from Status of Women Canada on issues relating to unpaid work - Sheila Regehr and Zeynep Karman -, and by someone who works very closely with women's groups and those who have been studying this question for a very long time.

[English]

At Status of Women Canada we believe the tax treatment of families must be considered as part of the larger concern of how families can be supported in meeting both their income needs and their need to care for children and other dependants. Given that most care work done in the home has no income associated with it, income tax measures may have limited ability to address families' concerns.

• 1540

The problem is not really that the tax system is unfair in its treatment of income, as we'll show a little further, but that families with high dependant care responsibilities have a reduced ability to work for pay as compared with other families. This issue of dependant care has wider social importance and is addressed through several policies. A dependant care framework shows how tax and other policies and transfers, from maternity benefits to pensions, can complement each other and expand the options available to all families to meet their diverse and changing needs.

There are many questionable assumptions, which we will deal with in our slide presentation, surrounding discussions of care and income as they've been played out in the media recently and that unfortunately, at times, have seemed to pit families against each other.

What's clear from the public response is that families with young children and those with an aging relative or one with a disability to care for are really feeling stretched to the limit.

There are good reasons to expect that responses to Canadian families' needs can be found. Though the issues are very complex, a large body of knowledge that has been developed by federal departments, outside researchers, and international organizations can be used. Almost all industrialized countries, including Canada, have some policies in place that support caregiving in the home. These can be drawn from and built upon.

We also have the best capacity in the world to conduct research and design policy options in this field. For a number of years we have been gathering information on both sides of the economy—the paid, or market, economy along with the unpaid, or household, economy.

Status of Women Canada, for its part, has really been engaged for the last two decades in the analysis of dependant care issues and the relationship between the market economy and the household. We've conducted our own research. We've funded independent research. We've worked with a number of international organizations who are also interested in finding out more about this issue.

We've also worked closely with other federal departments, some of whom you'll be hearing from a little later on, on related policy initiatives, such as child support. We've also worked with our federal-provincial colleagues and with the OECD and the United Nations on this kind of issue. Dependant care issues remain a priority within our department, and obviously we will continue to do the research and have the ongoing dialogue.

[Translation]

Although there are a number of federal family-assistance programs, two of them recognize more specifically work connected with home child care. This recognition is important. The child care exclusion provision of the Canada Pension Plan comes into effect on retirement. Employment Insurance Plan maternity, parental and adoption benefits are thus the main source of income while a parent is taking care of a baby.

Most other OECD countries give similar benefits, and several countries provide higher income replacement rates, longer benefit periods, greater flexibility in allowing part-time work or even greater coverage. They often include the self-employed or even people outside the labour force as such. Some countries give one- time payments to all mothers when a child is born.

Sheila Regehr is now going to continue the presentation. She will present some myths and facts concerning these issues, and I will come back at the very end to talk about policy options you might want to consider and on which you might want to make some recommendations. I'll come back when Sheila has finished her part of the presentation.

[English]

Ms. Sheila Regehr (Economic Policy Coordinator, Policy Analysis and Development and External Relations Directorate, Status of Women Canada): You'll note that we've distributed a number of documents. A short, in-depth presentation and a full text that explains everything more fully have been distributed, as has an additional document from which we've taken some charts on the economic gender equality indicators, previously published by Status of Women for federal-provincial-territorial ministers.

• 1545

Our presentation is going to be very unlike the one you're likely going to see from the Department of Finance, which concentrates on numbers. Our overview is going to be much more conceptual in looking at how we view these issues through our work over the past 20 years.

One of the things that is really important for us is to start looking at both assumptions and realities and to make sure, as Florence has said, that given our rich sources of data we really are challenging our assumptions.

From our perspective, dependant care is really the key issue in all of this. Tax policy in and of itself is an instrument for delivering both economic and social policy, and it's linked to other social policy areas. Benefits can be delivered in different ways.

For example, one of the things recently changed was the $213 credit that was available to people with young people in the home if they did not have receipted child care. You found that on a line on your income tax form. That now is delivered differently through the national child benefit. It's an equivalent amount, but it's being delivered and administered differently. So there are various ways to do things.

One of the questions then is, to what extent can we use the tax system and other measures to deliver what we really need to address—the dependant care needs? Again, I would reinforce that we need to challenge our assumptions.

Given the interaction of policies, assessing whether families are being treated fairly in the tax system requires looking at a whole range of influences that impact the resources parents have to meet family needs for both income and care.

For example, as we know from their presentation, the finance department will show you how some families may actually be taxed heavier than others, but it doesn't necessarily mean they have reduced disposable income as a result. We won't get into showing you that because the finance department will.

For us, the underlying issue is that parents with preschool children in particular have very high dependant care needs and they face the loss of income that this usually entails.

As Florence said, there are many policies in different countries. One of the areas of policy that's common across almost all countries as a primary vehicle for addressing that period of very high dependant care need is with regard to maternity and parental benefits. You find that almost across the board in industrialized countries.

I don't want to get too far away from the committee's mandate, which we know is focusing on dependant children, but with Canada's aging society, I think we also need to highlight dependant care needs for others, such as elders and those with disabilities, which draw on the same resources. So the same people very often are doing the same things.

This is something we have to look at from a larger perspective. We need to look at the fact that all parents, even with societal supports, continuously make sacrifices and trade-offs between time and money. One of the key points from Status of Women's perspective, which we will highlight throughout as well—it's very, very important to us from our mandate's perspective—is that these trade-offs that all parents make are rarely the same for mothers and fathers. Although both parents are involved in meeting needs of children, the personal adjustments are far greater for mothers. They do the majority of care work and they're the ones whose personal income is most affected and who may face long-term economic disadvantage as a result.

Let's look at some of the assumptions and realities. Now, there are a lot of assumptions, and they all need to be questioned, I think, but we have focused on three areas that we think have in some ways been miscast in the media reports we've seen. They've tended to simplify things, and in the process have often caused it to appear that families are being pitted against each other. This really isn't the direction in which we want to go.

• 1550

The first assumption, then, one that we saw in all kinds of headlines, was that there seemed to be two kinds of families—those with a parent providing unpaid care for children and those without.

The reality, of course, is that there are all kinds of families. They all have dependant care responsibilities. Families are not static. They change over time. Children are born; they grow up; parents age; they come home. It's family transitions, therefore, that are important to look at.

We want to focus on, again, dependant care work. A large portion of the unpaid work in families with preschoolers is child-oriented work, but not all of it is. All kinds of other unpaid work gets done in the household. There's a lot of unpaid work that people can refer to as “homemaking”, all of those things we all do, whether full time or part time, to enrich our lives, to develop emotional bonds with family and friends, to make our home and living environment more pleasant. Gardening, cooking—all of those things are important.

We need to stress that there's a continuum of care in society. We need to look at who provides care. Again, there's a range of providers—parents, other family members, friends, doctors, nurses, community workers, and teachers. Nobody does this alone.

We need to look at where care takes place. Here there's a continuum as well—the home, child care centres, hospitals, schools, and seniors' residences.

As well, we have to look at who pays. One of the misconceptions is that unpaid work is somehow free. It's not. Someone pays. But those costs can be shared, and are shared in many ways, by individual parents through their unpaid work, through insurance plans, such as employment insurance and health insurance, and some through public funds—for example, schools and health care.

One of the things we noted is that given that maternity and parental benefits are one of the key ways in which dependant care specifically is addressed within Canada, about 44% of children in a year are covered by this plan, which leaves the majority of births in Canada not covered.

In this slide we're looking at the ideas around single-income families. Those stereotypically are considered to be the ones where the husband, the father in the family, has a very high income, and these are the people who can afford to have a partner stay at home full time. In reality, the situation is quite different.

One thing we have to recall is that lone parents make up 21.6% of all families with children, so we're talking about a major group of people who are also the most economically vulnerable. So any tax or any other changes we're looking at need to consider this group.

For example, although just 14% of all children under 18 lived in female-headed, lone-parent families in 1993, children in these families accounted for 42% of all children in low-income families that year.

We also need to recognize that there's a great deal of diversity among lone-parent families. They're not all single parents, per se; they might be divorced or widowed, living in a variety of economic circumstances. Some even have very high incomes.

One of the key things, if we're looking at resources, is that we need to focus on both the time and money available in a household. We focus on income a lot, but time is often forgotten.

If we look at a household situation where there are two parents, for example, they have 48 hours a day between them to be able to divide up who works for pay for a certain amount of time and who does what unpaid work. There are many options.

For lone parents, if a parent does not have a supportive spouse who is participating in doing child care at some point, then they have only 24 hours a day to balance both needs.

I won't go through this in detail, but we've discovered that the father's income really doesn't have much effect on the employment status of the mother. The range is actually quite similar across income levels for the husband. A similar percentage of the mothers work full time, part time, or do not have paid employment.

• 1555

One of the things that matters a great deal in looking at those families is the age of the child. As you can see from the last statistic, a lot of women who were in the paid workforce will return within about two years. Other studies show that education of the mother is a key factor in how soon they return to paid work.

The third major assumption we're challenging is...and it's not so much.... It's a question. These are tough choices, and these are the hard questions I think the committee's going to face.

We need to look at whether people should be able to choose to have a full-time caregiver in the home if they want. There are rights and responsibilities that everybody shares. We have to balance those things. It is in the interests of society to make sure young children are cared for. In fact, in extreme cases society will step in if parents cannot provide that care.

We've identified, then, that it is in the public interest, but we also have to question how we are going to share those costs and who's going to share in them. As I said earlier, unpaid work does cost somebody somewhere.

The next chart shows some graphs taken from our publication. There are just a couple of things to highlight. You can look at them later more leisurely.

This compares women's and men's average income, across Canada. We have three time points. The good news is that things are improving everywhere, but from the perspective of tax equity in this, and looking at the tax transfer system, the important thing is the bottom line, which represents earnings. We can see that there's quite a large gender gap there.

The second line on top of that looks at all sources of income. The gap is narrowed. So women are getting closer to men, because things like child support, maternity benefits, transfers where the cheque goes to the mother, and other types of things all help narrow the gap.

The income tax system itself provides further gender equality assistance. That's the top line. You can see that after-tax income helps the gap even more.

The Chair: Can you explain the gender aspect of those graphs? I don't see it. You're saying the bottom line is the earnings, and then you have—

Ms. Sheila Regehr: Essentially, if you look at the 1995 figures, that 0.52 figure indicates that women's average income is about 52% of men's in terms of their earnings. When you look at all sources of income, it's a little bit higher. When you look at the income tax system effect, their total income is about 60% of men's.

The next chart is looking at the other side of our equation, which is time.

We don't have a lot of charts. There was so much information on this it was hard to pick what to show, but I think one of the critical points this chart makes is in terms of families that have young children in the home. In this case, all of the women and men who are being compared do have full-time employment. Some of them are the primary earners. In the other cases, you have families where both partners are working full time. One of the key things is that this shows how we in Canada—and most other countries can't do this—can break down time according to who it benefits.

The first column shows paid work, which benefits the market; the second column shows work that benefits children; then self and household; and finally other family and friends.

What I think is really interesting—and for this committee's work, important—comes in when you look at the difference between the purple and the grey bars in the first two columns. The purple bars are 1986 and the grey bars are 1992.

• 1600

We can see that women's share of both paid and child-oriented work is growing as compared with the share for men, which shows that there really is a lot of stress on women. There are men who are participating more in child-oriented activities, but it seems to be not enough to be showing up in some of the data.

With regard to the next slide, Florence has talked about this. As well, there are more details in the full report, so I won't go on about it. This just highlights that a great deal of research exists. We can use policy models that exist in various countries in order to compare.

Women's groups have been working in this area for a long time. One of their key priority concerns is the link between unpaid dependant care work that women do and the rate of women's and children's poverty. That's a clear, key issue for them in this area.

As I said before, we also have the best data in the world to be able to do this kind of research. There are annexes in the full written report that describe all of these things in more detail.

We have identified a list of the key areas of policy in which Canada supports families with children. This is on page 11 in the full English version and page 13 dans la version française. It gives a full description of the kinds of areas these policies address.

The next slide gives an indication of two of the policy areas in Canada that we think target dependant care work. Specifically, the best are maternity and parental benefits and the Canada Pension Plan child-rearing drop-out.

We've given a short list of some of the benefits these policies have. They provide direct benefit to the caregiver. They support sharing paid and unpaid work between women and men, because they're available to whoever provides the care, not just women. They support societal sharing, because they're funded by all contributors to the plan and not just parents. They support combining labour force participation with care work in the home. As well, EI and CPP benefits in particular are based on real costs of labour force withdrawal.

One of the things we have done at Status of Women in our work in this area is to look at some of the key criteria factors or principles, at the things we need to look at when we're assessing current policy or any future policy direction. I'll explain each of these very briefly.

The first is universality. In this particular context, we're talking about dependant care. The important message here is that we need to recognize that unpaid work is undertaken by everybody. For women and men in all sorts of families, dependant care is the key issue, but we have to look at who's doing it and not just focus on certain types of families.

Autonomy and choice recognizes that we do have legal obligations to women and men within the charter within various legal instruments. We do have to support those types of things. It's important, particularly to make sure that we don't have incentives or disincentives built in our systems that affect women's and men's choices differently.

From our perspective, we obviously need to look at gender equality in a range of areas. One of the areas is in some ways to encourage sharing and to break down some of the stereotapes in terms of how we look at things and the division of paid and unpaid labour between women and men.

Adequacy is a key issue in terms of the level of benefits provided. As we said, EI and CPP target dependant care and are focused directly on labour force withdrawal and what somebody would have been able to earn had they still had their paid job.

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Fairness is very important. We need to look at how policies may have an inadvertent impact in off-loading work from the paid sector of the economy to the unpaid sector of the economy without providing adequate resources in that sector to be able to take over that work.

As well, we need to look at compatibility with other economic and social policy objectives so that we're consistently moving in the same direction and not having one policy taking us this way and another policy taking us another way.

I will now turn this over to Florence, who will talk about the possible new elements.

Ms. Florence Ievers: I'll be very brief on the policy building blocks. I do want to bring to your attention the document we've circulated. It has much fuller explanations of the discussion we're initiating with you. It is available in both official languages.

[Translation]

I think it's important, when we consider improvements that might be made, to situate the discussion by asking two questions: one on improving maternity and parental benefits and the other on the taxation issue. Those two things have to go together.

The approach we would like to recommend—of course, we can go from the smaller option to the larger one, and not all are possible just now—, is what the English call a building block approach. We can, to start, look at something and then later build on what we started to look at.

In Part V, "New options", of our paper, we talk about the maternity and parental benefits system. The first option deals with maternity and parental benefits for births or adoptions that are not covered by the employment insurance system. For example, as I mentioned earlier, some countries give these benefits to self- employed people or to people who have not built up enough hours to be eligible for benefits or who get very small benefits, such as mothers of young children who worked part time before having a second child.

The second option would be to extend the benefit period and make it more flexible to allow parents to spend more time at home with their children during the crucial infancy period, the first year for example, and to allow parents to return more gradually to a full-time job, by combining part-time work and child care, which would ease the transition for both parents and children.

We might envisage increasing the replacement salary rate and eliminating waiting periods for employment insurance system maternity and parental benefits, particularly the two extra weeks for fathers who want to receive parental benefits which, at present, is a major barrier to parents sharing child care.

[English]

On the tax side, tax measures to recognize that all families with children have less ability to pay tax than those without, and greater use of credits for caregivers of dependant adults and children, would also be consistent with a supportive family policy.

Here we could look at tax measures that recognize that all families with children have less ability to earn income and to pay tax than those without. We could look at increasing the amount of income a caregiver may earn before the spousal benefit is reduced or withdrawn. This would support more gradual transitions from full-time caregiving to full-time employment.

We could look at administering spousal or caregiver amounts in such a way that the benefit is delivered directly to the caregiver, if possible, to allow income averaging for caregivers so that the fluctuations in income during periods of child-bearing and child rearing are also taken into account.

We feel very strongly that maintaining the child care expense deduction is very critical, as it only partially offsets a very large employment-related expense for parents. We feel that any reduction could disadvantage women in the paid labour market and restrict rather than expand options for families.

[Translation]

In conclusion, I would again like to point out that the experiences of many Canadian families today were not necessarily well understood or considered when previous policies were being developed.

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Families are evolving, just like the labour market. There are practically equal numbers of women and men in the paid labour force. There is also the aging-of-society problem and we can no longer presume that there will be enough people willing to provide unpaid care to people who need it, whether it be children, the sick, the elderly or the handicapped.

It will be essential also for the future of Canada, at the dawn of the next century, to make an in-depth study of the whole dependants question, and not only of children. Society is changing and is showing us some paths to follow on this issue.

[English]

Thank you for bearing with the length of this presentation. As I say, there is much more information provided in the documents we're leaving with you.

We're at your disposal.

The Chair: Thank you very much.

I'd now like to turn to the Reform Party, with Mr. Forseth.

We'll start with ten-minute rounds.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Ref.): Thank you very much.

Thank you for coming today.

Seeing as how this is the first question in the hearing series, I would like your general assessment of this on a somewhat general and philosophical level.

In that there is no economic penalty for choice of child care styles, with no direct comparison, holding all other variables equal, of the tax benefit scheme for comparable families—for example, where a two-parent family uses receipted, paid child care as compared with a family where a parent gives up earnings and provides in-home dependant care—is the current system socially neutral? Do you think it's socially neutral in that there are essentially no economic disincentives for the one choice as compared with the other?

The Chair: Who would like to answer that one?

Ms. Regehr.

Ms. Sheila Regehr: From what we've seen in terms of the information the finance department has provided, if we're talking about families at similar income levels, those who have not just the child care expense deduction but also other employment-related expenses, when looking at the whole mix of credits, deductions, and benefits that go into them, it does appear, from that information, that those those with less disposable income are in fact the two-earner and lone-parent families rather than the single-earner.

I think the larger issue, though, is that families don't necessarily have the choice of having a single earner with a $60,000 income and then they decide what the second earner does, whether they go into the paid labour force or not. If you have a father who has a job that pays $30,000 a year, they don't have that kind of choice.

So as we had talked about, the trade-offs between time and money are really difficult for all families. The tax system doesn't necessarily prejudice those things one way or another if you look at the whole mix.

One of the other things that goes into looking at this, too, is that we can't just look at the family; we have have to look at the individual earners. If you look at the situation of women, almost exclusively, at least for the first period of a child's life, they are the full-time caregiver. I mean, after you've given birth, you have no choice. You're the full-time caregiver.

If you then have to make a decision about whether or not to go back into the paid labour force, without the child care expense deduction that woman faces a very high penalty. It means that if she has $7,000 in child care costs, she has to earn $7,000 before she actually sees any money in her hand to spend on meeting the child's material needs. Once the care has been taken care of, you still have to buy food and clothing and furniture and books and all of those other things for children.

So the impact of that really is very important for women, from a gender equality perspective. That particular feature is very important to us.

• 1615

Mr. Paul Forseth: Okay.

Page 4 with regard to your slide presentation talks about this assumption—and it's almost written as a challenge—that, “People should be able to choose to have a full-time caregiver in the home if that is what they want.” Below that, under “Realities”, that statement is challenged.

I'm wondering if you could turn that on its head and ask whether the assumption that should be challenged is, “People should be able to choose to have paid caregivers outside the home if that is what they want.”. Maybe that's more the appropriate assumption to challenge and to knock down.

I'm wondering if you could comment on taking that assumption and turning it on its head, because you have the realities. Try to turn it around the other way.

Ms. Sheila Regehr: We do agree with you. This is a challenge, and turning it on its head is an equal challenge.

Starting a priori, though, meeting the child's needs, meeting the care needs, is the very first thing that has to happen in any family. Unless their child is cared for somehow, either by them or by somebody else, they cannot walk out the door. They literally cannot leave the house, physically, to earn an income. So I think for all families that's the main thing of importance.

Secondarily, however, as I mentioned, the child also has material needs that need to be met, such as food. In our society, those things require you to have an income.

Again, I think it's a balance. Both of those needs have to be met. Families have different ways in which they meet them. In the research we found that there are all sorts of variations. Some people work split shifts. If their priority is to have a parent caring for the child all the time, or they can't afford child care, they do split shifts. There are families where both parents will be working significant part-time jobs but not full-time, and families where there's full-time employment, no paid employment, or full-time/part-time arrangements.

It very often depends on their own circumstances, and their ability to earn income. As I said, if you're working at a $30,000 job you usually don't have the choice of picking one that will give you $60,000.

So those things are all difficult. Making either decision is extraordinarily difficult for families.

The other issue is that families get to choose, but who then subsidizes the choice? Those are the tough questions society has to answer. Ideally, we might want to do many things—and this is true in all areas of life—but if we have to set priorities, we have to look at not “which families” but “in which circumstances” families most need assistance.

Mr. Paul Forseth: Out in the community it's been put that, yes, who subsidizes the choices? The criticism has been, yes, society will subsidize the choice of a two-earner family to the detriment of the other choices. That's the way the system is, and it's an unfair and unreasonable one.

Ms. Zeynep Karman (Director of Research, Status of Women Canada): It's your assumption that this is how it's happening. As I think we tried to demonstrate, and Sheila tried to answer, we don't think it is one family subsidizing the other one. What we are saying here is that it is true that there is an imbalance, but the imbalance is mainly a gender imbalance. It is usually the case that women are the ones doing unpaid work, and therefore are subsidizing the rest of society.

Mr. Paul Forseth: Okay. We'll probably come back to this later when the finance department comes.

At page 12 you talk about potential tax measures. You list there, under potential tax measures, “credits for all families with children”.

Can you expand on that option a little bit? That looks kind of interesting.

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Ms. Sheila Regehr: I think this is less a specific option than a direction for an option. In fact, there used to be in the tax system a per-child deduction that could be claimed. There were policy decisions made such that this has now been rolled into the national child benefit in the child tax benefit system in order to put a priority on meeting the needs of low-income families.

So if there are questions and decisions to be made about doing things differently, then this might be one possible way one could recognize that all families with young children, regardless of income, have less ability to pay tax than families that don't have young children.

In particular, for a woman in the household, no matter how much that household is earning, it's the woman who subsumes the cost of withdrawing from the labour force to raise the child.

So there are two issues there.

Mr. Paul Forseth: With regard to your statement that “the woman subsumes the cost”, do you have any data around that? I would probably agree with you that socially that is true, but do you have any data on that one?

Ms. Sheila Regehr: The data basically is in the time-use surveys, which show how much time women spend in providing dependant care. That's time during which they cannot work for pay. The actual cost for each woman is going to be different. If somebody's a lawyer earning $90,000 a year, you could look at the cost to them withdrawing from the labour force as being very high.

Mr. Paul Forseth: You did produce some charts, and I was just wondering if you had a chart or a scale or something on that particular topic.

Ms. Sheila Regehr: You can probably get that kind of information from Statistics Canada. We don't really look at that; it's more the time issue—namely, you can't be in both places at once.

Mr. Paul Forseth: Okay.

Ms. Sheila Regehr: Physically, you can't be in the paid labour force and doing full-time child care work at the same time. If a woman is providing full-time care, she is subsuming the cost of that care by not being able to earn an income.

Mr. Paul Forseth: Yes, but my point is that when a broad-brush statement is made, it would be nice to have it supported by some kind of data, that's all.

Ms. Zeynep Karman: I think we can provide some data in terms of unpaid work for women, depending on which method is used. According to Statistics Canada, the value of unpaid work lies between $11,920 and $16,860 per year.

Mr. Paul Forseth: Can you state for the record where you're quoting that from?

Ms. Zeynep Karman: We certainly can, yes.

Mr. Paul Forseth: Just what study?

Ms. Zeynep Karman: It is a Statistics Canada study by William Chandler, called The Value of Household Work in Canada.

Mr. Paul Forseth: Is there a date on it, or a number?

Ms. Zeynep Karman: Yes—1993, catalogue number 13-001.

Mr. Paul Forseth: Thank you very much.

[Translation]

The Chair: Thank you, Mr. Forseth. Mr. Loubier, Dr. Pagtakhan has a meeting at 4:30 this afternoon and he has two small questions to ask. If you don't mind, I'm going to give him the floor right away and then I'll give it to you.

Mr. Yvan Loubier (Saint-Hyacinthe—Bagot, BQ): No problem, Mr. Chairman.

The Chair: Thank you very much.

[English]

Mr. Paul Forseth: Did I take too long?

The Chair: No, you were fine.

Mr. Pagtakhan.

Mr. Rey D. Pagtakhan (Winnipeg North—St. Paul, Lib.): Thank you, Mr. Chair.

Thank you for your consideration.

My first question relates to page 12 and the phrase, “credits for all families with children”. Can this be the magic bullet, the magic wand, that will see the amalgamation of all the various benefits approaches we have today, for simplicity? Is that doable, and if not, why not?

Ms. Sheila Regehr: The short answer is, no, it's not the magic bullet. Because there are so many different family types, and they have such a range of needs, I don't think this or any one answer.... From all of the research we've seen and all of the work we've done, because our families are so diverse and their needs change constantly, there's not going to be one bullet. It's important to have a range of mechanisms in place that address specific needs, some that are targeted very much toward dependant care specifically and others that are directed toward meeting children's material needs.

Mr. Rey Pagtakhan: My last question, since you opened with the principle of dependant care, is with regard to when a child is adopted. Whether or not a child is adopted, they are a child.

Ms. Sheila Regehr: Yes.

• 1625

Mr. Rey Pagtakhan: You talked about the potential for expanding benefits to those not covered by EI. Would you also go so far as to say we should not only expand what exists today for those who are covered but also extend the benefits to those situations in families with adopted children, and therefore the adoptive parents, to the extent that for once they would be treated equally under the law?

Ms. Sheila Regehr: Again, we're not necessarily making a specific recommendation, but based on what we've seen as models from other places, such as most European countries, they cover maternity and parental and adoptive benefits through social security systems. Some provide a one-time benefit for a child. There are different ways you can do that.

Yes, there are possibilities for doing things outside the employment insurance system so that it covers all people if those decisions are made. There are usually different levels of coverage in most of these other countries. They provide, for example, this one-time benefit, perhaps. Then they would have a certain level of benefit for people who have not worked before in the paid labour force. Then they would have another benefit that allows those who have been in the paid labour force to get direct compensation, up to 100% in some countries, with regard to income replacement.

So they usually have varying levels of coverage.

Mr. Rey Pagtakhan: Ideally, would you like it to be the same—yes or no—for Canada?

Ms. Sheila Regehr: Those are the policy choices Canadians have to make. I mean, all of those things come with a price tag. We have to decide how important our children are and how we're going to cover the costs of those systems.

The Chair: Thank you, Dr. Pagtakhan.

[Translation]

Mr. Loubier, if you please.

Mr. Yvan Loubier: Thank you very much for your excellent presentation. I was able to rapidly read your papers and they are marvellous. This is the first time I have ever found in such documents an attempt, perhaps involuntary, to make a connection between what would be possible at the family support level through the tax system and what can be done with direct benefits. You looked at it from the point of view of unpaid work, but all your findings and ground-clearing work could be applied to the analyses and options that are available to us. They could be applied to all income support policies that will be needed in the future. I find that very interesting.

The mandate of our sub-committee, which is only looking at the tax system as it applies to families with dependants, might be too limited and should perhaps be greatly broadened. We shouldn't just think about taxation because, even at the employment insurance level, you make a lovely connection between the needs of families with dependants and what the system does not provide them.

I was very happy to see that on page 22 of your paper in French on new options, you present some ways the employment insurance system could be changed, for example. I am very happy to see that because we've been saying for quite some time that things can't go on like that. You talk about that all through your paper. High rates are fine, not only for employment insurance benefits but also for child tax benefits, but when we look at the results at the end of the line, we see that there are still considerable pockets of poverty, that the money is perhaps not being properly spent and the wrong people are being targeted, considering the changes that have taken place, over the years, in family structure and family needs.

Since you have done all this ground clearing, what would you think of a committee on taxation with a wider mandate than ours that would analyze family support policies as a whole, not only as regards taxation, but also as regards direct benefits for families with dependants, families without dependants and families with one or more self-employed adults? In short, what would you think of a committee that would reexamine all family income support policies? In my opinion, it is perhaps time to take on that task.

• 1630

Ms. Florence Ievers: Thank you for the very flattering comments about the document you speed read through. All through the paper, we tried to present those aspects we are most concerned about and which, in our opinion, fit in with the mandate of this committee. I'm happy you said you found some interesting things to think about in it.

I don't think it's up to us, as a department, to suggest additional studies. It's already rare that we have a chance to appear before a House committee. We've been doing our homework for a number of years on all the issues that are of concern to the sub- committee and which it is looking at today. We are most happy to have the chance to appear before you.

As for broader questions, I believe that you'll have a chance to meet representatives from other departments who will give you their point of view, including representatives from Human Resources Development Canada, whose duty it is to look at overall issues. It is clear that we work with all the other departments and we express to them the points of view we have expressed here. However, I do not believe that it's up to us to pass judgement on the broader issue you mentioned.

Mr. Yvan Loubier: You don't have to pass judgement, Ms. Ievers, but you did do an analysis of the situation and noted basic changes in family needs. These needs have evolved, and some aspects of the labour market mean that today's families are not the same as those of just 15 years ago. You have only to look at the impact of self-employment. Most new jobs created, about 80 percent, over the last three years, were created by self-employed people.

The policies in force at the moment, whether at the employment insurance or even the tax level, have not been adapted to take account of these structural labour market changes. All I was asking you was whether, given that you are experts in the matter, that you made great efforts in the field and have also looked at what is being done elsewhere, simply from an intellectual point of view, without passing judgement on anything, you believe it would be useful to do an overall analysis of needs rather than trying to compartmentalize taxation, direct benefits and family types.

In short, perhaps we need to reexamine a bit our ways of doing things, as was done, in the late '60s, by the Carter Commission on the subject of taxation in general. That commission did a broad review that lasted almost two and a half years and that resulted in real taxation reform that is still with us today. That's the only question I'm asking you, and I'm going to take advantage of the occasion to ask you another.

[English]

Ms. Florence Ievers: I'm in a debate with the—

[Translation]

Mr. Yvan Loubier: You can't deal with anything at all?

Ms. Florence Ievers: Listen...

Mr. Yvan Loubier: We make the decisions that have to be made.

Ms. Florence Ievers: We look after our needs. It's clear that we did some work in preparing for our appearance before your committee, that we do this kind of work and that we would welcome a deeper study of the issues that concern us. The equality of women and equal opportunity in Canadian society are of great concern to us, and we work constantly to defend those principles. If some mechanisms might allow us to throw more light on the questions that concern us, we would most certainly support them.

Mr. Yvan Loubier: OK. I have another question to ask you. Mr. Chairman, how much time do I have?

The Chair: You still have a few minutes.

Mr. Yvan Loubier: Mr. Chairman, you're easier to get along with than the Chair of the Standing Committee. In any case, I prefer you, and I'll say that to his face.

The Chair: [Editor's note: Inaudible]

Mr. Yvan Loubier: I didn't say anything wrong. You can have preferences in life, and you should let them be known.

• 1635

On page 21 of the French version of your presentation, you say:

The study concluded that the way countries spend money can be just as important as the amounts they spend, and it points out that even though the United States is in second place, behind Norway, in average family income after taxes and transfers, their poverty rates are much higher and consequences for children more serious.

You also say that Canada is in the middle, between Norway, which is the leader in the fight against poverty through various kinds of income support payments and policies, and the United States, which are at the other extreme and are succeeding badly.

Did you department do any analysis on how Canada spends its money and the efficiency of its anti-poverty and family income support policies? If you say that Canada is between Norway, which is the champion, and the United States, which is in last place, am I to understand that Canada spends its money more or less well and gets only mediocre results?

[English]

Ms. Sheila Regehr: Internally in our department we don't have the really high-scale technical capacity—we're very small—to do this kind of very detailed work, but it is being done and we work closely with academics who are involved in this work. Shelley Phipps, who is at the University of Dalhousie, I think, is one of the key people in Canada who's doing this international comparative work.

[Translation]

Mr. Yvan Loubier: OK. Could you send us the results of the studies you mention at the end of your paper as they are finished? Mr. Chairman, could we set up a direct transfer mechanism to committee members? It will be very interesting to be able to follow the progress of the work until the year 2000.

Ms. Florence Ievers: The results of the research we are doing are available both on our Web site and in printed form. You might have already received those documents, but if you haven't, we would be happy to forward them to you. Unfortunately, we didn't bring any copies today.

Mr. Yvan Loubier: Very good.

Ms. Florence Ievers: We have already published a number of papers. This year, we did a detailed study on taxation and tax system issues because we knew that they have a serious and sometimes positive impact. We wanted to take an overall look at them. It's too bad that we didn't receive the results of the research, which won't be available until the fall, before appearing before your committee. We'll get in touch with you then so we can send them to you.

Mr. Yvan Loubier: Thank you. I would like to ask a last little question, Mr. Chairman.

Ms. Ievers, on page 22 of the French version of your brief, you suggest some options concerning maternity and parental benefits. The former seems very interesting to me, and we already presented it to the Human Resources Development minister. You allude to:

[...] maternity or parental benefits for births and adoptions that are not covered by the employment insurance system (e.g., self- employed workers who don't have enough hours to be eligible [...] mothers of young children who worked part time [...]

You say that you're in contact with all the departments. Have you submitted this proposal to Human Resources Development yet? If so, do you think it was well received?

Ms. Florence Ievers: We discussed all sorts of options with Human Resources Development Canada, as we did with a number of other departments. As Sheila Regehr explained to you a while ago, at certain times we should give priority to certain matters. Status of Women Canada has noticed, especially recently, that many people can not take advantage of these plans because they are self- employed. Recent research shows that more and more, for all sorts of reasons—some very positive, and others less so—, women are becoming self-employed. It would be good to include the greatest possible number of people by opening this door. Your committee's work is an ideal opportunity to get push things forward.

These are questions that you should ask representatives of other departments who will appear before you. Our department is very small and, although we do research, it is often impossible for us to give precise numbers regarding certain policies. That is why we are very careful and hesitant to give precise figures. The other departments that will appear before you will be able to give you some idea of the numbers attached to some of the suggestions we made to your committee today.

• 1640

Mr. Yvan Loubier: Thank you very much.

Ms. Florence Ievers: As I explained, these measures our department submitted to you represent an ideal situation. We believe that, little by little, we should continue to build up our system to make it more and more beneficial and accessible for the greatest possible number of people. We don't suggest today that all these measures should necessarily be adopted.

Mr. Yvan Loubier: I would like to make one last remark, Mr. Chairman. Carry on working as you have been, because I think you're doing a very good job. I hope that the big departments will follow the example of your little department. Your work is impeccable. We were looking for a first analysis, Mr. Chairman, you made a very good choice in inviting Status of Women Canada as your first witness. Thank you.

The Chair: Every fall, the Standing Committee on Finance holds public hearings and I invite you to put your name on the witness list. You're always welcome.

Mr. Yvan Loubier: I also would encourage you to do that.

Ms. Florence Ievers: Thank you.

The Chairman: I would appreciate it if you could give us your Web site address.

Ms. Florence Ievers: We'll send it to you.

The Chair: OK, thanks a lot.

Ms. Redman.

[English]

Ms. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chairperson.

I think it's very fitting that you be the first presenters to this committee. I haven't read the longer brief in detail. I was paying attention, but I will read that subsequent to this.

I'm wondering, though, and you may have already touched on it in the explanation of one of your building blocks, have you specifically looked at or do you have any statistics of the at-home worker who does provide child care as well as being a worker in the home? I'm thinking of the self-employed entrepreneur.

Ms. Sheila Regehr: Not at our fingertips, I don't believe, but that certainly is available from Statistics Canada. We could probably find it through our own resources.

Ms. Florence Ievers: The phenomenon of at-home entrepreneurs is growing so quickly that I think any data we might have might be stale at this point. This is a very quickly evolving situation for, as I said, a number of reasons, some positive and some not so positive.

Ms. Sheila Regehr: I want to highlight as well that Canada's third major time use survey was conducted in 1998. That data is just now starting to become available and will likely be published in the fall of 1999. That will give us a really good indication of where trends are going in a lot of these areas.

Ms. Karen Redman: I actually have four questions, Mr. Chairperson.

One of the issues that was raised when I was on a trade mission with female entrepreneurs was the fact that they wanted to be able to deduct in-home paid caregivers as a business expense. Has Status of Women looked at that at all and what it might cost specifically?

Ms. Florence Ievers: That's something we're aware of. We've been told by a number of women entrepreneurs that it's an impediment for their participation, as you say, to trade missions and other business enterprises that they might want to get into. Unfortunately, we have not costed that or done work specifically on it.

Ms. Karen Redman: Thank you.

Ms. Regehr made the comment that there's such a variety and so many different models of families and needs. One of the suggestions that came from my community was that people who are out of the workforce—and obviously statistics will tell us that to a large extent they're often women—would like to be able to make RRSP contributions. I'm wondering if Status of Women has looked at that at all as to what it would cost, what the numbers would look like, or maybe have a suggestion as to what we would base that kind of contribution on?

Ms. Sheila Regehr: We haven't done any specific work on that, but it is a very interesting question and its value has been debated within women's organizations. The issue around RRSPs is that they do tend to benefit those with higher incomes. I think the view is that for many women it wouldn't be the first place to start perhaps in terms of retirement savings. There might be other ways to help ensure a broader range of women are able to plan for their later years. But it certainly is one. There are now ways whereby even spouses can buy for a stay-at-home partner. So there are some ways already of being able to make RRSP contributions.

• 1645

Ms. Karen Redman: Have you also looked at what the consequence would be of increasing the spousal amount through the tax system?

Ms. Sheila Regehr: It would depend by how much it was increased and it would depend on the objective of the increase. One of the things we show in the paper is that actually it's quite a low number of people with young...people with young children are not the only people who claim the spousal amount. So it isn't necessarily directed at caregiving, because there are lots and lots of people who aren't necessarily caregivers who are receiving the spousal credit.

So one of the things in looking at modifications is to look at exactly what objectives one would be trying to reach in that, and if one were to want to increase it, by what manner, and who would be eligible—is it everybody or is it some group of people who are currently receiving benefit?

The majority of families—I believe it's about 66% of families—are couples and don't get any benefit from the spousal credit. There are also a number of families, including those with children, whose incomes are so low that they as well don't receive benefit from it. And there is a small but significant group of elderly who do get benefit from it as well. So it's kind of a mixed policy area.

Ms. Karen Redman: Thank you.

The Chair: Thank you, Ms. Redman.

I'd like to now turn to Ms. Dockrill.

Ms. Michelle Dockrill (Bras d'Or—Cape Breton, NDP): Thank you, Mr. Chairman.

I think one of the important statements I've seen in your presentation is on the first page, where you clearly talk about dependent care being the key issue. I'd be interested in hearing from you what role you feel the national child care strategy or home care plan would play.

Ms. Sheila Regehr: I think both are very important parts that need to be considered within a range of supports available for families. As we talked about earlier, I don't think there's going to be any one magic bullet. I think we need to look at the range of needs, what's most important to families. Certainly with an aging population home care is one the government is increasingly turning its attention to, and child care will certainly remain important for women.

Ms. Michelle Dockrill: The reason I ask is I think you made a statement earlier that families get to choose. My concern is that because of the unavailability of child care and home care for individuals, they don't clearly have the choice to enter into the labour force.

I have one other question. I'd be interested in whether or not your department did any studies with respect to the effects the changes to EI have had on women and the eligibility of women and maternity benefits.

Ms. Sheila Regehr: We have been working closely with Human Resources Development Canada, who have done an initial analysis and may be pursuing further work to look at some of the reasons behind the unanticipated effects—of which there's been some indication—of the policy. They are looking at those.

Ms. Michelle Dockrill: The figure you have here is 44%; the maternity parental benefits cover about 44%.

Ms. Sheila Regehr: That was in 1998.

Ms. Michelle Dockrill: Okay, that was my next question.

The Chair: Thank you.

Mr. Herron, please.

Mr. John Herron (Fundy—Royal, PC): My first question ties into a comment you made earlier that the definition of a family or how families have changed over the last 10 to 15 years is quite different today from how it was only perhaps a decade ago. One of the things I see in visiting this particular issue is providing families with the choice in terms of how they may actually care for their children, whether they choose to do it by having a parent stay at home or perhaps having child care by having someone come inside their home.

• 1650

Can you make some comments on the fact that given that the type of work we perform in society has drastically changed today and is likely to change in the next era in terms of information technology.... The old era of Ward and Joan Cleaver, where the man went out to the steel mill or whatever and the woman stayed at home and looked after the children is gone. I see a different era where we don't necessarily use the traditional labour we used to have, given that we're using our minds to actually grow our economies now. The choice traditionally was who had the most upper mobility in terms of who needed to sacrifice their career most if they chose to have someone stay at home.

Do you see that actually having a more balanced tax program would benefit families, given the change in work and that the percentage of women participating in certain fields, whether it be IT or different disciplines, is becoming more equitable compared to that of males? Do you know where I'm going in that regard?

Ms. Sheila Regehr: There was a lot in there. I have a few comments. One, in terms of the labour market changing, you're quite right that this is really an important issue. I think the impact it has on families can be quite dramatic. We still tend to often think of families as being different types and that they're static somehow, and I am guilty of this as well as anybody. A family that has decided to have a parent stay home for a certain period of time with a child may make that choice and find that the employed parent loses their job next week. In lots of cases the labour market is becoming more precarious. If we go back to Ms. Dockrill's example, a child care centre might open up down the street that provides an option that wasn't there for that family when it make its original choice.

That one family is going to be all of those families. It's going to be a stay-at-home family. It's going to be a dual-income family. It's going to be perhaps a single parent family at some point.

We're talking about transitions, and I think your other area, a more balanced tax program, can help. What our research has shown is that the more you have a range of provisions available to families, to help them meet those transitions and to help meet them as quickly as possible, because children don't wait very long, in my experience, before they need to be fed again.... The more you can help families expand their range of choices and be able to make transitions through different stages, the research shows that this is the kind of support that really assists families, whether it's things in the tax system or outside the tax system.

The Chair: Any more questions, Mr. Herron?

Mr. Szabo, please.

Mr. Paul Szabo (Mississauga South, Lib.): Thank you, Mr. Chairman, and thank you to the panel for your good work to pull together a good start for our consultations.

The Beverly Smith complaint before the UN is terribly relevant to what we're talking about. I wonder if you would undertake to table with the committee a copy of the official response of Status of Women.

Ms. Sheila Regehr: Yes. It's the Government of Canada's response. We certainly would be willing to provide that to the committee.

Mr. Paul Szabo: Okay.

I found myself agreeing with a lot of the points you made, most importantly that caring for children was the first priority. To me this is not a tax issue; it's a children's issue. We're looking for ways to provide the best possible environment to have healthy outcomes for kids. You made the point that we have diverse configurations, arrangements, and opportunities. It's going to be very difficult to find a simple solution to this. It makes me think we need a more dynamic or fluid arrangement so that no matter where you are you won't be either penalized or compelled to do something because there's this very rigid structure of benefits.

• 1655

So I like the idea of flexibility and options, choices, for parents. To me, it makes some sense, because it respects parents' ability to understand what their situation is, what the options are, and what the best possible care arrangement is for their children, given those options and choices and their own value system. I don't think I would ever want to have policy that takes that away from parents, and I'm glad you're setting a foundation that we should understand that situations are very diverse and it's going to be difficult for us to take some things.

Also, I think Ms. Dockrill raised a very good point. We don't all live in urban centres. The availability and affordability of care options is a real challenge, and that's part of it. I think we do need child care options as well as the full range of options. This respect of parents' integrity to make the right choices for their children and for their family has to be respected, and I hope we can find that proper balance.

In the first sentence in the second paragraph of your executive summary, on page 2 of the major document, there is a phraseology that I need some help with. The whole sentence reads:

The problem is not that the tax system is unfair in its treatment of income

We can leave that; that's a preamble. But here's the rub:

but that families with high dependent care responsibilities have a reduced ability to work for pay compared to others.

You're suggesting that is the issue, but when I read that, it says to me that someone who has dependent care responsibilities has more difficulty being in the paid labour force than someone who doesn't have dependent care responsibilities, because they have a dependent. I don't believe that's the issue. The issue for which this committee was set up is two cases where the comparatives both had dependents and were making a decision.

I believe this comparison of a one-earner family with $60,000 compared to a two-earner family both earning $30,000 is an inappropriate comparison for us to work with. I believe very clearly that what we are trying to deal with is this. If both spouses are working, they finish their schooling and they both go out into the paid labour force and they then have a child, we have to ask, what are the consequences of both of them continuing to work and engaging third-party care or one withdrawing from the paid labour force and providing direct parental care?

The comparison isn't within the same family. So it's not $60,000 of family income, one earner, compared to two $30,000 incomes; it really is if, say, one spouse is making $40,000 and one is making $20,000. The question is, should we have $60,000 of family income or should we have $40,000 of family income with one staying at home? That's the comparison. That's the analysis we have to do.

What are the economics? We know the spousal amount, the non-refundable tax credit, can be picked up if someone withdraws from the workforce. We know you lose the opportunity for the child care expense deduction if you have somebody staying at home. We know the increase in the child tax credit if you have lower family income, but with the low thresholds of clawback, I suspect it doesn't really come into play in most cases.

That sentence does not hit the mark for me, because it says we're comparing somebody with dependent care responsibilities to somebody who has no dependent care responsibilities. That is just not the case with what we're dealing with here. So I would ask you to look at that again at some point and see whether or not we have really hit the mark on this issue.

• 1700

I want to talk about the child care expense deduction, because I believe that is the one issue that has raised the whole topic of discrimination.

I believe there is discrimination in two ways, and I will ask for a response to this question. Is it the view of Status of Women Canada that it is equitable within the income tax system that where two families with the identical configuration both send their one child to the same day care at a cost of $5,000 a year, one family would get a higher refund cheque than the other simply because the lower-income-earning spouse has a higher level of income? I think you know what I'm talking about. It is basically that deductions are worth more to a high-income earner versus a low-income earner. Do you not believe that is discrimination?

Ms. Sheila Regehr: We've heard different perspectives on this. It is interesting, in fact, that when most of the deductions in the income tax system were converted into credits—I think this was in the 1980s—this one stayed as a deduction. For some people, if it really is an employment-related expense, then it should actually be tied to employment income. That's one perspective that people have put on this. Many women's groups have actually recommended over the years that this be turned into a credit so that it has the same value for all families.

Mr. Paul Szabo: Does Status of Women Canada have an opinion that a tax expenditure such as the child care expense deduction should have the same value to all taxpayers regardless of their income?

Ms. Sheila Regehr: Again, it's not our position to actually make a recommendation for something in the absence of looking at the entire picture and looking at what else is available and seeing what impact that might have on families.

Mr. Paul Szabo: Point 5, on page 10 in your hand-out, is “Fairness”. Does Status of Women Canada believe in fairness? How about universality? That's here.

Ms. Sheila Regehr: We're presenting our research and our findings to you. Yes, it is an issue, certainly.

Mr. Paul Szabo: One of the statements that was made is that somebody would have to earn $7,000 before they could get any benefit out of the child care expense deduction. In fact, if they claim their personal amount, they have to earn $13,000, actually, but even then they couldn't claim the full $7,000, because as you probably know, the amount of the child care expense deduction that you can claim is limited to two-thirds of your earned income. So you actually have to make $21,000 before you can claim $7,000.

I wonder if any one of you could tell me, of the 13 million or 14 million taxpayers in Canada, roughly how many claim the child care expense deduction? The figures I have are from 1996, which is the last one Revenue Canada put out in terms of analysis. Have you any idea how many, what percentage of taxpayers, actually claim the child care expense deduction?

Ms. Sheila Regehr: We can get that, but I don't have it at my fingertips.

Mr. Paul Szabo: There were about 750,000 claimants. But it's important to put it in context.

Does anybody on the panel know what the average claim is for child care expenses? Knowing that you have $7,000, and $4,000, and so on, what would you estimate to be the average claim that a claimant would make?

Ms. Sheila Regehr: I think you probably have the answer to that. I don't know the exact figure, but it is much less than $7,000.

Mr. Paul Szabo: As a matter of fact, it's just a little over $2,000.

The Chair: Mr. Szabo can tell you what line in the tax form that applies to.

Mr. Paul Szabo: It's line 28 on the schedule.

I found it absolutely amazing that in fact a very small proportion of families where both parents are working actually claim the child care expense deduction. I also found that the average amount claimed is very small relative to the maximums available. It tells me that there is another major issue here, and that is that there's a lot of underground or under-the-table care arrangements being made. As all of you will know, most of this is probably not in the best interests of children. I raise it because I would like to have the Status of Women go back and look at the fundamentals to do with the child care expense deduction, because you said in here that it's important to keep it.

• 1705

But I have to tell you that there's discrimination, unfairness, inequity, underutilization, underground economy implications, and some other problems we have to deal with. Only $2 billion worth of child care expense deductions were claimed in 1996, and that was spread over 750,000 taxpayers. It says to me that the child care expense deduction is not the big item everybody has been playing with.

But there is an underlying problem, and that is that our children in fact are not getting the quality care. I think all of you know that it's quality care that translates into good childhood outcomes.

So I wanted to raise that with you. You may want to examine it, and maybe you can come back to the committee with some commentary on this. Your conclusion that we have to maintain this child care expense deduction may not be where you want to leave it if you look at those numbers. I don't know if you have some comments on that so far.

Ms. Sheila Regehr: I think nobody would argue with you that it may not be perfect. But from what we've heard, for those people who are able to use it and to claim it, it's essential that it be there. Whether it's in the form of a deduction or a credit, there are debates about that, and they certainly should take place.

With regard to the other issue of the underground economy and quality care, the quality issue is something that in essence is outside the mandate of this committee and outside the scope of what we did. But given what we know about the variety of arrangements families use, it seems that some caution should be exercised in terms of assuming what's going on. It certainly is an area where further work needs to be done.

I think increasingly there are couples sharing part-time work and doing shift work. There may be grandparents or other relatives looking after children for periods of time. It may be the ideal situation for your child to have the neighbour look after it, or it may be a last-ditch effort; you couldn't find anything else, and maybe the neighbour isn't qualified. There's a huge range within that. But precisely because it is kind of labelled underground, it's hard to get information on it. I think some caution is urged in thinking about what actually is going on for those people who don't claim the child care expense deduction.

Mr. Paul Szabo: Another issue for me would be inclusiveness. We have the situation of, say, a farm mom who for tax purposes is not deemed to be working and therefore doesn't qualify. I find that rule under the child care expense deduction is somewhat unfair. For university students and post-secondary education students there's no income and there's no place to have a credit. So the tax system doesn't work for everybody. Somehow we have to deal as well with the fact that there are circumstances where there will be no income.

The other impact is that the child tax benefit is linked to the child care expense deduction. There is a reduction of that in addition to the income clawback. I find the whole calculation of the benefits to be extremely complex, and it's very difficult to explain to ordinary Canadians about where the dollars in their pockets come from. You can get them from a number of sources. It's not very clear, but if you added them all up, I think you'd find there are many opportunities to get benefits.

The real issue, though—and I have to come back to it—is the equity between choices. I hope you'll be able to give me an answer to my final question. Do the present circumstances, whether they be inside or outside of the tax system, discriminate against one-earner families, dual-earner families, or any other configuration? Is there somebody that the current system in fact discriminates against?

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Ms. Sheila Regehr: In essence, I am going to plead the fifth, because I think what we have been looking at so far is a very limited range of comparisons, and you've highlighted some of that yourself. We've taken this $60,000 family and compared it with this $60,000 family when there are so many different family circumstances. There is certainly some validity to what you say, that it's hard for Canadians to understand where they're getting their money from and what it's for so that they can make choices for themselves. Some of the things in the tax system are, I think, kind of convoluted, and it's hard for people to figure out where to claim what. There may be ways in which some people are missing out on some benefits they might be entitled to.

But I think you have to do a much broader range of comparison and open it up to look at all of the choices and all of the supports that are available for families, and you have to look at time and money trade-offs. That one is really hard. It's very difficult, but there are some ways it can be done.

Mr. Paul Szabo: With regard—

The Chair: I thought that was your last question.

Mr. Paul Szabo: It was, but she couldn't answer fully. Well, let's put it this way. It's probably not appropriate to answer it fully right now.

Then let's leave it to the principle. In terms of the cliché “social engineering”, do you believe our policy as a whole should neither compel nor penalize parents for their choices?

Ms. Sheila Regehr: It should enable them to make the best decisions they can in order to meet their needs. I think it's important to distinguish between needs and choices and to think of society overall in determining who is going to assume the price tag for these things. We have to look first at what needs need to be met. Then if the world is perfect and we can allow people more choice and we're all willing to pay for it, that's the next stage.

The Chair: Thank you, Mr. Szabo.

An awful lot of the questions that were asked may be more appropriately directed to the minister. If the committee so chooses, we could always have the ministry come back at a later date.

[Translation]

Mr. Loubier, if you please.

Mr. Yvan Loubier: You took the words right out of my mouth, Mr. Chairman. I think that Mr. Szabo should save his questions for the big shots in the Finance Department who are coming to see us soon to talk about taxation. It would be much more constructive than doing the work he just did.

As for the first part of his comments, if he's so equity- conscious and thinks taxpayers should get much more out of the tax system with lots of deductions, he should put pressure on his own government and demand, as we have been doing for the last three years, that some of those deductions be converted into non- refundable tax credits. That way, there would perhaps be more middle-income families in the lower tax bracket who could benefit from the tax system.

I think Ms. Regehr answered your questions very well when she said we should perhaps think about changes and converting deductions into tax credits. I think that's a very good suggestion, but we've been asking your department for that for the last three years and I never saw you get up in the House of Commons and make those remarks and put pressure on your minister to change the tax system to do that. So, save your questions for the right audience.

The Chair: You're not here to talk among ministers, but to ask questions.

Mr. Yvan Loubier: Mr. Chairman, I find many good aspects to the answers from Status of Women and I also think that Mr. Szabo was exaggerating a bit. I just had to tell him that.

The Chair: And you, you never exaggerate.

Mr. Yvan Loubier: I never exaggerate in front of witnesses; in front of you or your government, most certainly. We keep asking you questions and never get any answers.

[English]

The Chair: Are there any other questions from members? Ms. Redman, please.

Ms. Karen Redman: Thank you. I have just one quick question. Obviously, you've looked at many other models. Is there one that looks like it speaks to some of the issues we're trying to broach on this committee?

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Ms. Sheila Regehr: I don't think there's necessarily a model, looking at the variety that's available in different countries. One would have to look at what's currently in place in Canada. If one wanted to move beyond that in a certain direction, there might be parts of something in one country, parts of something in another country and parts of what we already have in Canada that could be expanded upon. It's hard to just transplant one thing.

Ms. Karen Redman: I certainly appreciate that. Of all the international models you looked at, what were the three best or most universal we could look to?

Ms. Sheila Regehr: One of the useful things that could be looked at is the work Shelley Phipps did for the Canadian Policy Research Networks, which we briefly refer to here. It's a five-country comparison and it shows some of the similarities and differences between Canada and these other countries. In all of these it's a matter of deciding what's most important for us now, given what we have and where we might want to go.

The Chair: Mr. Forseth.

Mr. Paul Forseth: Your comment about needs and choices was interesting. I just wonder whose needs you're talking about. I think Mr. Szabo and I certainly come from the perspective of looking at the child's needs first, rather than a whole list of others.

Certainly you know the common debate is about this charge of social engineering, tax discrimination, and all that kind of stuff. You've heard it all. You know what those arguments are, yet when that's addressed here, you kind of dance around the issue. You are well prepared and know what all those arguments are, yet we're not quite getting anything here.

I understand the clear distinction between a policy and the kinds of things the minister would say about policy. Clearly you're in the analysis and recommendation stage, and so on. But you could certainly respond a little more fully to some of the things Mr. Szabo has raised.

The Chair: I would recommend you take the time to review the testimony. I would encourage you to feel free to supply the committee in writing with anything you want to add. They have been difficult questions; I'll be the first one to admit that. I don't think it's fair to the witnesses to obligate them to have the answers quickly.

So feel free to respond, because we would like to hear an awful lot from you—your opinions, as well as the opinions of the minister and the ministry. In any of the questions to any of the members, I would encourage you to provide us, through the clerk, with any written response. We also have the choice of asking the minister to testify later on.

Mr. Paul Forseth: I think that's essentially where I was going in my comments.

The Chair: Oh, I'm sorry.

Mr. Paul Forseth: You've made them for me, so that's fine.

The Chair: Thank you.

Do you have a last, short question? Go ahead, Paul.

Mr. Paul Szabo: On page 12 of your handout, you have policy building blocks. I just need some clarification here.

I understand the credits for all families with children. What is the increase in income threshold for caregivers?

Ms. Sheila Regehr: There is a certain amount of income a spouse who is at home full-time, more or less, can earn before the value of that credit starts being withdrawn.

Mr. Paul Szabo: It's $5,000.

Ms. Sheila Regehr: It's quite low. As a matter of fact, in the original tax system, when there were child credits as well—it was a deduction at that time—children were able to earn $1,000 or so. They were able to earn much more than the parent.

Mr. Paul Szabo: It's tax-exempt income, basically.

Ms. Sheila Regehr: That seemed to have some problems for us conceptually. One would expect the adult in the household to earn income to support the family rather than the children. If you increased that threshold, it would again allow a parent to work part-time in a very small way for awhile, to keep some attachment to the paid labour force, keep some other social circles, and have some ability to make a transition over the long term.

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Mr. Paul Szabo: When you say caregivers, are you actually talking about the viability of income splitting?

Ms. Sheila Regehr: No. There used to be an individual income averaging feature. It is still available for farmers and some people in special circumstances. It was one of the ideas suggested to us that we thought was interesting and had some potential. We haven't explored this fully. But caregivers are people who have large fluctuations in incomes. A women earning $40,000 and paying full tax who has a child and stays home for awhile would have zero income the next year. There might be some way—I don't know how it might be administered—of evening that out a little over the long term, so she isn't penalized quite so much for having those highs and lows.

Mr. Paul Szabo: I just wanted to be sure no one mistook that for you talking about averaging between a couple. You're talking about a taxpayer and their stream of income.

Ms. Sheila Regehr: No. It's for the caregiver.

Mr. Paul Szabo: For a caregiver. Okay. Thank you.

The Chair: I have just one last question then.

In the debate that's been ongoing, there are those on one side of the debate who say we should base some of those decisions on family income. In your presentations you chose not to speak about that issue at all. I wonder if you could elaborate on whether combining family income is the right approach, for example, for certain analyses such as we're doing. I'd be interested in knowing some of your comments.

Ms. Sheila Regehr: There is a very small portion in the chart, where we look at what's currently in place, that addresses it to a very minimal extent. In general, we don't necessarily see any inconsistency between having an individual-based tax system and having family-based social policy, depending on how its administered.

The Chair: I'd like to thank you for an excellent presentation. Despite some of the cold, calculated questions, you broke the ice on this debate. It's only the first of many more discussions. As I stated before in the committee, if you feel you'd like to add to it, please feel free to write to us through the clerk. We will certainly review it. Again I would like to thank all four of you for excellent presentations and good answers to very difficult questions, but that's our job also.

Ms. Florence Ievers: Thank you very much for the opportunity of presenting. We appreciate that.

The Chair: Thank you.

The meeting is adjourned.